Directive 2005/89/EC of the European Parliament and of the Council of  18 January 2006  concerning measures to safeguard security of electricity supply and infrastructure investment   (Text with EEA relevance)
Date: 2006-01-18
Institutions: Council of the European Union, European Parliament
Subjects: electrical energy, energy grid, energy supply, investment, security of supply

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DIRECTIVE 2005/89/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

of 18 January 2006

concerning measures to safeguard security of electricity supply and infrastructure investment

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EURO-
PEAN UNION,

Having regard to the Treaty establishing the European Commu-
nity, and in particular Article 95 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Economic and
Social Committee (1),

After consulting the Committee of the Regions,

Acting in accordance with the procedure laid down in Article 251
of the Treaty (2),

(4)

Whereas:

(1)

(2)

(3)

Directive 2003/54/EC of the European Parliament and of
the Council of 26 June 2003 concerning common rules for
the internal market in electricity (3), has made a very impor-
tant contribution towards the creation of the internal mar-
ket for electricity. The guarantee of a high level of security
of electricity supply is a key objective for the successful
operation of the internal market and that Directive gives
the Member States the possibility of imposing public ser-
vice obligations on electricity undertakings, inter alia, in
relation to security of supply. Those public service obliga-
tions should be defined as precisely and strictly as possible,
and should not result in the creation of generation capac-
ity that goes beyond what is necessary to prevent undue
interruption of distribution of electricity to final customers.

Demand for electricity is usually forecast over a medium-
term period on the basis of scenarios elaborated by trans-
mission system operators or by other organisations
capable of constructing them at the request of a Member
State.

A competitive single EU electricity market necessitates
transparent and non-discriminatory policies on security of
electricity supply compatible with the requirements of
such a market. The absence of such policies in individual

(1) OJ C 120, 20.5.2005, p. 119.
(2) Opinion of the European Parliament of 5 July 2005 (not yet published
in the Official Journal) and Council Decision of 1 December 2005.
(3) OJ L 176, 15.7.2003, p. 37. Directive as amended by Council Direc-

tive 2004/85/EC (OJ L 236, 7.7.2004, p. 10).

Member States, or significant differences between the poli-
cies of the Member States would lead to distortions of
competition. The definition of clear roles and responsibili-
ties of the competent authorities, as well as of Member
States themselves and all relevant market actors, is there-
fore crucial in safeguarding security of electricity supply
and the proper functioning of the internal market while at
the same time avoiding creating obstacles to market
entrants, such as companies generating or supplying elec-
tricity in a Member State that have recently started their
operations in that Member State, and avoiding creating dis-
tortions of the internal market for electricity or significant
difficulties for market actors, including companies with
small market shares, such as generators or suppliers with a
very small share in the relevant Community market.

Decision No 1229/2003/EC of the European Parliament
and of the Council (4), sets out a series of guidelines for
Community policy on trans-European energy networks.
Regulation (EC) No 1228/2003 of the European Parlia-
ment and of the Council of 26 June 2003 on conditions
for access to the network for cross-border exchanges in
electricity (5) sets out, inter alia, the general principles and
detailed rules relating to congestion management.

(5) When promoting electricity from renewable energy
sources, it is necessary to ensure the availability of associ-
in
ated back-up capacity, where technically necessary,
the
order to maintain the reliability and security of
network.

(6)

(7)

In order to meet the Community’s environmental commit-
ments and to reduce its dependence on imported energy,
it is important to take account of the long-term effects of
growth of electricity demand.

transfer capacity,

Cooperation between national transmission system opera-
tors in issues relating to network security including defini-
tion of
information provision and
network modelling is vital to the development of a well-
functioning internal market and could be
further
improved. A lack of coordination regarding network secu-
rity is detrimental to the development of equal conditions
for competition.

(4) OJ L 176, 15.7.2003, p. 11.
(5) OJ L 176, 15.7.2003, p. 1. Regulation as amended by Council Regu-

lation (EC) No 1223/2004 (OJ L 233, 2.7.2004, p. 3).

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(8)

The main intention of the relevant technical rules and rec-
ommendations, such as those contained in the Union for
the Coordination of Transmission of Electricity (UCTE)
Operation handbook, similar rules and recommendations
developed by Nordel, the Baltic Grid Code and those for
the United Kingdom and Irish systems, is to provide sup-
port for the technical operation of the interconnected net-
work, thus contributing to meeting the need for continued
operation of the network in the event of system failure at
an individual point or points in the network and minimis-
ing the costs related to mitigating such supply disruption.

(9)

Transmission and distribution system operators should be
required to deliver a high level of service to final custom-
ers in terms of the frequency and duration of interruptions.

