Common Position (EC) No 5/2003 of 3 February 2003 adopted by the Council, acting in accordance with the procedure referred to in Article 251 of the Treaty establishing the European Community, with a view to adopting a Directive of the European Parliament and of the Council concerning common rules for the internal market in electricity and repealing Directive 96/92/EC
Date: 2003-02-03
Institutions: Council of the European Union
Subjects: approximation of laws, electrical energy, energy distribution, energy grid, energy production, energy supply, energy transport, market access, single market

4.3.2003

EN

Official Journal of the European Union

C 50 E/15

COMMON POSITION (EC) No 5/2003

adopted by the Council on 3 February 2003

with a view to the adoption of the Directive 2003/. . ./EC of the European Parliament and of the
Council of . . . concerning common rules for the internal market in electricity and repealing
Directive 96/92/EC

(2003/C 50 E/02)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE
EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community, and in particular Article 47(2), Article 55 and
Article 95 thereof,

Having regard to the proposals from the Commission (1),

Having regard to the Opinion of the European Economic and
Social Committee (2),

Having consulted the Committee of the Regions,

Acting in accordance with the procedure laid down in Article
251 of the Treaty (3),

Whereas:

(1) Directive 96/92/EC of the European Parliament and of the
Council of 19 December 1996 concerning common rules
in electricity (4) has made
for
significant
the creation of an
internal market for electricity.

internal market
contributions

towards

the

(2) Experience in implementing this Directive shows

service

the
benefits that may result from the internal market in elec-
tricity, in terms of efficiency gains, price reductions, higher
standards of
and increased competitiveness.
important shortcomings and possibilities for
However,
improving the functioning of the market remain, notably
in ensuring a level playing field in generation and
addressing the risks of predatory behaviour, ensuring
non-discriminatory transmission and distribution tariffs,
tariffs
through access to the network on the basis of
published prior to their entry into force, and ensuring
that
the rights of small and vulnerable customers are
protected and that information on energy sources for elec-
tricity generation is disclosed, as well as reference to
sources, where available, giving information on their
environmental impact.

(3) At its meeting in Lisbon on 23 and 24 March 2000, the
European Council called for rapid work to be undertaken
to complete the internal market in both electricity and gas

(1) OJ C 240 E, 28.8.2001, p. 60 and OJ C 227 E, 24.9.2002, p. 393.
(2) OJ C 36, 8.2.2002, p. 10.
(3) Opinion of the European Parliament of 13 March 2002 (OJ C 47 E,
27.2.2003, p. 351), Council Common Position of 3 February 2003
and Decision of the European Parliament of . . . (not yet published
in the Official Journal).
(4) OJ L 27, 30.1.1997, p. 20.

sectors and to speed up liberalisation in these sectors with
a view to achieving a fully operational
internal market.
The European Parliament,
in its Resolution of 6 July
2000 on the Commission's second report on the state of
liberalisation of energy markets, requested the Commission
to adopt a detailed timetable for the achievement of
accurately defined objectives with a view to gradually
but completely liberalising the energy market.

(4) The freedoms which the Treaty guarantees European
citizens — free movement of goods, freedom to provide
services and freedom of establishment — are only possible
in a fully open market, which enables all consumers freely
to choose their suppliers and all suppliers freely to deliver
to their customers.

(5) The main obstacles in arriving at a fully operational and
competitive internal market relate amongst other things to
issues of access to the network, tarification issues and
different degrees of market opening between Member
States.

(6) For competition to function, network access must be

non-discriminatory, transparent and fairly priced.

(7) In order

to complete the internal electricity market,
non-discriminatory access to the network of the trans-
mission or
is of
paramount
importance. A transmission or distribution
system operator may comprise one or more undertakings.

the distribution system operator

(8) In order

efficient

to ensure

and non-discriminatory
network access it is appropriate that the distribution and
transmission systems are operated through legally separate
entities where vertically integrated undertakings exist. The
Commission should assess measures of equivalent effect,
developed by Member States to achieve the aim of this
requirement, and, where appropriate, submit proposals to
amend this Directive. It is also appropriate that the trans-
mission and distribution system operators have effective
decision-making rights with respect
to assets necessary
to maintain, operate and develop networks when the
assets in question are owned and operated by vertically
integrated undertakings.

It is important however to distinguish between such legal
separation and ownership unbundling. Legal separation
imply a change of ownership of assets and
does not
employment
prevents
nothing
conditions applying throughout the whole of the vertically
integrated undertakings. However, a non-discriminatory
decision-making process
ensured through
organisational measures regarding the independence of
the decision-makers responsible.

should be

identical

similar

or

C 50 E/16

EN

Official Journal of the European Union

4.3.2003

(9) In the case of small systems the provision of ancillary
services may have to be ensured by transmission system
operators (TSOs) interconnected with small systems.

(10) While this Directive is not addressing ownership issues it
is recalled that in case of an undertaking performing trans-
mission or distribution and which is separated in its legal
form from those undertakings performing generation
and/or supply activities, the designated system operators
may be the same undertaking owning the infrastructure.

(11) To avoid imposing a disproportionate financial and admin-
istrative burden on small distribution companies, Member
States should be able, where necessary, to exempt such
companies
unbundling
legal
requirements.

distribution

from the

(12) Authorisation procedures should not lead to an adminis-
trative burden disproportionate to the size and potential
impact of electricity producers.

in the

framework of

balancing
electricity needed
requirements.
In the absence of such a liquid market,
national regulatory authorities should play an active role
to ensure that balancing tariffs are non-discriminatory and
cost-reflective. At the same time, appropriate incentives
should be provided to balance in-put and off-take of elec-
tricity and not to endanger the system.

(17) National regulatory authorities should be able to fix or
approve tariffs, or the methodologies underlying the calcu-
lation of the tariffs, on the basis of a proposal by the
transmission system operator or distribution system
operator(s), or on the basis of a proposal agreed
between these operator(s) and the users of the network.
In carrying out these tasks, national regulatory authorities
should ensure that transmission and distribution tariffs are
non-discriminatory and cost-reflective, and should take
the long-term, marginal, avoided network
account of
costs
from distributed generation and demand-side
management measures.

(13) Further measures should be taken in order to ensure trans-
parent
to
networks. Those tariffs should be applicable to all system
users on a non-discriminatory basis.

and non-discriminatory tariffs

access

for

(14) In order to facilitate the conclusion of contracts by an
electricity undertaking established in a Member State for
the supply of electricity to eligible customers in another
Member State, Member States and, where appropriate,
national
should work towards
more homogenous conditions and the same degree of
eligibility for the whole of the internal market.

regulatory authorities

(15) The existence of effective regulation, carried out by one or
more national
is an important
regulatory authorities,
factor in guaranteeing non-discriminatory access to the
network. Member
functions,
competences and administrative powers of the regulatory
authorities. It is important that the regulatory authorities
in all Member States share the same minimum set of
competences.

specify

States

the

the

tariffs, or

Those authorities should have the competence to fix or
approve
the methodologies
at
underlying the calculation of transmission and distribution
tariffs. In order to avoid uncertainty and costly and time-
consuming disputes, these tariffs should be published prior
to their entry into force.

least,

(18) The benefits resulting from the internal market should be
available to all Community industry and commerce,
including small and medium-sized enterprises, and to all
Community citizens as quickly as possible, for reasons of
fairness,
create
employment as a result of the efficiency gains that will
be enjoyed by enterprises.

competitiveness,

indirectly,

and

to

(19) Electricity customers

should be able to choose their
supplier freely. Nonetheless a phased approach should be
taken to completing the internal market for electricity to
enable industry to adjust and ensure that adequate
measures and systems are
the
interests of customers and ensure they have a real and
effective right to choose their supplier.

to protect

in place

(20) Progressive market opening towards

full competition
should as soon as possible remove differences between
Member
in the
implementation of this Directive should be ensured.

States. Transparency

and certainty

(21) Nearly

all Member

chosen to ensure
States have
competition in the electricity generation market through
a transparent authorisation procedure. However, Member
States
should ensure the possibility to contribute to
security of supply through the launching of a tendering
procedure or an equivalent procedure in the event that
sufficient electricity generation capacity is not built on
the basis of the authorisation procedure.

(16) In order to ensure effective market access for all market
players,
including new entrants, non-discriminatory and
cost-reflective balancing mechanisms are necessary. As
soon as the electricity market is sufficiently liquid, this
should be achieved through the setting up of transparent
market-based mechanisms for the supply and purchase of

Member States should have the possibility, in the interests
of environmental protection and the promotion of infant
new technologies, of tendering for new capacity on the
basis of published criteria. New capacity includes inter alia
renewables and combined heat and power (CHP).

