Opinion of the Economic and Social Committee on the "Proposal for a Decision of the European Parliament and of the Council amending Decision No 1254/96/EC laying down a series of guidelines for trans-European energy networks" (COM(2001) 775 final — 2001/0311 (COD))
Date: 2002-07-18
Institutions: European Economic and Social Committee
Subjects: action programme, electrical energy, energy grid, energy policy, natural gas, security of supply, trans-European network, transport infrastructure

C 241/146

EN

Official Journal of the European Communities

7.10.2002

Opinion of the Economic and Social Committee on the ‘Proposal for a Decision of the European
Parliament and of the Council amending Decision No 1254/96/EC laying down a series of
guidelines for trans-European energy networks’

(COM(2001) 775 final — 2001/0311 (COD)) (1)

(2002/C 241/28)

On 21 March 2002 the Council decided to consult the Economic and Social Committee, under Article 262
of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Transport, Energy, Infrastructure and the Information Society was responsible for
preparing the Committee’s work on the subject. Mr Graf von Schwerin was appointed rapporteur-general
under Rules 20 and 50 of the Rules of Procedure.

At its 392nd Plenary Session (meeting of 18 July 2002), the Committee adopted the following opinion
by 77 votes to two.

1.

Introduction

This Commission energy infrastructure package meets
1.1.
the call of the Stockholm European Council of 23-24 March
2001, which concluded that ‘.... the creation of an effectively
functioning internal market in services is one of Europe’s
highest priorities ... and ... must go hand in hand with
a framework for developing effective cross-border markets
supported by adequate infrastructure capacity.’

1.2.
This new initiative has been prompted by the dissatis-
faction with the outcome of the moves made so far to liberalise
and open energy markets. The European internal energy
market continues to be hampered by numerous obstacles and
discriminatory practices. The Commission notes that
the
allocation of electricity and gas infrastructure capacity as well
as tarification methods, vary considerably between Member
States and often result in discrimination and barriers to fair
competition.

the individual Member States, although a distinction must
generally be made between electricity and gas networks.
The Commission also mentions the simple lack of requisite
infrastructure for cross-border energy exchange. The desired
internal energy market is currently hampered by a number of
bottlenecks and an interconnection capacity that is either
lacking or inadequate.

2. Gist of the Commission proposals

2.1.
To remove these obstacles, therefore, the Commission
communication proposes a thirteen-point action plan (2) with
the following objectives in mind:

— to improve the use of existing infrastructure, particularly
through more transparent rules for congestion manage-
ment and tarification;

— to ensure a stable and favourable regulatory environment

for infrastructure investments;

— to refocus Community financial support on priority

projects;

1.3.
This is largely due not only to a very wide range of
national interests deemed worthy of protection, but also to
differences in the application of the single market directives in

— to raise political awareness generally and harness support
for energy infrastructure issues at all levels; to take on
political commitments at Community and national level;

( 1) COM(2001) 775 also contains two other papers that are dealt
with in this EESC opinion: the Communication from the Com-
mission to the European Parliament and the Council on European
energy infrastructure, and the Report from the Commission to
the European Parliament, the Council, the Economic and Social
Committee and the Committee of the Regions on the implemen-
tation of the guidelines for trans-European energy networks in the
period 1996-2001.

— to safeguard gas supplies to Europe.

2.2.
Building on the action plan, the cornerstone of this
energy infrastructure package is the Commission proposal
to revise the TEN energy guidelines. Initially, this involves
introducing or redefining new priorities.

(2) For a detailed list of the individual actions, see points 3.1-3.6 of

the Commission communication.

7.10.2002

EN

Official Journal of the European Communities

C 241/147

These include:

— to reduce risks;

— importance for the completion of the single market
(closing ‘missing links’ and resolving bottlenecks);

— inclusion of renewable energy production;

— interoperability of electricity networks with those of the

candidate countries;

— development of gas-supply infrastructure and

— connection of peripheral regions.

2.3.
As well as these basic principles, the revised guidelines
highlight so-called priority projects of European interest, i.e.
projects of particular importance for the completion of the
internal energy market and/or security of supply. Seven of
these priority projects of European interest relate to cross-
border congestion and capacity problems in the electricity
sector and five concern gas (see Appendix I of the proposal).
the
In order
Commission has already proposed raising the maximum rate
of funding under the TEN Financial Support Regulation from
10 to 20 % (1). Other proposals to amend the TEN guidelines
include defining the projects of common interest more broadly
(10 projects instead of the current 90) and incorporating
detailed project definitions into the project specifications.

to support these projects more effectively,

3. General comments

3.1.
Over the past few years, the energy sector has increas-
ingly become an area of key importance for all national
economies. European economies in particular are marked by a
growing dependence on external suppliers. Energy consump-
tion is increasing at different rates across the European Union
– in some cases keeping pace with economic growth. Domestic
energy production is not enough to cover these energy needs.
The real problem therefore is the non-availability of sufficient
domestic energy (2). Basic ways of tackling the issue would be:

— to ensure long-term security of supply;

— to use energy efficiently and sparingly;

— to protect the environment;

— to ensure economically acceptable costs in both absolute

and relative terms (competitiveness).

