Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 1775/2005 on conditions for access to the natural gas transmission networks {SEC(2007) 1179} {SEC(2007) 1180}
Date: 2007-09-19
Institutions: European Commission
Subjects: energy grid, energy transport, market access, natural gas, single market

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 19.9.2007 
COM(2007) 532 final 

2007/0199 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Regulation (EC) No 1775/2005 on conditions for access to the natural gas 
transmission networks 

(presented by the Commission) 

{SEC(2007) 1179} 
{SEC(2007) 1180} 

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EXPLANATORY MEMORANDUM 

Electricity  and  gas  are  at  the  heart  of  the  Europe’s  well-being.  Without  a  competitive  and 
efficient European electricity and gas market, Europe’s citizens will pay excessive prices for 
what  is  one  of  their  most  fundamental  daily  needs.  The  electricity  and  gas  market  is  also 
essential for Europe’s competitiveness as energy is an important input for European industry.  

Furthermore, a competitive and efficient electricity and gas market is a pre-condition to tackle 
climate  change.  Only  with  a  functioning  market  is  it  possible  to  develop  an  effectively 
functioning emissions trading mechanism and a renewable energy industry that will meet the 
ambitious objective, agreed by the European Council of ensuring that the EU's energy mix is 
sourced 20% from renewable energy sources by 2020. 

Finally, a competitive EU-wide electricity and gas market is crucial to ensure the security of 
Europe’s  energy  supply,  as  only  a  Europe-wide  and  competitive  market  generates  the  right 
investment signals and offer fair network access for all potential investors, and provides real 
and  effective  incentives  to  both  network  operators  and  generators  to  invest  the  billions  of 
Euros that will be needed in the EU over the next two decades. 

The process of liberalising the electricity and gas market started about 10 years ago. During 
these  10  years,  many  of  Europe's  citizens  have  benefited  from  more  choice  and  more 
competition,  with  improved  service  and  security.  The  assessment  carried  out  by  the 
Commission  and  Europe's  energy  regulators  has  however  demonstrated  that  the  process  of 
developing  real  competitive  markets  is  far  from  complete.  In  practice,  far  too  many  of  the 
EU's  citizens  and  businesses  lack  a  real  choice  of  supplier.  Market  fragmentation  along 
national borders, a high degree of vertical integration and high market concentration are at the 
root of the lack of a truly internal market.  

Since  the  entry  into  force  of  the  present  electricity  and  gas  Directives  in  July  2003,  the 
Commission  has  constantly  monitored  their  implementation  and  their  effects  on  the  market, 
and  it  has  been  in  regular  contact  with  all  stakeholders  concerned.  In  particular,  the 
Commission has, every year, published its benchmarking report on the implementation of the 
internal  electricity  and  gas  market.  It  has  organised  the  Electricity  Regulatory  Forum  of 
Florence  and  the  Gas  Regulatory  Forum  of  Madrid  bringing  together  on  a  regular  basis 
ministries,  national  regulatory  authorities,  the  Commission,  transmission  system  operators, 
suppliers, traders, consumers, trade unions, network users and power exchanges.  

At the end of 2005, the Hampton Court European Council called for a true European Energy 
Policy. In response to this call the Commission published on 8 March 2006 a Green Paper on 
developing  a  common,  coherent  European  Energy  Policy.  The  public  consultation  yielded 
1 680 responses. Already in 2005, the Commission started an inquiry into competition in gas 
and electricity markets. The energy inquiry responded to concerns voiced by consumers and 
new entrants in the sector about the development of wholesale gas and electricity markets and 
limited  choice  for  consumers.  The  Final  Report  of  the  inquiry  was  adopted  by  the 
Commission together with a comprehensive package of measures, to propose a new Energy 
Policy for Europe on 10 January 2007.  