4.3.2003

EN

Official Journal of the European Union

C 50 E/17

(22) In the interest of security of supply, the supply/demand
balance in individual Member States should be monitored,
and monitoring should be followed by a report on the
situation at Community level, taking account of intercon-
nection capacity between areas. Such monitoring should
be carried out sufficiently early to enable appropriate
measures to be taken if security of supply is compromised.
the necessary
The construction and maintenance of
network
interconnection
capacity, should contribute to ensuring a stable electricity
supply.

infrastructure,

including

(23) Member States should ensure that household customers
and, where Member States deem it appropriate, small
enterprises, enjoy the right to be supplied with electricity
of a specified quality at clearly comparable, transparent
and reasonable prices. In order to ensure the maintenance
of the high standards of public service in the Community,
all measures taken by Member States to achieve the
objectives of this Directive should be regularly notified
to the Commission. The Commission should regularly
publish a report analysing measures taken at national
level to achieve public service objectives and comparing
their effectiveness, with a view to making recommen-
dations as regards measures to be taken at national level
to achieve high public service standards.

in the context of

Member States should take the necessary measures to
the
protect vulnerable customers
internal electricity market. Such measures can differ
according to the particular circumstances in the Member
States in question and may include specific measures
relating to the payment of electricity bills, or more
general measures taken in the social security system.

When universal service is also provided to small enter-
prises, measures to ensure that this universal service is
provided may differ according to households and small
enterprises.

common minimum standards,

(24) The respect of the public service requirements is a funda-
mental requirement of this Directive, and it is important
that
respected by all
Member States, are specified in this Directive, which take
common protection,
into account
security
and
protection
equivalent levels of competition in all Member States. It
is important that the public service requirements can be
taking into account
interpreted on a national basis,
national circumstances and subject
to the respect of
Community law.

the objectives of
supply,

environmental

of

that

undertaking,
distribution, provided that
requirements of this Directive.

also performs

the

it meets

of
functions
the unbundling

(26) Measures implemented by Member States to achieve the
objectives of social and economic cohesion may include,
in particular,
economic
incentives, using, where appropriate, all existing national
and Community tools. These tools may include liability
mechanisms to guarantee the necessary investment.

the provision of

adequate

(27) To the extent to which measures taken by Member States
to fulfil public service obligations constitute State aid
under Article 87(1) of the Treaty, there is an obligation
according to Article 88(3) of the Treaty to notify them to
the Commission.

(28) The requirement to notify the Commission of any refusal
authorisation to construct new generation
to grant
capacity has proven to be an unnecessary administrative
burden and should therefore be dispensed with.

(29) Since the objective of the proposed action, namely the
creation of a fully operational internal electricity market,
in which fair competition prevails, cannot be sufficiently
achieved by the Member States and can therefore, by
reason of the scale and effects of the action, be better
achieved at Community level, the Community may adopt
measures in accordance with the principle of subsidiarity
as set out in Article 5 of the Treaty. In accordance with
the principle of proportionality, as set out in that Article,
this Directive does not go beyond what is necessary in
order to achieve that objective.

electricity

(30) In the light of the experience gained with the operation of
Council Directive 90/547/EEC of 29 October 1990 on the
through transmission grids (1),
transit of
measures should be taken to ensure homogeneous and
non-discriminatory
transmission,
between
including
Member States. To ensure homogeneity in the treatment
of access to the electricity networks, also in the case of
transit, that Directive should be repealed.

cross-border

flows of

electricity

regimes

access

for

(31) Given the scope of the amendments that are being made
to Directive 96/92/EC, it is desirable, for reasons of clarity
and rationalisation, that the provisions in question should
be recast.

(32) This Directive

and
the
observes the principles, recognised in particular by the
Charter of Fundamental Rights of the European Union,

fundamental

respects

rights,

(25) Member States may appoint a supplier of last resort. This
supplier may be the sales division of a vertically integrated

(1) OJ L 313, 13.11.1990, p. 30. Directive as last amended by
Commission Directive 98/75/EC (OJ L 276, 13.10.1998, p. 9).

C 50 E/18

EN

Official Journal of the European Union

4.3.2003

HAVE ADOPTED THIS DIRECTIVE:

CHAPTER I

SCOPE AND DEFINITIONS

Article 1

Scope

This Directive establishes common rules for the generation,
transmission, distribution and supply of electricity.
lays
down the rules relating to the organisation and functioning
of the electricity sector, access to the market, the criteria and
procedures applicable to calls for tenders and the granting of
authorisations and the operation of systems.

It

Article 2

Definitions

For the purposes of this Directive:

1.

‘generation’ means the production of electricity;

8.

‘wholesale customers’ means any natural or legal persons
who purchase electricity for the purpose of resale inside or
outside the system where they are established;

9.

‘final customers’ means customers purchasing electricity
for their own use;

10.

‘household customers’ means customers purchasing elec-
tricity for their own household consumption, excluding
commercial or professional activities;

11.

‘non-household customers’ means any natural or legal
persons purchasing electricity which is not for their own
household use and shall include producers and wholesale
customers;

12.

‘eligible customers’ means customers who are free to
their choice
purchase electricity from the supplier of
within the meaning of Article 21 of this Directive;

13.

‘interconnectors’ means equipment used to link electricity
systems;

14.

‘interconnected system’ means a number of transmission
and distribution systems linked together by means of one
or more interconnectors;

2.

‘producer’ means a natural or legal person generating elec-
tricity;

15.

3.

4.

5.

6.

high-voltage

‘transmission’ means the transport of electricity on the
extra
interconnected
system with a view to its delivery to final customers or
to distributors, but not including supply;

high-voltage

and

‘transmission system operator’ means a natural or legal
person responsible for operating, ensuring the main-
tenance of and, if necessary, developing the transmission
system in a given area and, where applicable, its intercon-
ensuring the
nections with other
long-term ability of
reasonable
demands for the transmission of electricity;

systems, and for
the system to meet

‘distribution’ means the transport of electricity on high-
voltage, medium-voltage
and low-voltage distribution
systems with a view to its delivery to customers, but not
including supply;

‘distribution system operator’ means a natural or legal
person responsible for operating, ensuring the main-
tenance of and,
if necessary, developing the distribution
system in a given area and, where applicable, its intercon-
ensuring the
systems
nections with other
reasonable
the system to meet
long-term ability of
demands for the distribution of electricity;

and for

‘direct
line’ means either an electricity line linking an
isolated production site with an isolated customer or an
electricity line linking an electricity producer and an elec-
tricity supply undertaking to supply directly their own
premises, subsidiaries and eligible customers;

16.

‘economic precedence’ means the ranking of sources of
electricity supply in accordance with economic criteria;

17.

‘ancillary services’ means all services necessary for the
operation of a transmission or distribution system;

18.

‘system users’ means
legal persons
supplying to, or being supplied by, a transmission or
distribution system;

any natural or

19.

‘supply’ means the sale, including resale, of electricity to
customers;

20.

‘integrated electricity undertaking’ means a vertically or
horizontally integrated undertaking;

21.

‘vertically integrated undertaking’ means an undertaking or
a group of undertakings whose mutual relationships are
defined in Article 3(3) of Council Regulation (EEC)
No 4064/89 of 21 December 1989 on the control of
concentrations between undertakings (1) and where the
undertaking/group concerned is performing at least one
of the functions of transmission or distribution and at
least one of the functions of generation or supply of elec-
tricity;

7.

‘customers’ means wholesale and final customers of elec-
tricity;

(1) OJ L 395, 30.12.1989, p. 1. Regulation as last amended by Regu-

lation (EC) No 1310/97 (OJ L 180, 9.7.1997, p. 1).

4.3.2003

EN

Official Journal of the European Union

C 50 E/19

22.

‘related undertaking’ means affiliated undertakings, within
the meaning of Article 41 of the Seventh Council Directive
83/349/EEC of 13 June 1983 based on Article 44(2)(g) (*)
and/or
of
associated undertakings, within the meaning of Article
33(1) thereof, and/or undertakings which belong to the
same shareholders;

the Treaty on consolidated accounts (1),

30.

‘renewable energy sources’ means renewable non-fossil
tidal,
energy sources
(wind,
hydropower, biomass,
treatment
plant gas and biogases);

solar, geothermal, wave,
landfill gas,

sewage

31.

‘distributed generation’ means generation plants connected
to the distribution system.

23.

‘horizontally integrated undertaking’ means an undertaking
performing at least one of the functions of generation for
sale, or transmission, or distribution, or supply of elec-
tricity, and another non-electricity activity;

CHAPTER II

24.

‘tendering procedure’ means the procedure through which
planned additional requirements and replacement capacity
are covered by supplies from new or existing generating
capacity;

25.

‘long-term planning’ means the planning of the need for
investment in generation and transmission and distribution
capacity on a long-term basis, with a view to meeting the
demand of the system for electricity and securing supplies
to customers;

GENERAL RULES FOR THE ORGANISATION OF THE
SECTOR

Article 3

Public service obligations and customer protection

1. Member States shall ensure, on the basis of their institu-
tional organisation and with due regard to the principle of
subsidiarity, that, without prejudice to paragraph 2, electricity
undertakings are operated in accordance with the principles of
this Directive with a view to achieving a competitive and
sustainable market
in electricity, and shall not discriminate
between these undertakings as regards either rights or obli-
gations.