3.2.
Today, energy is a key factor in Europe’s competi-
tiveness and economic development. The main aim of EU
energy policy is thus to provide all consumers with a secure,
affordable energy supply, while at the same time ensuring that
the environment is protected and fair competition is promoted
on the European energy market.

3.3.
The main concern of Community energy policy is to
establish an internal energy market. Europe is to be equipped
with the most efficient, safest and most competitive energy
market. Measures laid down to ensure price transparency for
final consumers and to facilitate gas and electricity transfer
between the major Community networks were followed, in
1996 and 1998, by the directives on common rules for the
internal market in electricity and natural gas, the purpose of
which was to ensure the free movement of electricity and
natural gas within the Community. Electricity and gas markets
were opened up for large consumers to start with, but this
took place at different speeds in the individual Member States.
That, together with delays by some Member States in setting
up a regulatory authority, led to different degrees of effective-
ness in liberalisation across the EU; hence, competition was
still inadequate.

3.4.
The Lisbon European Council called for a swifter
completion of the single market in electricity and gas. Accord-
ingly, in March 2001, the Commission submitted a proposal
to speed up full energy market liberalisation. Under this
proposal, all customers are free to choose their electricity and
gas supplier from 1 January 2005. The arrangements are set
out in a communication on completing the internal energy
market, a draft directive amending the directives concerning
common rules for the internal market in electricity and gas,
and a draft regulation on conditions for access to the network
for cross-border exchanges in electricity. The Commission
proposes a better environment for genuine and fair compe-
tition and the establishment of an internal market that offers
security to citizens, protects the environment and ensures a
safe and economical energy supply.

( 1) See COM(2002) 134 final.
( 2) For a more detailed analysis, see the Commission Green Paper
security of energy supply
Towards a European strategy for
(COM(2002) 769 final) and the EESC opinion on it (CES 705/
2001).

the

3.5.
At the EU’s Barcelona summit in March of this year,
Member States agreed on full market opening for electricity
and gas from 2004, with the remaining areas up for decision
before the 2003 spring summit. The European Parliament
backed these target dates during the first reading of the
proposals for directives on 13 March of this year.

C 241/148

EN

Official Journal of the European Communities

7.10.2002

3.6.
The proposed decision amends some articles in the
existing TEN energy guidelines. The purpose of these guidelines
is to promote the interlinking, interoperability and ongoing
development of the trans-European networks.

between various gas suppliers. This would mean that it would
have to be possible to interchange gas from any one supply
source with gas from any other supply source anywhere in
Europe.

Electricity grid and network costs are quite substantial.
3.7.
At the moment, they are considerably higher even than net
electricity production costs in power plants. Distance plays a
definite role and also causes grid losses. Thus, consideration
should be given not only to networks, but also to broad-based
power-plant provision. For electricity of course, account must
also be taken of the full range of environmental solutions
currently under consideration.

3.8.
The proposal to amend the guidelines above all shifts
the emphasis in projects of common interest. It would seem
that the focus is to be on those projects deemed useful in
making the internal energy market operate in accordance with
a desired regulatory strategy. The Community is also to have a
more active input into financing projects of common interest.

3.9.
Under the proposals, the Commission also shares a
regulatory remit. Fundamentally, however, this must not lead
to any shift in the established division of labour between the
Community and the Member States. The Committee also feels
that no basis should be established for widespread subsidising
of infrastructure projects. This could result in distortions of
competition between individual companies and substantial
redistribution among consumers in the individual Member
States.

3.10.
The proposed amendments are the results of new
priorities for the trans-European networks that have emerged
as a result of market opening and the changed competitive
environment within the internal energy market. The recitals
give the impression that the changes to single market compe-
tition rules have exposed major deficits in transmission
infrastructure (1). This is not the case for natural gas, where
Europe enjoys blanket coverage. Natural gas is available in
most European regions. Availability should be extended,
wherever it makes technical and economic sense to do so, to
the EU’s peripheral and ultraperipheral regions as well, perhaps
also with the help of the Cohesion Fund.

3.11.
Infrastructure deficits would, at most, be an issue if
the aim of distribution policy were to provide every European
consumer with the option of virtually unlimited arbitrage

( 1) It should be pointed out, however, that the main purpose of
transmission lines is meant to be security of supply, not — for
both environmental and economic reasons — continuous transfer.

3.12.
To achieve that, major infrastructure would be
required that, in reality, would neither be used nor needed for
supply purposes. In the gas industry, however, not a single
pipeline has yet been constructed for reasons of arbitrage
alone, but always on the basis of specific procurement plans.
Such a scenario,
taken together with the subsidising of
such projects of common interest would significantly distort
competition between the individual gas companies and pro-
duce a redistributive effect between Member States.

4. Specific comments

4.1.
The Committee broadly backs the proposed amend-
ments to Decision No 1254/96/EC laying down a series of
guidelines for trans-European energy networks. The Com-
mittee is pleased that the Community wishes to lay down
priorities, not on the basis of short-term considerations, but
with the safeguarding of sustainable development in mind.