(10) Measures which may be used to ensure that appropriate
levels of generation reserve capacity are maintained should
be market-based and non-discriminatory and could include
measures such as contractual guarantees and arrange-
ments, capacity options or capacity obligations. These
measures could also be supplemented by other non-
discriminatory instruments such as capacity payments.

(11)

In order to ensure that appropriate prior information is
available, Member States should publish measures taken to
maintain the balance between supply and demand among
actual and potential investors in generation and among
electricity consumers.

(12) Without prejudice to Articles 86, 87 and 88 of the Treaty,
it is important for Member States to lay down an unam-
biguous, appropriate and stable framework which will
facilitate security of electricity supply and is conducive
to investments in generation capacity and demand man-
agement techniques. It is also important that appropriate
measures are taken to ensure a regulatory framework that
encourages investment in new transmission interconnec-
tion, especially between Member States.

(14) While it is important to determine the maximum available
transfer capacities without breaching the requirements of
secure network operation, it is also important to ensure
full transparency of the capacity calculation and allocation
procedure in the transmission system. In this way, it could
be possible to make better use of existing capacity, and no
false shortage signals will be given to the market, which
will support the achievement of a fully competitive inter-
nal market as envisaged in Directive 2003/54/EC.

(15)

Transmission and distribution system operators need an
appropriate and stable regulatory framework for invest-
ment, and for maintenance and renewal of the networks.

(16) Article 4 of Directive 2003/54/EC requires Member States
to monitor and submit a report on security of electricity
supply. This report should cover short, medium and long-
term factors relevant for security of supply including trans-
mission system operators’
in the
network. In compiling such a report, Member States will be
expected to refer to information and assessments already
being undertaken by transmission system operators both
on an individual and collective basis, including at European
level.

intention to invest

(17) Member States should ensure the effective implementation

of this Directive.

(18)

Since the objectives of the proposed action, namely secure
electricity supplies based on fair competition and the cre-
ation of a fully operational internal electricity market, can-
not 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 principles of
subsidiarity as set out in Article 5 of the Treaty. In accor-
dance with the principle of proportionality, as set out in
that Article, this Directive does not go beyond what is nec-
essary in order to achieve those objectives,

HAVE ADOPTED THIS DIRECTIVE:

Article 1

Scope

(13)

The European Council in Barcelona on 15 and 16 March
2002 agreed on a level of interconnection between Mem-
ber States. Low levels of interconnection have the effect of
fragmenting the market and are an obstacle to the devel-
opment of competition. The existence of adequate physi-
cal transmission interconnection capacity, whether cross-
border or not, is crucial but it is not a sufficient condition
for competition to be fully effective. In the interest of final
customers, the relation between the potential benefits of
new interconnection projects and the costs for such
projects should be reasonably balanced.

1.
This Directive establishes measures aimed at safeguarding
security of electricity supply so as to ensure the proper function-
ing of the internal market for electricity and to ensure:

(a) an adequate level of generation capacity;

(b) an adequate balance between supply and demand;

and

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(c) an appropriate level of interconnection between Member

(c)

States for the development of the internal market.

the internal market and the possibilities for cross-border
cooperation in relation to security of electricity supply;

2.
It establishes a framework within which Member States are
to define transparent, stable and non-discriminatory policies on
security of electricity supply compatible with the requirements of
a competitive internal market for electricity.

Article 2

Definitions

For the purposes of this Directive, the definitions contained in
Article 2 of Directive 2003/54/EC shall apply. In addition, the fol-
lowing definitions shall apply:

(a)

‘regulatory authority’ means the regulatory authorities in
Member States, as designated in accordance with Article 23
of Directive 2003/54/EC;

(d)

(e)

the need for regular maintenance and, where necessary,
renewal of the transmission and distribution networks to
maintain the performance of the network;

the importance of ensuring proper implementation of Direc-
tive 2001/77/EC of the European Parliament and of the
Council of 27 September 2001 on the promotion of electric-
ity produced from renewable energy sources in the internal
electricity market (1) and Directive 2004/8/EC of the Euro-
pean Parliament and of the Council of 11 February 2004 on
the promotion of cogeneration based on a useful heat
demand in the internal energy market (2), insofar as their pro-
visions are related to security of electricity supply;

(f)

the need to ensure sufficient transmission and generation
reserve capacity for stable operation;

and

(b)

‘security of electricity supply’ means the ability of an electric-
ity system to supply final customers with electricity, as pro-
vided for under this Directive;

(g)

the importance of encouraging the establishment of liquid
wholesale markets.