26.

27.

isolated

system’ means

‘small
system with
consumption of less than 3 000 GWh in the year 1996,
where less than 5 % of annual consumption is obtained
through interconnection with other systems;

any

isolated

system with
‘micro
consumption less than 500 GWh in the year 1996,
where there is no connection with other systems;

system’ means

any

28.

‘security’ means both security of supply and provision of
electricity, and technical safety;

29.

efficiency/demand-side management’ means

‘energy
a
global or integrated approach aimed at influencing the
amount and timing of electricity consumption in order
to reduce primary energy consumption and peak loads
by giving precedence to investments in energy efficiency
measures, or other measures, such as interruptible supply
contracts, over investments to increase generation capacity,
if the former are the most effective and economical option,
taking into account the positive environmental impact of
reduced energy consumption and the security of supply
and distribution cost aspects related to it;

(*) The title of Directive 83/349/EEC has been adjusted to take account
of the renumbering of the Articles of the Treaty establishing the
European Community in accordance with Article 12 of the Treaty
of Amsterdam; the original reference was to Article 54(3)(g).
(1) OJ L 193, 18.7.1983, p. 1. Directive as last amended by Directive
2001/65/EC of the European Parliament and of the Council (OJ L
283, 27.10.2001, p. 28).

Having full regard to the relevant provisions of

the
2.
Treaty,
in particular Article 86 thereof, Member States may
impose on undertakings operating in the electricity sector, in
the general economic interest, public service obligations which
may relate to security, including security of supply, regularity,
quality and price of supplies and environmental protection,
including energy efficiency and climate protection. Such obli-
gations shall be clearly defined, transparent, non-discriminatory
and verifiable. In relation to security of supply, energy effi-
ciency/demand-side management and for the fulfilment of
referred to in this paragraph,
environmental goals,
implementation of
Member
States may
long-term planning,
the possibility of
taking into account
third parties seeking access to the system.

introduce

the

as

turnover or balance

(namely enterprises with fewer

3. Member States shall ensure that all household customers,
and, where Member States deem it appropriate, small enter-
than 50 occupied
prises,
sheet not
persons and an annual
exceeding EUR 10 million), enjoy universal service,
is
that
the right to be supplied with electricity of a specified quality
within their territory at reasonable prices. To that end, Member
States may appoint a supplier of last resort. Member States
shall
impose on distribution companies an obligation to
connect customers to their grid under terms, conditions and
tariffs set
in accordance with the procedure laid down in
Article 23(2).

The first subparagraph shall be implemented in a transparent
and non-discriminatory way and shall not impede the opening
of the market provided for in Article 21.

C 50 E/20

EN

Official Journal of the European Union

4.3.2003

4. When financial compensation, other forms of compen-
sation and exclusive rights which a Member State grants for the
fulfilment of the obligations set out in paragraphs 2 and 3 are
provided, this shall be done in a non-discriminatory and trans-
parent way.

imposed on electricity undertakings in the general economic
interest and insofar as the development of trade would not be
affected to such an extent as would be contrary to the interests
of the Community. The interests of the Community include,
amongst others, competition with regard to eligible customers
in accordance with this Directive and Article 86 of the Treaty.

5. Member States shall take appropriate measures to protect
final customers, and shall in particular ensure that there are
adequate safeguards to protect vulnerable customers, including
measures to help them avoid disconnection. In this context,
Member States may take measures to protect final customers
in remote areas. They shall ensure high levels of consumer
protection, particularly with respect to transparency regarding
contractual
information and
dispute settlement mechanisms. Member States shall ensure
that the eligible customer is in fact able to switch to a new
supplier. As
these
measures shall include those set out in Annex A.

terms and conditions, general

least household customers,

regards at

6. Member States
shall ensure that electricity suppliers
specify in or with the bills and in promotional materials
made available to final customers:

(a) the contribution of each energy source to the overall fuel

mix of the supplier over the preceding year;

(b) at least the reference to existing reference sources, such as
environmental
web-pages, where
impact,
in terms of at least emissions of CO2 and the
radioactive waste resulting from the electricity production
from different energy sources, is publicly available.

information on the

With respect to electricity obtained via an electricity exchange
or
the
imported from an undertaking situated outside
Community, aggregate figures provided by the exchange or
the undertaking in question over the preceding year may be
used.

shall, upon implementation of

9. Member States
this
Directive, inform the Commission of all measures adopted to
fulfil universal service and public service obligations, including
consumer protection and environmental protection, and their
possible effect on national and international competition,
whether or not such measures require a derogation from this
Directive. They shall
inform the Commission subsequently
every two years of any changes to such measures, whether
or not they require a derogation from this Directive.

Article 4

Monitoring of security of supply

Member States shall ensure the monitoring of security of
supply issues. Where Member States consider it appropriate
they may delegate this task to the regulatory authorities
referred to in Article 23(1). This monitoring shall, in particular,
cover the supply/demand balance on the national market, the
level of expected future demand and envisaged additional
capacity being planned or under construction, and the quality
and level of maintenance of the networks, as well as measures
to cover peak demand and to deal with shortfalls of one or
more suppliers. The competent authorities shall publish every
two years, by 31 July at the latest, a report outlining the
findings resulting from the monitoring of
these issues, as
well as any measures taken or envisaged to address them and
shall forward this report to the Commission forthwith.

Member States shall ensure that appropriate mechanisms are
put in place, e.g. by the supplier, to verify the reliability of the
information on the fuel mix.

Article 5

Technical rules

7. Member States shall implement appropriate measures to
achieve the objectives of
social and economic cohesion,
environmental protection, which may include energy effi-
ciency/demand-side management measures and means
to
combat
supply. Such
climate
the provision of
measures may
adequate economic incentives, using, where appropriate, all
existing national and Community tools, for the maintenance
and construction of
the necessary network infrastructure,
including interconnection capacity.

and security of
in particular,

change,
include,

to

the

generating

system of

requirements

design and operational

Member States shall ensure that technical safety criteria are
technical rules establishing the minimum
defined and that
the
technical
for
connection
installations,
distribution systems, directly connected consumers' equipment,
interconnector circuits and direct lines are developed and made
public. These technical rules shall ensure the interoperability of
systems and shall be objective and non-discriminatory. They
shall be notified to the Commission in accordance with
Article 8 of Directive 98/34/EC of the European Parliament
the Council of 22 June 1998 laying down a
and of
procedure for the provision of
information in the field of
technical standards and regulations and of rules on Information
Society Services (1).

8. Member States may decide not to apply the provisions of
Articles 6, 7, 20 and 22 insofar as their application would
obstruct the performance, in law or in fact, of the obligations

(1) OJ L 204, 21.7.1998, p. 37. Directive as amended by Directive

98/48/EC (OJ L 217, 5.8.1998, p. 18).

4.3.2003

EN

Official Journal of the European Union

C 50 E/21

CHAPTER III

GENERATION

Article 6

Authorisation procedure for new capacity

1.
For the construction of new generating capacity, Member
States shall adopt an authorisation procedure, which shall be
conducted in accordance with objective,
transparent and
non-discriminatory criteria.

2. Member States shall lay down the criteria for the grant of
authorisations for the construction of generating capacity in
their territory. These criteria may relate to:

(a)

the safety and security of the electricity system, installations
and associated equipment;

(b) protection of public health and safety;

(c) protection of the environment;

(d)

land use and siting;

(e) use of public ground;

(f) energy efficiency;

(g) the nature of the primary sources;

(h) characteristics particular to the applicant, such as technical,

economic and financial capabilities;

(i) compliance with measures adopted pursuant to Article 3.

3. Member States shall ensure that authorisation procedures
for small and/or distributed generation take into account their
limited size and potential impact.

The authorisation procedures and criteria shall be made
4.
public. Applicants shall be informed of the reasons for any
refusal
to grant an authorisation. The reasons must be
objective, non-discriminatory, well founded and duly substan-
tiated. Appeal procedures shall be made available to the
applicant.

Article 7

Tendering for new capacity

1. Member States shall ensure the possibility, in the interests
of security of supply, of providing for new capacity or energy
efficiency/demand-side management measures
through a
tendering procedure or any procedure equivalent in terms of
transparency and non-discrimination, on the basis of published
criteria. These procedures can, however, only be launched if on
the basis of the authorisation procedure the generating capacity
being built or the energy efficiency/demand-side management
measures being taken are not sufficient to ensure security of
supply.

2. Member States may ensure the possibility, in the interests
of environmental protection and the promotion of infant new

technologies, of tendering for new capacity on the basis of
published criteria. This tender may relate to new capacity or
energy
efficiency/demand-side management measures. A
tendering procedure can, however, only be launched if on
the generating
the authorisation procedure
the basis of
capacity being built or the measures being taken are not
sufficient to achieve these objectives.