That said, the Committee feels the following must be

4.2.
borne in mind.

4.2.1.
The explanatory memorandum accompanying the
proposal calls on, among others, the Member States concerned
to give particular attention to priority projects of European
interest. Given that the text identifies ‘priority axes ... for the
electricity and natural gas networks’, this call must not lead to
it being understood that ultimately a specific framework for
action is to be drawn up which obliges Member States to carry
out specific projects. Member States are obliged only to
promote the measures provided for in the TEN guidelines in
an appropriate way and to help ensure they are realised in
practice.

The explanatory memorandum repeatedly uses the
4.2.2.
term ‘security of supply’. In the case of energy infrastructure, it
should be made clear that, under Treaty Article 154, this can
only refer to technical security of supply. Accordingly, more
far-reaching regulatory approaches to security of supply — a
matter which falls within the remit of national energy policy
— would be unacceptable in the context of the political
priorities, not least since the Treaty has no energy chapter.

7.10.2002

EN

Official Journal of the European Communities

C 241/149

4.2.2.1.
The Commission proposes a 10 % threshold for
cross-border networking capacity. The Committee feels this is
an arbitrary figure that fails to reflect the wide variety of
conditions in individual Member States in terms of production
capacity and power reserves.

hitherto successful market-led coordination of infrastructure
investments can still function in a liberalised environment. In
the Community seems to favour a centralised
its place,
planning approach to help resolve difficulties supposedly
arising from liberalisation.

The Commission’s analysis of border conditions
4.2.2.2.
repeatedly places the blame for the current shortfall in capacity
on long-term contracts. Such a view is at odds with the
observations on profitability and investments, and on security
of supply. Any desire to keep these legitimate concerns in
check will inevitably be detrimental to the development of
interconnected systems.

4.2.2.3.
The Commission rightly addresses the environmen-
tal difficulties involved in expanding the trans-European
networks. This dilemma is set to become, if anything, even
more acute - which is why the Community and the Member
States must help boost public acceptance of action on this
front. The Committee would stress that statements that
overrate decentralised and widely scattered energy solutions
(mainly involving non-renewables) encourage the public to
reject centralised solutions requiring large-scale transmission.

Under the new Article 4(a), the Community is given
4.2.3.
an active role in developing energy infrastructure, whereas,
hitherto, it merely laid down the appropriate framework. The
aim is to develop energy transmission infrastructure in such a
way that it supports the operation of the internal energy
market and economic and social cohesion, not least by being
able to resolve problems at national
interfaces and other
bottlenecks, and tackle new requirements arising from network
liberalisation. First of all, the Committee feels it is vital to note
the various gas network
that,
interfaces present no particular problems. However, doubts
would also appear to be raised at this point as to whether the

to electricity,

in contrast

Brussels, 18 July 2002.

4.2.4. With regard to Article 4(b)
(‘the connection of
renewable energy production’), the Committee feels it would
be both helpful and logical to spell out the relevant criteria,
since basically — given that the growth in renewable energy
production is politically desirable — it makes sense to use TEN
or other appropriate resources for this purpose.

4.2.5.
The Committee is pleased that valuable priority
projects of European interest for electricity and gas set out in
Annex I have been brought into the debate. As part of this
initiative, it is also vital to stress explicitly the importance of a
stable, clear-cut environment. However, the Committee notes
that the plan to subsidise these projects in no small measure
from public EU money risks giving the impression of state
investment control and centralised investment planning.

5. Concluding remarks

To sum up, the Committee broadly welcomes the proposal for
a series of guidelines for the trans-European energy networks,
subject to the above general and specific comments.

Member States and the Community have a duty to safeguard a
stable regulatory framework, which facilitates cost-effective
line construction and thus also provides investment incentives.
The Member States and the Community can and should
establish a favourable investment climate. For that to happen,
companies need a reliable regulatory framework for investment
decisions that reflects the specific economic conditions on the
market in which they operate.

The President

of the Economic and Social Committee

Göke FRERICHS

C 241/150

EN

Official Journal of the European Communities

7.10.2002

APPENDIX

to the opinion of the Economic and Social Committee

The following amendment, which received at least a quarter of the votes cast, was defeated when put to the vote:

Point 3.7

Add a new point 3.7:

‘As a result of the ongoing liberalisation and opening-up of the electricity market and the increasing expansion of
trade in electricity, the capacity utilisation of transmission networks has changed and is, in some cases, extremely
high. For instance, the existing, antiquated north-south connections are proving to be permanent bottlenecks and are
stretched to the limits of technical transmission capacity. The Committee therefore welcomes the Commission’s
initiative to promote the expansion of cross-border line capacity in the electricity sector. To achieve that objective, it
is, in some Member States, no doubt also necessary to develop sufficient national capacity.’

Reason

The new guidelines are of major importance, particularly for the electricity sector. The opinion should make that
explicitly clear.

Result of the vote

For: 17, against: 35, abstentions: 7.