(c)

‘operational network security’ means the continuous opera-
tion of the transmission and, where appropriate, the distri-
bution network under foreseeable circumstances;

(d)

‘balance between supply and demand’ means the satisfaction
of foreseeable demands of consumers to use electricity with-
out the need to enforce measures to reduce consumption.

Article 3

General provisions

1. Member States shall ensure a high level of security of elec-
tricity supply by taking the necessary measures to facilitate a
stable investment climate and by defining the roles and responsi-
bilities of competent authorities, including regulatory authorities
where relevant, and all relevant market actors and publishing
information thereon. The relevant market actors include, inter alia,
transmission and distribution system operators, electricity genera-
tors, suppliers and final customers.

In implementing the measures referred to in paragraph 1,

2.
Member States shall take account of:

(a)

the importance of ensuring continuity of electricity supplies;

In implementing the measures referred to in paragraph 1,

3.
Member States may also take account of:

(a)

the degree of diversity in electricity generation at national or
relevant regional level;

(b)

the importance of reducing the long-term effects of the
growth of electricity demand;

(c)

the importance of encouraging energy efficiency and the
adoption of new technologies, in particular demand manage-
ment technologies, renewable energy technologies and dis-
tributed generation;

and

(d)

the importance of removing administrative barriers to invest-
ments in infrastructure and generation capacity.

4. Member States shall ensure that any measures adopted in
accordance with this Directive are non-discriminatory and do not
place an unreasonable burden on the market actors, including
market entrants and companies with small market shares. Mem-
ber States shall also take into account, before their adoption, the
impact of
the measures on the cost of electricity to final
customers.

(b)

the importance of a transparent and stable regulatory
framework;

of Accession.

(2) OJ L 52, 21.2.2004, p. 50.

(1) OJ L 283, 27.10.2001, p. 33. Directive as amended by the 2003 Act

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In ensuring an appropriate level of interconnection between
5.
Member States, as referred to in Article 1(1)(c), special consider-
ation shall be given:

(a)

each Member State’s specific geographical situation;

(b) maintaining a reasonable balance between the costs of build-
ing new interconnectors and the benefit to final customers;

and

(c)

ensuring that existing interconnectors are used as efficiently
as possible.

Article 4

Operational network security

1.

(a) Member States or the competent authorities shall
ensure that transmission system operators set the mini-
mum operational rules and obligations on network
security.

Before setting such rules and obligations, they shall
consult with the relevant actors in the countries with
which interconnection exists;

(b) notwithstanding the first subparagraph of point (a),
Member States may require transmission system opera-
tors to submit such rules and obligations to the com-
petent authority for approval;

(c) Member States shall ensure that transmission and,
where appropriate, distribution system operators com-
ply with the minimum operational rules and obliga-
tions on network security;

(d) Member States shall require transmission system opera-
tors to maintain an appropriate level of operational
network security.

To that effect, transmission system operators shall
maintain an appropriate level of technical transmission
reserve capacity for operational network security
and cooperate with the transmission system operators
concerned to which they are interconnected.

(e) Member States shall, in particular, ensure that intercon-
nected transmission and, where appropriate, distribu-
tion system operators exchange information relating to
the operation of networks in a timely and effective
fashion in line with the minimum operational require-
ments. The same requirements shall, where appropri-
ate, apply to transmission and distribution system
operators that are interconnected with system opera-
tors outside the Community.

2. Member States or the competent authorities shall ensure
that transmission and, where appropriate, distribution system
operators set and meet quality of supply and network security
performance objectives. These objectives shall be subject to
approval by the Member States or competent authorities and their
implementation shall be monitored by them. They shall be objec-
tive, transparent and non-discriminatory and shall be published.

3.
In taking the measures referred to in Article 24 of Directive
2003/54/EC and in Article 6 of Regulation (EC) No 1228/2003,
Member States shall not discriminate between cross-border con-
tracts and national contracts.

4. Member States shall ensure that curtailment of supply in
emergency situations shall be based on predefined criteria relat-
ing to the management of imbalances by transmission system
operators. Any safeguard measures shall be taken in close consul-
tation with other relevant transmission system operators, respect-
ing relevant bilateral agreements, including agreements on the
exchange of information.

Article 5

Maintaining balance between supply and demand

1. Member States shall take appropriate measures to maintain
a balance between the demand for electricity and the availability
of generation capacity.

In particular, Member States shall:

(a) without prejudice to the particular requirements of small iso-
lated systems, encourage the establishment of a wholesale
market framework that provides suitable price signals for
generation and consumption;

(b)

require transmission system operators to ensure that an
appropriate level of generation reserve capacity is available
for balancing purposes and/or to adopt equivalent market
based measures.