Details of

the
capacity

tendering procedure
for means of
3.
efficiency/demand-side
energy
and
generating
management measures
shall be published in the Official
Journal of the European Union at least six months prior to the
closing date for tenders.

The tender specifications
interested undertaking established in the
Member State so that
submit a tender.

shall be made available to any
territory of
a
time in which to

it has sufficient

With a view to ensuring transparency and non-discrimination
the tender specifications shall contain a detailed description of
the contract specifications and of the procedure to be followed
by all tenderers and an exhaustive list of criteria governing the
selection of tenderers and the award of the contract, including
incentives, such as subsidies, which are covered by the tender.
These specifications may also relate to the fields referred to in
Article 6(2).

to tender

In invitations

4.
the requisite generating
capacity, consideration must also be given to electricity
from existing
supply offers with long-term guarantees
generating units, provided that additional requirements can
be met in this way.

for

5. Member States shall designate an authority or a public
body or a private body independent from electricity generation,
transmission, distribution and supply activities, which may be a
regulatory authority referred to in Article 23(1),
to be
responsible for the organisation, monitoring and control of
the tendering procedure referred to in paragraphs 1 to 4.
Where a transmission system operator is fully independent
from other activities not relating to the transmission system
in ownership terms, the transmission system operator may be
designated as the body responsible for organising, monitoring
and controlling the tendering procedure. This authority or
body shall take all necessary steps to ensure confidentiality of
the information contained in the tenders.

CHAPTER IV

TRANSMISSION SYSTEM OPERATION

Article 8

Designation of Transmission System Operators

Member States shall designate, or shall require undertakings
which own transmission systems to designate, for a period of
time to be determined by Member States having regard to
considerations of efficiency and economic balance, one or
more transmission system operators. Member States
shall
ensure that transmission system operators act in accordance
with Articles 9 to 12.

C 50 E/22

EN

Official Journal of the European Union

4.3.2003

Article 9

Tasks of Transmission System Operators

Each transmission system operator shall be responsible for:

(a) ensuring the long-term ability of

the system to meet

reasonable demands for the transmission of electricity;

(b) contributing to security of supply through adequate trans-

mission capacity and system reliability;

(c) managing energy flows on the system, taking into account
exchanges with other interconnected systems. To that end,
the transmission system operator shall be responsible for
ensuring a secure, reliable and efficient electricity system
and,
in that context, for ensuring the availability of all
necessary ancillary services insofar as this availability is
transmission system with
independent
which its system is interconnected;

from any other

(d) providing to the operator of any other system with which
its system is interconnected sufficient information to ensure
the secure and efficient operation, coordinated development
and interoperability of the interconnected system;

(e) ensuring non-discrimination as between system users or
its

system users, particularly in favour of

classes of
related undertakings.

(f) providing system users with the information they need for

efficient access to the system.

Article 10

Unbundling of Transmission System Operators

in terms of

1. Where the transmission system operator is part of a
it shall be independent at
vertically integrated undertaking,
least
form, organisation and decision
making from other activities not relating to transmission.
This requirement shall not imply or result in the requirement
to separate the ownership of assets of the transmission network
from the vertically integrated undertaking.

its legal

In order to ensure the independence of the transmission
the following

2.
system operator referred to in paragraph 1,
minimum criteria shall apply:

(a) those persons responsible for the management of the trans-
mission system operator may not participate in company
undertaking
structures
of
responsible, directly or
the day-to-day
operation of
the generation, distribution and supply of
electricity;

electricity
for

integrated

indirectly,

the

(b) appropriate measures must be taken to ensure that the
interests of the persons responsible for the
professional
the transmission system operator are
management of
taken into account in a manner that ensures that they
are capable of acting independently;

(c) the transmission system operator
independent

decision-making rights,

shall have effective
from the integrated

electricity undertaking, with respect to assets necessary to
operate, maintain or develop the network. This should not
prevent the existence of appropriate coordination mech-
anisms to ensure that
the economic and management
supervision rights of the parent company in respect of
return on assets in a subsidiary are protected;

(d) the

shall

transmission system operator

establish a
compliance programme, which sets out measures taken
to ensure that discriminatory conduct
is excluded, and
ensure that observance of it is adequately monitored. The
specific obligations of
programme
employees
report,
setting out the measures taken, shall be submitted by the
person or body responsible for monitoring the compliance
programme to the regulatory authority referred to in
Article 23(1) and shall be published.

this objective. An annual

shall
to meet

set out

the

Article 11

Dispatching and Balancing

1. Without prejudice to the supply of electricity on the basis
of contractual obligations, including those which derive from
the tendering specifications, the transmission system operator
shall, where it has this function, be responsible for dispatching
the generating installations in its area and for determining the
use of interconnectors with other systems.

2.
The dispatching of generating installations and the use of
interconnectors shall be determined on the basis of criteria
which may be approved by the Member State and which
must be objective, published and applied in a non-discrimi-
natory manner which ensures the proper functioning of the
internal market in electricity. They shall take into account the
economic precedence of electricity from available generating
installations or
transfers and the technical
constraints on the system.

interconnector

A Member State may require the system operator, when
3.
dispatching
to
installations,
generating installations using renewable energy sources or
waste or producing combined heat and power.

to give priority

generating

A Member State may, for reasons of security of supply,
4.
direct
that priority be given to the dispatch of generating
installations using indigenous primary energy fuel sources, to
an extent not exceeding in any calendar year 15 % of the
overall primary energy necessary to produce the electricity
consumed in the Member State concerned.

States may

5. Member
system
operators to comply with minimum standards for the main-
tenance and development of the transmission system, including
interconnection capacity.

transmission

require

6.
Transmission system operators shall procure the energy
they use to cover energy losses and reserve capacity in their
system according to transparent, non-discriminatory and
market-based procedures, whenever they have this function.

4.3.2003

EN

Official Journal of the European Union

C 50 E/23

for
Rules adopted by transmission system operators
7.
balancing the electricity system shall be objective, transparent
and non-discriminatory,
including rules for the charging of
system users of their networks for energy imbalance. Terms
including rules and tariffs, for the provision
and conditions,
of such services by transmission system operators shall be
established pursuant
to a methodology compatible with
Article 23(2) in a non-discriminatory and cost-reflective way
and shall be published.

Article 12

Confidentiality for Transmission System Operators

the

Without prejudice to Article 18 or any other legal duty to
disclose information, the transmission system operator shall
preserve
sensitive
its
information obtained in the course of carrying out
business, and shall prevent information about its own activities
which may be commercially advantageous from being disclosed
in a discriminatory manner.

confidentiality

commercially

of

Distribution system operators shall procure the energy
5.
they use to cover energy losses and reserve capacity in their
system according to transparent, non-discriminatory and
market based procedures, whenever they have this function.
This requirement shall be without prejudice to using electricity
acquired under contracts concluded before 1 January 2002.

6. Where distribution system operators are responsible for
balancing the electricity distribution system, rules adopted by
transparent and
them for that purpose shall be objective,
non-discriminatory,
charging of
system users of their networks for energy imbalance. Terms
and conditions,
including rules and tariffs, for the provision
of such services by distribution system operators shall be estab-
lished in accordance with Article 23(2) in a non-discriminatory
and cost-reflective way and shall be published.

including rules

the

for

energy

the distribution
7. When planning the development of
network,
management
efficiency/demand-side
measures and/or distributed generation that might supplant
the need to upgrade or replace electricity capacity shall be
considered by the distribution system operator.

CHAPTER V

Article 15

DISTRIBUTION SYSTEM OPERATION

Unbundling of Distribution System Operators

Article 13

Designation of Distribution System Operators

Member States shall designate or shall require undertakings that
own or are responsible for distribution systems to designate,
for a period of time to be determined by Member States having
regard to considerations of efficiency and economic balance,
one or more distribution system operators. Member States shall
ensure that distribution system operators act in accordance
with Articles 14 to 16.

Article 14

Tasks of Distribution System Operators

The distribution system operator shall maintain a secure,
1.
reliable and efficient electricity distribution system in its area
with due regard for the environment.

In any event,

2.
it must not discriminate between system
users or classes of system users, particularly in favour of its
related undertakings.

in terms of

1. Where the distribution system operator is part of a
it shall be independent at
vertically integrated undertaking,
least
form, organisation and decision
making from other activities not relating to distribution. This
requirement shall not imply or result in the requirement to
separate the ownership of assets of the distribution network
from the vertically integrated undertaking.

its legal

In order to ensure the independence of the distribution
the following

2.
system operator referred to in paragraph 1,
minimum criteria shall apply:

the
(a) those persons responsible for the management of
distribution system operator may not participate
in
company structures of the integrated electricity undertaking
the day-to-day
responsible, directly or
operation of the generation, transmission or supply of elec-
tricity;

indirectly,

for

(b) appropriate measures must be taken to ensure that the
interests of the persons responsible for the
professional
management of
the distribution system operator are
taken into account in a manner that ensures that they
are capable of acting independently;

3.
The distribution system operator shall provide system
users with the information they need for efficient access to
the system.