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The  Commission  Communication  of  10  January  2007  entitled  "An  Energy  Policy  for 
Europe"1  highlighted  the  importance  of  completing  the  internal  market  in  electricity  and 
natural gas. It was backed by a comprehensive internal market report, the final results of the 
competition sector inquiry and in-depth reviews of the situation of the national electricity and 
gas market. In parallel, the Commission has carried out an impact assessment to assess policy 
options  related  to  the  completion  of  the  internal  gas  and  electricity  market.  The  impact 
assessment included a stakeholder consultation. A total of 339 questionnaires were filled out 
by  organisations  having  their  roots  in  19  countries.  In  addition  73  questionnaires  were 
received  by  organisations  not  connected  to  a  particular  country.  Interviews  were  conducted 
with 56 additional stakeholders, mainly companies which could be affected by the unbundling 
of their assets or increased transparency requirements.  

The 2007 Spring European Council invited the Commission to propose further measures, such 
as:  

•  the  effective  separation  of  supply  and  production  activities  from  network 

operation;  

•  the  further  harmonisation  of  the  powers  and  enhanced  independence  of  the 

national energy regulators;  

•  the  establishment  of  an  independent  mechanism  for  cooperation  among  national 

regulators;  

•  the  creation  of  a  mechanism  for  transmission  system  operators  to  improve  the 
coordination of networks operation and grid security, cross-border trade and grid 
operation; and  

•  greater transparency in energy market operations.  

The European Council also underlined the need to strengthen security of supply in a spirit of 
solidarity between Member States.  

In its Resolution on Prospects for the internal gas and electricity market adopted on 10 July 
2007,  the  European  Parliament  expressed  strong  political  support  for  a  common  energy 
policy,  considering  that  "transmission  ownership  unbundling  is  the  most  effective  tool  to 
promote investments in infrastructures in a non-discriminatory way, fair access to the grid for 
new  entrants  and  transparency  in  the  market".  Parliament  underlined,  however,  that  other 
measures were also necessary and that the differences between the electricity and gas markets 
might  call  for  differing  implementation  arrangements.  Parliament  also  called  for  enhanced 
"cooperation  between  national  regulators  at  EU  level,  through  an  EU  entity,  as  a  way  to 
promote a more European approach to regulation on cross-border issues".  

The  Council  of  European  Energy  Regulators  (CEER)  welcomed  the  Commission’s 
Communication of 10 January, and strongly endorsed the call for new EU legislation to put 
the  single  energy  market  project  back  on  track.  On  6  June  2007,  the  European  Energy 
Regulators published a set of six papers taking position on the main issues in the new energy 
legislation.  They  supported  in  particular  the  Commission's  proposals  for  a  strengthened 

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COM(2007) 1. 

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independent regulatory oversight at national and EU level, and for effective unbundling of the 
transmission  networks.  The  regulators  clearly  recommended  that  ownership  unbundling  of 
transmission  should,  in  principle,  be  the  model  required  in  new  EU  legislation  and  should 
apply to both electricity and gas.  

These elements were taken fully into consideration in drawing up the current proposals, which 
are summarised below. 

1. 

1.1. 

EFFECTIVE SEPARATION OF SUPPLY AND PRODUCTION ACTIVITIES FROM NETWORK 
OPERATIONS 

Existing  unbundling  provisions  are  not  sufficient  to  ensure  a  well-functioning 
market 

Existing  legislation  requires  that  network  operations  be  legally  and  functionally  separated 
from supply and generation or production activities. Member States have complied with this 
requirement  by  applying  different  organisational  structures.  Several  Member  States  have 
created  a  totally  separate  company  for  network  operation,  while  others  have  created  a  legal 
entity  within  an  integrated  company.  The  requirements  of  legal  and  functional  unbundling 
have made a positive contribution to the emergence of competitive electricity and gas markets 
in several Member States. 

However, experience has shown that where the transmission system operator is a legal entity 
within an integrated company, three types of problems arise. 

Firstly,  the  transmission  system  operator  may  treat  its  affiliated  companies  better  than 
competing third parties. In fact, integrated companies may use network assets to make entry 
more difficult for competitors. The underlying reason is that legal and functional unbundling 
do  not  solve  the  fundamental  conflict  of  interest  within  integrated  companies,  whereby  the 
supply  and  production  interests  aim  to  maximise  their  sales  and  market  share  while  the 
network operator is obliged to offer non-discriminatory access to competitors. This inherent 
conflict of interest is almost impossible to control by regulatory means as the independence of 
the  transmission  system  operator  within  an  integrated  company  is  impossible  to  monitor 
without an excessively burdensome and intrusive regulation.  