2. Without prejudice to Articles 87 and 88 of the Treaty,
Member States may also take additional measures, including but
not limited to the following:

The level of foreseeable circumstances in which secu-
rity shall be maintained is defined in the operational
network security rules;

(a) provisions facilitating new generation capacity and the entry

of new generation companies to the market;

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(b)

removal of barriers that prevent the use of interruptible
contracts;

(c)

removal of barriers that prevent the conclusion of contracts
of varying lengths for both producers and customers;

(d) encouragement of the adoption of real-time demand man-

agement technologies such as advanced metering systems;

(e)

encouragement of energy conservation measures;

(f)

tendering procedures or any procedure equivalent in terms of
transparency and non-discrimination in accordance with
Article 7(1) of Directive 2003/54/EC.

3. Member States shall publish the measures to be taken pur-
suant to this Article and shall ensure the widest possible dissemi-
nation thereof.

Article 6

Network investment

(d)

the investment intentions, for the next five or more calendar
years, of transmission system operators and those of any
other party of which they are aware, as regards the provision
of cross-border interconnection capacity.

2. Member States or the competent authorities shall prepare
the report in close cooperation with transmission system opera-
tors. Transmission system operators shall, if appropriate, consult
with neighbouring transmission system operators.

The section of the report relating to interconnection invest-
3.
ment intentions, referred to in paragraph 1(d), shall take account
of:

(a)

the principles of congestion management, as set out in Regu-
lation (EC) No 1228/2003;

1. Member States shall establish a regulatory framework that:

(b) existing and planned transmission lines;

(a) provides investment signals for both the transmission and
distribution system network operators to develop their net-
works in order to meet foreseeable demand from the market;

(c)

expected patterns of generation,
supply, cross-border
exchanges and consumption, allowing for demand manage-
ment measures,

and

(b)

facilitates maintenance and, where necessary, renewal of their
networks.

and

2. Without prejudice to Regulation (EC) No 1228/2003, Mem-
ber
in
allow for merchant
interconnection.

States may

investments

Member States shall ensure that decisions on investments in inter-
connection are taken in close cooperation between relevant trans-
mission system operators.

Article 7

Reporting

(d)

regional, national and European sustainable development
objectives, including those projects forming part of the Axes
for priority projects set out
to Decision
No 1229/2003/EC.

in Annex I

Member States shall ensure that transmission system operators
provide information on their investment intentions or those of
any other party of which they are aware as regards the provision
of cross-border interconnection capacity.

1. Member States shall ensure that the report referred to in
Article 4 of Directive 2003/54/EC covers the overall adequacy of
the electricity system to supply current and projected demands for
electricity, comprising:

Member States may also require transmission system operators to
provide information on investments related to the building of
internal lines that materially affect the provision of cross-border
interconnection.

(a) operational network security;

(b)

the projected balance of supply and demand for the next five-
year period;

(c)

the prospects for security of electricity supply for the period
between five and 15 years from the date of the report;

4. Member States or the competent authorities shall ensure
that the necessary means for access to the relevant data are facili-
tated to the transmission system operators and/or to the compe-
tent authorities where relevant in the development of this task.

and

The non-disclosure of confidential information shall be ensured.

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On the basis of the information referred to in para-
5.
graph 1(d), received from the competent authorities, the Commis-
sion shall report to the Member States, the competent authorities
and the European Regulators Group on Electricity and Gas estab-
lished by Commission Decision 2003/796/EC (1) on the invest-
ments planned and their contribution to the objectives set out in
Article 1(1).

This report may be combined with the reporting provided for in
point (c) of Article 28(1) of Directive 2003/54/EC and shall be
published.

Article 9

Reporting

The Commission shall monitor and review the application of this
Directive and submit a progress report to the European Parlia-
ment and the Council by 24 February 2010.

Article 10

Entry into force

Article 8

Transposition

This Directive shall enter into force on the 20th day following its
publication in the Official Journal of the European Union.

1. Member States shall bring into force the laws, regulations
and administrative provisions necessary to comply with this
Directive by 24 February 2008. They shall forthwith inform the
Commission thereof.

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

Article 11

Addressees

This Directive is addressed to the Member States.

Done at Strasbourg, 18 January 2006.

2.
By 1 December 2007, Member States shall notify the Com-
mission of the text of the provisions of national law which they
adopt in the field covered by this Directive.

For the European Parliament
The President
J. BORRELL FONTELLES

For the Council
The President
H. WINKLER

(1) OJ L 296, 14.11.2003, p. 34.