(c)

A Member State may require the distribution system
4.
operator, when dispatching generating installations,
to give
priority to generating installations using renewable energy
sources or waste or producing combined heat and power.

independent

shall have
effective
the distribution system operator
decision-making rights,
from the integrated
electricity undertaking, with respect to assets necessary to
operate, maintain and develop the network. This should
not preclude the existence of appropriate coordination
mechanisms to ensure that the economic and management
supervision rights of the parent company in respect of
return on assets in a subsidiary are protected;

C 50 E/24

EN

Official Journal of the European Union

4.3.2003

(d) the

shall

establish

distribution

a
system operator
compliance programme, which sets out measures taken
to ensure that discriminatory conduct
is excluded, and
ensure that observance of it is adequately monitored. The
specific obligations of
programme
employees
report,
setting out the measures taken, shall be submitted by the
person or body responsible for monitoring the compliance
programme to the regulatory authority referred to in
Article 23(1) and published.

this objective. An annual

shall
to meet

set out

the

Member States may decide not to apply paragraphs 1 and 2 to
integrated electricity undertakings serving less than 100 000
connected customers, or serving small isolated systems.

Article 16

Confidentiality for Distribution System Operators

the

Without prejudice to Article 18 or any other legal duty to
the distribution system operator must
disclose information,
sensitive
preserve
information obtained in the course of carrying out
its
business, and shall prevent information about its own activities
which may be commercially advantageous being disclosed in a
discriminatory manner.

confidentiality

commercially

of

Article 17

Combined operator

is

excluded,

and ensure

that
discriminatory conduct
observance of it is adequately monitored. The programme
shall set out the specific obligations of employees to meet
this objective. An annual report, setting out the measures
taken, shall be submitted by the person or body responsible
for monitoring the compliance programme to the regu-
latory authority referred to in Article 23(1) and published.

CHAPTER VI

UNBUNDLING AND TRANSPARENCY OF ACCOUNTS

Article 18

Right of access to accounts

any

States or

they
1. Member
including the regulatory authorities referred to in
designate,
Article 23, shall,
their
functions, have right of access to the accounts of electricity
undertakings as set out in Article 19.

insofar as necessary to carry out

competent

authority

2. Member States and any designated competent authority,
including the regulatory authorities referred to in Article 23,
shall preserve the confidentiality of commercially sensitive
information. Member States may provide for the disclosure of
such information where this is necessary in order for the
competent authorities to carry out their functions.

a

the
The rules in Articles 10(1) and 15(1) do not prevent
operation of
combined transmission and distribution
system operator, which is independent in terms of its legal
form, organisation and decision making from other activities
not relating to transmission or distribution system operation
and which meets the following requirements:

Article 19

Unbundling of accounts

1. Member States shall take the necessary steps to ensure
that
in
the accounts of electricity undertakings are kept
accordance with paragraphs 2 to 3.

(a) those persons responsible for

the management of
system operator may not participate

the
combined
in
company structures of the integrated electricity undertaking
responsible, directly or
the day-to-day
operation of the generation, or supply of electricity;

indirectly,

for

(b) appropriate measures must be taken to ensure that the
professional
interests of the persons responsible for the
management of the combined system operator are taken
into account in a manner that ensures that they are capable
of acting independently;

(c) the combined system operator shall have effective decision-
making rights, independent from the integrated electricity
undertaking, with respect to assets necessary to operate,
maintain and develop the network. This
should not
prevent the existence of appropriate coordination mech-
anisms to ensure that
the economic and management
supervision rights of the parent company in respect of
return on assets in a subsidiary are protected;

(d) the combined system operator shall establish a compliance
programme which sets out measures taken to ensure that

their

Electricity

undertakings, whatever

2.
system of
ownership or legal form, shall draw up, submit to audit and
publish their annual accounts in accordance with the rules of
national law concerning the annual accounts of limited liability
companies adopted pursuant to the Fourth Council Directive
78/660/EC of 25 July 1978 based on Article 44(2)(g) (*) of the
Treaty
certain types of
companies (1).

accounts of

on the

annual

Undertakings which are not legally obliged to publish their
annual accounts shall keep a copy of these at the disposal of
the public in their head office.

___________
(*) The title of Directive 78/660/EEC has been adjusted to take account
of the renumbering of the Articles of the Treaty establishing the
European Community in accordance with Article 12 of the Treaty
of Amsterdam; the original reference was to Article 54(3)(g).
(1) OJ L 222, 14.8.1978, p. 11. Directive as last amended by Directive
2001/65/EC of the European Parliament and of the Council (OJ L
283, 27.10.2001, p. 28).

4.3.2003

EN

Official Journal of the European Union

C 50 E/25

Electricity undertakings shall, in their internal accounting,
3.
keep separate accounts for each of
their transmission and
distribution activities as they would be required to do if the
activities in question were carried out by separate undertakings,
with a view to avoiding discrimination, cross-subsidisation and
distortion of competition. They shall also keep accounts, which
may be consolidated, for other electricity activities not relating
to transmission or distribution. Until 1 July 2007, they shall
keep separate accounts
for eligible
customers and supply activities for non-eligible customers.
Revenue
transmission/distribution
system shall be specified in the accounts. Where appropriate,
they shall keep consolidated accounts for other, non-electricity
activities. The internal accounts shall include a balance sheet
and a profit and loss account for each activity.

from ownership of

supply activities

the

for

CHAPTER VII

ORGANISATION OF ACCESS TO THE SYSTEM

Article 20

Third party access

to the

third party access

1. Member States shall ensure the implementation of a
system of
transmission and
distribution systems based on published tariffs, applicable to
all eligible customers and applied objectively and without
discrimination between system users. Member States shall
ensure that
these tariffs, or the methodologies underlying
their calculation, are approved prior to their entry into force
in accordance with Article 23 and that these tariffs, and the
methodologies — where only methodologies are approved —
are published prior to their entry into force.

The operator of a transmission or distribution system
2.
may refuse access where it lacks the necessary capacity. Duly
substantiated reasons must be given for
in
particular having regard to Article 3. Member States shall
ensure, where appropriate and when refusal of access takes
place, that the transmission or distribution system operator
provides relevant
information on measures that would be
necessary to reinforce the network. The party requesting such
information may be charged a reasonable fee reflecting the cost
of providing such information.

such refusal,

(c)

from 1 July 2007, all customers.

2.

To avoid imbalance in the opening of electricity markets:

(a) contracts for the supply of electricity with an eligible
customer in the system of another Member State shall
not be prohibited if the customer is considered as eligible
in both systems involved;

the two systems,

(b) in cases where transactions as described in point (a) are
the customer being eligible only in
refused because of
one of
the Commission may oblige,
taking into account the situation in the market and the
common interest,
the
the Member State
the request of
requested supply at
where the eligible customer is located.

refusing party to execute

the

Article 22

Direct lines

1. Member States shall
enable:

take the measures necessary to

(a) all electricity producers and electricity supply undertakings
territory to supply their own
established within their
premises, subsidiaries and eligible customers through a
direct line;

(b) any eligible customer within their territory to be supplied
through a direct line by a producer and supply under-
takings.

2. Member States shall lay down the criteria for the grant of
authorisations for the construction of direct
lines in their
territory. These criteria must be objective and non-discrimi-
natory.

Article 21

Market opening and reciprocity

3.
The possibility of supplying electricity through a direct
line as referred to in paragraph 1 shall not affect the possibility
of contracting electricity in accordance with Article 20.

1. Member States shall ensure that the eligible customers
are:

(a) until 1 July 2004, the eligible customers as specified in
Article 19(1) to (3) of Directive 96/92/EC. Member States
shall publish by 31 January each year the criteria for the
definition of these eligible customers;

(b) from 1 July 2004, at

the latest, all non-household

customers;

4. Member States may make authorisation to construct a
direct line subject either to the refusal of system access on
the basis, as appropriate, of Article 20 or to the opening of
a dispute settlement procedure under Article 23.