Secondly,  under  the  current  unbundling  rules,  non-discriminatory  access  to  information 
cannot  be  guaranteed  as  there  is  no  effective  means  of  preventing  transmission  system 
operators  releasing  market  sensitive  information  to  the  generation  or  supply  branch  of  the 
integrated company.  

Thirdly,  investment  incentives  within  an  integrated  company  are  distorted.  Vertically 
integrated  network  operators  have  no  incentive  for  developing  the  network  in  the  overall 
interests of the market and hence for facilitating new entry at generation or supply levels; on 
the contrary, they have an inherent interest to limit new investment when this will benefit its 
competitors  and  bring  new  competition  onto  the  incumbent's  "home  market".  Instead,  the 
investment decisions made by vertically integrated companies tend to be biased to the needs 
of supply affiliates. Such companies seem particularly disinclined to increase interconnection 
or gas import capacity and thereby boosting competition in the incumbent’s home market to 
the detriment of the internal market.  

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To  sum  up,  a  company  that  remains  vertically  integrated  has  an  in-built  incentive  both  to 
under-invest in new networks (fearing that such investments would help competitors to thrive 
in “its” home market) and - wherever possible - to privilege its own sales companies when it 
comes to network access. This damages the EU's competitiveness and its security of supply 
and prejudices the attainment of its climate change and environmental objectives.  

Investment  figures  from  recent  years  show  this:  vertically  integrated  companies  have,  for 
example, reinvested significantly less of their receipts from cross-border congestion rents in 
new  interconnectors  than  fully  unbundled  ones.  Effective  unbundling  removes  the  kind  of 
distorted investment incentives typical of vertically integrated transmission system operators. 
It thus promotes security of supply. The Commission has observed that effective unbundling 
of  transmission  system  operators  promotes  TSO  investment  activity.  The  Member  States 
concerned  have  subsequently  attracted  new  infrastructure  investors  that,  for  example,  build 
terminals for liquefied natural gas (LNG). 

Moreover, the price of electricity on different markets in recent years shows the benefits of 
ownership  unbundling:  over  the  last  10  years,  vertically  integrated  companies  have  raised 
prices more, and maintained higher prices, than fully unbundled ones.  

1.2.  More effective unbundling of transmission system operators is therefore clearly 

necessary 

The  concrete  proposal  in  this  respect  makes  it  clear  that  the  preferred  option  of  the 
Commission remains ownership unbundling. In practice this means that Member States must 
ensure that the same person or persons cannot exercise control over a supply undertaking and, 
at the same time, hold any interest in or exercise any right over a transmission system operator 
or  transmission  system.  This  provision  also  applies  vice  versa,  that  is,  control  over  a 
transmission system operator precludes the possibility of holding any interest in or exercising 
any right over a supply undertaking.  

This option allows for a situation in which the same person, for example a pension fund, holds 
non-controlling  minority  interests  in  both  a  transmission  system  operator  and  a  supply 
undertaking.  However,  such  a  minority  shareholder  cannot  have  blocking  rights  in  both 
undertakings, nor can it appoint members of their boards, nor can any person be a member of 
the  boards  of  both  undertakings.  This  option,  making  a  clear  ownership  separation  between 
transmission system  operators  and  any supply  undertakings,  is  the  most  effective  and  stable 
way  of  achieving  effective  unbundling  of  the  transmission  network  and  thus  of  solving  the 
inherent conflict of interest.  

In  order  to  implement  this  option,  Member  States  may  choose  the  following  arrangement 
which  may  help  to  fully  preserve  the  interests  of  the  shareholders  of  vertically  integrated 
companies. The shares of the vertically integrated company may be divided into shares of the 
company owning the transmission system on the one hand and shares of the supply company 
on  the  other.  Subsequently,  these  shares  may  be  attributed  to  the  shareholders  of  the 
previously vertically integrated company.  