5. Member States may refuse to authorise a direct line if the
granting of
the
provisions of Article 3. Duly substantiated reasons must be
given for such refusal.

such an authorisation would obstruct

C 50 E/26

EN

Official Journal of the European Union

4.3.2003

Article 23

Regulatory authorities

1. Member States shall designate one or more competent
bodies with the function of regulatory authorities. These auth-
orities shall be wholly independent from the interests of the
electricity industry. They shall at
least be responsible for
ensuring non-discrimination, effective competition and the
efficient functioning of the market, by at least monitoring in
particular:

(a) the rules on the management and allocation of intercon-
regulatory
those Member States with

in conjunction with the

nection capacity,
authority or authorities of
which interconnection exists;

(b) any mechanisms to deal with congested capacity within the

national electricity system;

Regulatory authorities shall have the authority to require
4.
transmission and distribution system operators, if necessary, to
modify the terms and conditions, tariffs, rules, mechanisms and
methodologies referred to in paragraphs 1, 2 and 3, to ensure
that they are proportionate and applied in a non-discriminatory
manner.

to the

5.
Any party having a complaint against a transmission or
issues
distribution system operator with respect
mentioned in paragraphs 1, 2 and 4 may refer the complaint
to the regulatory authority which, acting as dispute settlement
authority, shall issue a decision within two months after receipt
of the complaint. This period may be extended by two months
information is sought by the regulatory
where additional
authority. This period may be further extended with the
agreement of
the complainant. Such a decision shall have
binding effect unless and until overruled on appeal.

(c) the time taken by transmission and distribution under-

takings to make connections and repairs;

Where a complaint concerns connection tariffs for major new
generation facilities, the two-month period may be extended by
the regulatory authority.

(d) the publication of appropriate information by transmission
and distribution system operators concerning intercon-
nectors, grid usage and capacity allocation to interested
treat
account
parties,
non-aggregated information as commercially confidential;

taking

need

into

the

to

(e) the effective unbundling of accounts, as referred to in
there are no cross-subsidies
Article 19,
between generation, transmission, distribution and supply
activities;

to ensure that

(f)

for connecting new
the terms, conditions and tariffs
producers of
are
electricity to guarantee
objective, transparent and non-discriminatory, in particular
taking full account of the costs and benefits of the various
renewable
distributed
generation and combined heat and power.

technologies,

sources

energy

these

that

2.
The regulatory authorities shall be responsible for fixing
or approving, prior to their entry into force, at least the metho-
dologies used to calculate or establish the terms and conditions
for:

(a) connection and access to national networks,

including

transmission and distribution tariffs;

(b) the provision of balancing services.

the regulatory authorities

Notwithstanding paragraph 2, Member States may
3.
provide that
for
formal decision, to the relevant body in the Member State
the tariffs or at least the methodologies referred to in that
paragraph as well as the modifications in paragraph 4.

submit,

shall

Any party who is affected and has a right to complain
6.
concerning a decision on methodologies taken pursuant
to
paragraphs 2, 3 or 4 or, where the regulatory authority has
a duty to consult, concerning the proposed methodologies,
may, at
the latest within two months, or a shorter time
period as provided by Member States, following publication
of
submit a
shall not have
complaint
suspensive effect.

review. Such a complaint

the decision or proposal

a decision,

for

for

7. Member States shall take measures to ensure that regu-
latory authorities are able to carry out their duties referred to
in paragraphs 1 to 5 in an efficient and expeditious manner.

shall create appropriate and efficient
8. Member States
mechanisms for regulation, control and transparency so as to
avoid any abuse of a dominant position, in particular to the
detriment of consumers, and any predatory behaviour. These
mechanisms shall take account of the provisions of the Treaty,
and in particular Article 82 thereof.

taken,

including

9. Member States shall ensure that the appropriate measures
criminal
administrative
are
proceedings in conformity with their national
law, against
the natural or legal persons responsible where confidentiality
rules imposed by this Directive have not been respected.

action or

10.
In the event of cross-border disputes, the deciding regu-
latory authority shall be the regulatory authority which has
jurisdiction in respect of the system operator which refuses
use of, or access to, the system.

These tariffs or the methodologies or modifications thereto
shall be published together with the decision on formal
adoption.

11.
Complaints referred to in paragraphs 5 and 6 shall be
without prejudice to the exercise of rights of appeal under
Community and national law.

4.3.2003

EN

Official Journal of the European Union

C 50 E/27

CHAPTER VIII

FINAL PROVISIONS

Article 24

Safeguard measures

In the event of a sudden crisis in the energy market and where
the physical safety or security of persons, apparatus or instal-
lations or system integrity is threatened, a Member State may
temporarily take the necessary safeguard measures.

Such measures must cause the least possible disturbance in the
functioning of the internal market and must not be wider in
scope
sudden
difficulties which have arisen.

strictly necessary to remedy the

than is

The Member State concerned shall without delay notify these
measures to the other Member States, and to the Commission,
the Member State concerned must
which may decide that
insofar as they distort
amend or abolish such measures,
competition and adversely affect trade in a manner which is
at variance with the common interest.

Article 25

Monitoring of imports of electricity

shall

inform the Commission every three
Member States
months of imports of electricity,
in terms of physical flows,
that have taken place during the previous three months from
third countries.

Article 26

Derogations

1. Member States which can demonstrate, after the Directive
has been brought into force, that there are substantial problems
for the operation of their small isolated systems, may apply for
derogations from the relevant provisions of Chapters IV, V, VI,
VII, as well as Chapter III, in the case of micro isolated systems,
as far as refurbishing, upgrading and expansion of existing
capacity are concerned, which may be granted to them by
the Commission. The latter shall
inform the Member States
of those applications prior to taking a decision, taking into
for confidentiality. This decision shall be
account
respect
published in the Official
the European Union. This
Article shall also be applicable to Luxembourg.

Journal of

Article 27

Review Procedure

In the event that the report referred to in Article 28(3) reaches
the conclusion whereby, given the effective manner in which
network access has been carried out in a Member State —
which gives rise to fully effective, non-discriminatory and
unhindered network access — the Commission concludes
that certain obligations imposed by this Directive on under-
takings (including those with respect to legal unbundling for
distribution system operators) are not proportionate to the
objective pursued, the Member State in question may submit
a request
exemption from the
requirement in question.

to the Commission for

The request shall be notified, without delay, by the Member
State to the Commission,
the relevant
the conclusion
information necessary to demonstrate that
reached in the report on effective network access being
ensured will be maintained.

together with all

its receipt of a notification,

Within three months of
the
to the
Commission shall adopt an opinion with respect
request by the Member State concerned, and where appro-
priate, submit proposals to the European Parliament and to
the Council to amend the relevant provisions of the Directive
or provide for other appropriate means.

Article 28

Reporting

shall monitor

The Commission

1.
review the
application of this Directive and submit an overall progress
report
to the European Parliament and the Council before
the end of the first year following the entry into force of
this Directive, and thereafter on an annual basis. The report
shall cover at least:

and

(a)

the experience gained and progress made in creating a
complete and fully operational internal market in electricity
and the obstacles that remain in this respect,
including
aspects of market dominance,
concentration in the
market, predatory or anti-competitive behaviour;

(b) the extent

to which the unbundling and tarification
contained in this Directive have been
requirements
successful
in ensuring fair and non-discriminatory access
to the Community's electricity system and equivalent
levels of competition, as well as the economic, environ-
mental and social consequences of the opening of the elec-
tricity market for customers;

into force,

A Member State which, after the Directive has been
2.
brought
for reasons of a technical nature has
substantial problems in opening its market for certain limited
groups of the non-household customers referred to in Article
21(1)b may apply for derogation from this provision, which
may be granted to it by the Commission for a period not
exceeding 18 months after the date referred to in Article
30(1).
In any case, such derogation shall end on the date
referred to in Article 21(1)c.

(c) an examination of issues relating to system capacity levels
and security of supply of electricity in the Community, and
in particular the existing and projected balance between
demand and supply,
the physical
capacity for exchanges between areas;

taking into account

(d) special attention will be given to measures

taken in
Member States to cover peak demand and to deal with
shortfalls of one or more suppliers;

C 50 E/28

EN

Official Journal of the European Union

4.3.2003

(e)

the derogation provided under
the implementation of
Article 15(2) with a view to a possible revision of the
threshold;

Where appropriate, the Commission shall submit proposals to
the European Parliament and the Council,
in particular to
guarantee high public service standards.

(f) a general assessment of the progress achieved with regard
to bilateral relations with third countries which produce
and export or transport electricity,
including progress in
market integration, trade and access to the networks of
such third countries;

(g) the need for possible harmonisation requirements that are

not linked to the provisions of this Directive;

the

(h) the manner in which Member States have implemented in
labelling
practice
contained in Article 3(6), and the manner in which any
Commission Recommendations on this issue have been
taken into account.

requirements

regarding

energy

Where appropriate, this report may include recommendations
especially as regard the scope of labelling provision.

2.
Every two years, the report referred to in paragraph 1
shall also cover an analysis of the different measures taken in
the Member States to meet public service obligations, together
with an examination of the effectiveness of those measures
and, in particular, their effects on competition in the electricity
market. Where appropriate, this report may include recom-
mendations as to the measures to be taken at national level
to achieve high public service standards, or measures intended
to prevent market foreclosure.

3.
The Commission shall, no later than 1 January 2006,
forward to the European Parliament and Council, a detailed
report outlining progress in creating the internal electricity
market. The report shall, in particular, consider:

— the existence of non-discriminatory network access;

— effective regulation;

— the development of interconnection infrastructure and the

security of supply situation in the Community;

— the extent to which the full benefits of the opening of
markets are accruing to small enterprises and households,
notably with respect to public service and universal service
standards;

— the extent

to which markets are in practice open to

effective competition;

— the extent

to which customers are actually switching

suppliers and renegotiating tariffs;

— price developments, including supply prices, in relation to

the degree of the opening of markets;

integrated

— the experience gained in the application of the Directive as
far as the effective independence of system operators in
and
vertically
concerned
undertakings
inde-
whether other measures in addition to functional
been
have
pendence
legal
to
developed which
unbundling.

separation
have

of
effects

equivalent

accounts

and

is

Where appropriate, the Commission shall submit proposals to
the European Parliament and the Council,
in particular to
ensure full and effective independence of distribution system
operators before 1 July 2007.

Article 29

Repeals

Directive 90/547/EEC shall be repealed with effect from 1 July
2004.

Directive 96/92/EC shall be repealed from 1 July 2004 without
prejudice to the obligations of Member States concerning the
said
deadlines
Directive. References made to the repealed Directive shall be
construed as being made to this Directive and should be read
in accordance with the correlation table in Annex B.

transposition and application of

the

for

Article 30

Implementation

1. Member States shall bring into force the laws, regulations
and administrative provisions necessary to comply with this
Directive not later than 1 July 2004. They shall
forthwith
inform the Commission thereof.

2. Member States may postpone the implementation of
Article 15(1) until 1 July 2007.

3. When Member States adopt these measures, they shall
contain a reference to this Directive or shall be accompanied
by such reference on the occasion of their official publication.
The methods of making such reference shall be laid down by
Member States.

Article 31

Entry into force

This Directive shall enter into force on the twentieth day
following that of its publication in the Official Journal of the
European Union.

Article 32

Addresses

This Directive is addressed to the Member States.

Done at . . .

For the European Parliament

The President

For the Council

The President

4.3.2003

EN

Official Journal of the European Union

C 50 E/29

ANNEX A

MEASURES ON CONSUMER PROTECTION

Without prejudice to Community rules on consumer protection,
in particular Directives 97/7/EC of the European
Parliament and of the Council (1) and Council Directive 93/13/EC (2), the measures referred to in Article 3 are to
ensure that customers:

(a) have a right to a contract with their electricity service provider that specifies:

— the identity and address of the supplier;

— the services provided, the service quality levels offered, as well as the time for the initial connection;

— if offered, the types of maintenance service offered;

— the means by which up-to-date information on all applicable tariffs and maintenance charges may be obtained;

— the duration of the contract, the conditions for renewal and termination of services and of the contract, the

existence of any right of withdrawal;

— any compensation and the refund arrangements which apply if contracted service quality levels are not met; and

— the method of initiating procedures for settlement of disputes in accordance with point (f).

Conditions shall be fair and well known in advance. In any case, this information should be provided prior to the
conclusion or confirmation of the contract. Where contracts are concluded through intermediaries, the above
information shall also be provided prior to the conclusion of the contract;

(b) are given adequate notice of any intention to modify contractual conditions and are informed about their right of
withdrawal when the notice is given. Service providers shall notify their subscribers directly of any increase in
charges, at an appropriate time no later than one normal billing period after the increase comes into effect. Member
States shall ensure that customers are free to withdraw from contracts if they do not accept the new conditions
notified to them by their electricity service provider;

(c) receive transparent information on applicable prices and tariffs and on standard terms and conditions, in respect of

access to and use of electricity services;

(d) are offered a wide choice of payment methods. Any difference in terms and conditions shall reflect the costs to the
supplier of the different payment systems. General terms and conditions shall be fair and transparent. They shall be
given in clear and comprehensible language. Customers shall be protected against unfair or misleading selling
methods;

(e) shall not be charged for changing supplier;

(f) benefit from transparent, simple and inexpensive procedures for dealing with their complaints. Such procedures shall
enable disputes to be settled fairly and promptly with provision, where warranted, for a system of reimbursement
and/or compensation. They should follow, wherever possible, the principles set out in Commission Recommen-
dation 98/257/EC (3);

(g) when having access to universal service under the provisions adopted by Member States pursuant to Article 3(3), are

informed about their rights regarding universal service.

(1) OJ L 144, 4.6.1997, p. 19.
(2) OJ L 95, 21.4.1993, p. 29.
(3) OJ L 115, 17.4.1998, p. 31.

C 50 E/30

EN

Official Journal of the European Union

4.3.2003

ANNEX B

CORRELATION TABLE

Directive 96/92/EC

This Directive

Article 1

Article 2

Article 1 Scope

Article 2 Definitions

Articles 3 & 10(1)

Article 3 PSOs and Customer protection

—

Article 7(2)

Articles 4 & 5

Articles 4 & 6

Article 7(1)

Article 7(3)-(5)

Article 7(6)

Article 8

Article 9

Article 4 Monitoring of security of supply

Article 5 Technical rules

Article 6 Authorisation procedure for new capacity

Article 7 Tendering for new capacity

Article 8 Designation of TSOs

Article 9 Tasks of TSOs

Article 10 Unbundling of TSOs

Article 11 Dispatching and balancing

Article 12 Confidentiality for TSOs

Articles 10(2) & (3)

Article 13 Designation of DSOs

Article 11

—

Article 12

—

Article 13

Article 14

Article 14 Tasks of DSOs

Article 15 Unbundling of DSOs

Article 16 Confidentiality for DSOs

Article 17 Combined operator

Article 18 Right of access to accounts

Article 19 Unbundling of accounts

Articles 15-18

Article 20 Third Party Access

Article 19

Article 21

Article 21 Market opening and reciprocity

Article 22 Direct lines

Articles 20(3)-(4) & 22

Article 23 Regulatory authorities

Article 23

—

Article 24

—

Articles 25 & 26

—

Article 27

Article 28

Article 29

Article 24 Safeguard measures

Article 25 Monitoring of imports of electricity

Article 26 Derogations

Article 27 Review procedure

Article 28 Reporting

Article 29 Repeals

Article 30 Implementation

Article 31 Entry into force

Article 32 Addressees

Annex A Measures on consumer protection

4.3.2003

EN

Official Journal of the European Union

C 50 E/31

STATEMENT OF THE COUNCIL'S REASONS

I. INTRODUCTION

1. On 2 May 2001, the Commission presented a proposal (1) for a Directive amending Directives

96/92/EC and 98/30/EC based on Articles 47(5), 55 and 95 of the Treaty.

2. The Economic and Social Committee delivered its Opinion (2) on 3 October 2001. The Committee

of the Regions decided not to deliver an Opinion.

3. The European Parliament adopted its Opinion (3) at first reading on 13 March 2002, approving 157
amendments, of which 90 amendments related to electricity and 67 to gas. In the light of this
opinion, the Commission presented a modified proposal on 10 June 2002 (4).

4. On 3rd February 2003, the Council adopted its Common Position in accordance with Article 251 of

the Treaty.

II. OBJECTIVE OF THE PROPOSAL

5. The proposal, which is part of a package, together with the Regulation on conditions for access to
the network for cross-border exchanges in electricity, contains ‘quantitative’ provisions with regard
to a full opening of the markets to all customers by 1 January 2005, as well as ‘qualitative’
provisions relating to the unbundling of transmission and distribution, third party access, regulatory
authorities, public service obligations, universal service and consumer protection.

III. ANALYSIS OF THE COMMON POSITION

6. The Council considered it more effective and coherent with Directives 96/92/EC and 98/30/EC to

recast the provisions of both Directives, as also suggested by the Parliament.

7. The main elements of the common position are the following:

(a) Public Service Obligations (PSO), protection of final customers and Energy labelling (Article 3 and Annex

A; Article 28(1) and 28(2))

The Council retained, as a general principle, the protection of final customers and ensuring a
high level of consumer protection. Examples of measures contributing to high standards of
consumer protection and information are presented in an Annex (Annex A), which is
mandatory for household customers. Moreover, household customers and, where Member
States deem it appropriate, small enterprises, shall enjoy ‘universal service’, i.e. the right to be
supplied with electricity of a specified quality at reasonable prices. While this concept of
universal service, and more generally, public service requirements, can be interpreted on a
national basis, they have to be implemented in a transparent and non-discriminatory way.
PSOs and universal service shall also be the subject of a detailed Commission report.

In the paragraph on ‘Energy labelling’ (Article 3(6)) the Council specified that information on the
contribution of each energy source to the overall fuel mix has to be made available to final
customers, as well as the reference to publicly available sources, such as web-pages, where
impact of CO2 emissions and radioactive waste resulting
information on the environmental
from electricity production can be found.

(1) OJ C 240 E, 28.8.2001 p. 60.
(2) OJ C 36, 8.2.2002, p. 10.
(3) OJ C 47 E, 27.2.2003, p. 351.
(4) OJ C 227 E, 24.9.2002, p. 393.

C 50 E/32

EN

Official Journal of the European Union

4.3.2003

(b) Unbundling of transmission system operators (TSO) (Article 10) and unbundling of distribution system

operators (DSO) (Articles 15, 27 and 30(2))

Transmission and distribution system operators (TSO/DSO) should be independent, in terms of
their legal form as well as their organisation and decision making, from activities not relating to
transmission, respectively, distribution. Moreover, TSO/DSOs have to fulfil four criteria on
functional independence (compliance, managerial independence, etc.). However, functional inde-
pendence regarding decision-making rights of the unbundled operator should not prevent some
form of co-ordination between the parent company and its subsidiaries.

DSOs serving 100 000 customers or less may be exempted from these provisions;
the
Commission will review this threshold in the framework of its reporting exercise. Besides
Member States may postpone (Article 30) the implementation of legal unbundling for DSOs
until the full market opening.

Furthermore, in the context of the review procedure provided for in Article 27, a Member State
may, under certain conditions related to the manner in which it has carried out network access,
request to the Commission to be exempted from requirements such as the legal unbundling of
DSOs. This request may lead to the Commission submitting proposals to the Parliament and
Council to amend the relevant provisions of the Directive or provide for other appropriate
means.

(c) Market opening (Articles 21, 26(2) and 28(3)) and implementation (Article 30)

The Council followed the two-step opening proposed by the Commission, with 2004 for all
non-household customers as set by the Barcelona European Council, and 2007 for all customers.
Member States may take into account
the situation of certain groups of non-household
customers during the first step by applying for a 18-month derogation.

By 1 January 2006 the Commission is due to produce a detailed report addressing i.a. public
service and universal service issues as well as various issues related to the implementation and
consequences of the market opening.

The Directive shall be implemented not later than 1 July 2004.

(d) Regulatory authorities (Article 23)

The common position, whilst confirming the Barcelona conclusions that it is left to Member
States to define the institutional arrangements appropriate to carry out the regulatory tasks,
clarified the formulation of Article 23(1), by stating that the independent regulatory authorities
are ‘at least responsible for ensuring non-discrimination, effective competition and the efficient
functioning of the market, by at least monitoring’ various rules and conditions listed in the
Commission proposal. They are also responsible for approving ex-ante at least the metho-
dologies underlying the terms and conditions for connection and access to networks and for
balancing services, and have the authority to require ex-post modifications of these terms and
conditions.

The text also clarifies the provisions (Article 23(5) and (6)) concerning the prompt handling of
complaints by administrative bodies.

(e) New capacity (Article 7)

Member States have to ensure the possibility, in the interests of security of supply (Article 7(1)),
to provide for new capacity or energy efficiency/demand-side management measures through a
tendering or equivalent procedure. Moreover, Member States may also ensure the possibility of
tendering in the interests of environmental protection and the promotion of infant new tech-
nologies.

(f) Unbundling of accounts (Article 19)

Undertakings have to keep separate accounts for each of their transmission and distribution
activities, and for other electricity activities. Supply activities to eligible and to non-eligible
customers shall be separated in the accounts of these undertakings until full market opening.

4.3.2003

EN

Official Journal of the European Union

C 50 E/33

(g) Derogations (Article 26)

Further to derogations already granted under Directive 96/92/EC (e.g. for small isolated systems)
and to the derogation mentioned under point c above the common position introduces the
possibility of derogation for micro isolated systems (consumption less than 500 Gwh in 1996).

IV. AMENDMENTS ACCEPTED

8. The Council accepted the following amendments, some of them in substance, partially or in
principle. Although the Parliament adopted some of these amendments in relation to the Gas
proposal the Council was of the view that they were also relevant to the Electricity one.

Title:

— Amendment 1: divide the proposal in two separate legal acts

Recitals:

— Amendment 2: reference to the Charter of Fundamental Rights (recital 32)

— Amendment 3: consequent to division of proposal (recital 1)

— Amendment 4: list obstacles impeding the functioning of the energy market (Recital 2)

— Amendment 97: stresses the calls for rapid work for the completion of the internal market in

energy from the European Council and the European Parliament (Recital 3)

— Amendment 5: stresses that free choice of suppliers is only possible in a fully open market

(Recital 4)

— Amendment 7: stresses the non-discriminatory character of network access (Recital 6)

— Amendment 8: construction and maintenance of networks (recital 22)

— Amendment 10: transparent and non-discriminatory tariffs for the access to networks need

further measures to be taken by Member States (Recital 13)

— Amendments 11 and 23: repealing of the transit Directive 90/547/EEC (Recital 30)

— Amendment 14: benefits resulting from the internal market should contribute to indirectly create

employment as a result of the efficiency gains enjoyed by enterprises (Recital 18)

— Amendment 18: stresses the need for monitoring of the supply/demand balance in order to allow

appropriate measures to be taken (Recital 22)

— Amendment 20: customers to enjoy the right to be supplied with electricity at clearly comparable

prices (Recital 23)

— Amendment 22: is a consequence to amendment 1 (Recital 29)

C 50 E/34

EN

Official Journal of the European Union

4.3.2003

Articles:

— Amendments 12, 13: in relation to tasks of the regulatory authorities (recitals 15 and 17)

— Amendment 25: consequence of Amendment 1 (Article 1)

— Amendment 34: definition of eligible customer (Article 2(12))

— Amendment 28: extension of long-term planning definition also to distribution (Article 2(25))

— Amendment 123: definition of security (Article 2(28))

— Amendment 30: definition of energy efficiency/demand-side management (Article 2(29))

— Amendment 32: definition of renewable energy sources (Article 2(30))

— Amendment 33 (partially): definition of distributed generation (Article 2(31))

— Amendment 40: addition of the objective of achieving a sustainable electricity markets (Article

3(1))

— Amendment 41 (partially): extension of public service obligations that Member States may impose

on undertakings (Article 3(2) and (7))

— Amendment 42 (partially): specification of measures to protect vulnerable customers (Article 3(5))

— Amendment 126: possibility for eligible customers to switch to a new supplier (Article 3(5))

— Amendment 43 (partially): information obligations with regard to the fuel mix (Article 3(6))

— Amendments 46 and 47: notification of possible competition effect of PSOs-related measures, and

Commission reporting (Article 3(9) and 28(2))

— Amendment 50 (partially): provides for appropriate authorisation procedures for small and/or

distributed generation (Article 6(3))

— Amendment 51 (partially): extends

the tendering procedure to energy efficiency/demand

management measures (Article 7 (1), (2), (3))

— Amendment 53 (partially): monitoring of security of supply to cover also the quality and level of

maintenance of the networks (Article 4)

— Amendments 56 and 164, and 60: designation (Article 8) and tasks of TSOs (Article 9); TSO

which is part of a vertically integrated undertaking to be independent (Article 10)

— Amendment 61: TSO which is part of a vertically integrated undertaking to be independent

(Article 15)

— Amendment 62 (partially): specifies the decision-making rights of system operators (Article10(2)c,

15(2)c and 17(c))

— Amendment 58: Member States may require TSOs to comply with minimum standards for the

system (Article 11(5))

— Amendment 59 (partially): terms and conditions for balancing the transmission system (Article

11(7))

— Amendment 171: DSOs to take energy efficiency/demand side management measures into

account when planning the development of the network (Article 14(7))

4.3.2003

EN

Official Journal of the European Union

C 50 E/35

— Amendment 66: specifies the right of access to accounts (Article 18 (1))

— Amendment 70: specifies conditions for refusing third party access to the transmission or

distribution system (Article 20(2))

— Amendments 75 (partially), 76, 45 and 57: specify tasks of regulatory authorities (Article 23(1)-(3))

including with respect to the non-discrimination of new producers

— Amendments 77 and 78: power of regulatory authorities to require from operators the modifi-
cation of terms and conditions (Article 23(4)); efficient handling of complaints (Article 23(5) and
(6))

— Amendment 82 (partially): provision for monitoring of imports of electricity (Article 25)

— Amendments 55 (in substance), 79 (partially), 85 and 86:

reporting requirements for

the

Commission (Article 27 and 28(1))

— Amendment 89 (in substance): specifies information to be provided to customers (Annex A)

V. AMENDMENTS NOT INTEGRATED

9. The Council considered that amendments 6, 12, 15-17, 19, 24, 180, 27, 29, 31, 36-38, 44, 48, 52,
54, 63, 170, 64, 65, 163, 67, 68, 172, 72, 74, 80, 81, 83, 84, 87 and 90 were either not in
coherence with the proposed Electricity Directive, too restrictive, not within the scope of the
Directive, or were already covered by existing provisions, and decided therefore not to integrate
them in its common position. The Commission has rejected notably amendments 1, 5, 6, 7, 16, 19,
20, 22-25, 27, 29, 31, 35, 36-38, 44, 48, 52, 54, 63, 170, 64, 65, 163, 67, 68, 172, 72, 74, 80,
81, 83, 84, 87 and 90.