Whilst the Commission considers that ownership unbundling remains the preferred option it 
does however provide an alternative option for Member States that choose not to go down this 
path.  This  option  must,  however,  provide  the  same  guarantees  regarding  independence  of 
action of the network in question and the same level of incentives on the network to invest in 
new  infrastructure  that  may  benefit  competitors.  This  option,  a  derogation  from  the  basic 

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ownership unbundling approach, is known as the "Independent System Operator". This option 
enables  vertically  integrated  companies  to  retain  the  ownership  of  their  network  assets,  but 
requires that the transmission network itself is managed by an independent system operator - 
an  undertaking  or  entity  entirely  separate  from  the  vertically  integrated  company  -  that 
performs  all  the  functions  of  a  network  operator.  In  addition,  to  ensure  that  the  operator 
remains  and  acts  truly  independently  of  the  vertically  integrated  company,  regulation  and 
permanent regulatory monitoring must be put in place.  

In some instances, vertically integrated energy companies may be forced to dispose of some 
of  their  assets,  notably  their  transmission  networks,  or  to  hand  over  the  operation  of  such 
assets  to  a  third  party,  in  order  to  comply  with  the  proposed  requirements  of  effective 
unbundling. But there does not appear to be any alternative to the options proposed if we are 
to ensure the full independence of the TSOs. 

The  two  options  apply  in  the  same  manner  to  the  electricity  and  gas  sector.  Although  the 
Commission  recognises  that  progress  towards  ownership  unbundling  generally  speaking  is 
currently  more  advanced  in  the  electricity  sector  in  the  EU,  the  Commission  has  found  no 
convincing  argument  to  justify  different  treatment  of  the  two  sectors.  In  particular,  the 
fundamental conflict of interest between the supply and production activities on the one hand 
and  network  operation  and  development  on  the  other  applies  equally  to  both  sectors. 
Moreover, the key to concluding long-term supply agreements with upstream gas producers is 
not  the  ownership  of  the  network  but  the  existence  of  a  strong customer  base.  The  EU  will 
undoubtedly  remain  a  highly  attractive  gas  supply  market  irrespective  of  the  ownership 
structure  of  the  purchasing  companies  which,  once  effectively  unbundled,  will  be  able  to 
compete  for  gas  on  an  equal  footing.  The  Commission  recognises,  moreover,  that  gas 
transportation, as opposed to electricity transmission, involves the physical movement of gas 
molecules through pipelines. The TSO therefore has a greater degree of control in defining the 
direction  of  flows  and  the  capacity  utilisation  in  the  system.  This  means  that  effective 
unbundling of the gas networks is at least as important as for the electricity networks.  

However, with a view to encouraging investment in new energy infrastructures by supply and 
production companies, the present proposal includes the possibility of a temporary derogation 
to ownership unbundling rules for the construction of new infrastructure. This exemption will 
be  applied  on  a  case  by  case  basis,  taking  into  account  in  the  economics  of  the  new 
investment, the internal market objectives and the security of supply objective. 

In  keeping  with  Article  295  EC,  the  proposal  applies  in  the  same  way  to  publicly  and 
privately  owned  companies.  This  means  that  irrespective  of  its  public  or  private  nature,  no 
person or group of persons would be able alone or jointly to influence the composition of the 
boards, the voting or decision making of either transmission system operators or the supply or 
production  companies.  This  ensures  that  where  supply  or  production  activities  are  in  public 
ownership,  the  independence  of  a  publicly  owned  transmission  system  operator  is  still 
guaranteed; but these proposals do not require state owned companies to sell their network to 
a privately owned company. For instance, to comply with this requirement, any public entity 
or  the  State  could  transfer  the  rights  (which  provide  the  “influence”)  to  another  publicly  or 
privately  owned  legal  person.  The  important  thing  is  that  in  all  cases  where  unbundling  is 
carried  out,  the  Member  State  in  question  must  demonstrate  that  in  practice,  the  results  are 
truly effective and that the companies operate entirely separate from one another, providing a 
real level-playing field across the whole of the EU. 

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Finally,  for  Member  States  that  have  no  gas  or  electricity  transmission  networks  but  only  a 
distribution network, the provisions on the ownership unbundling of transmission networks do 
not apply 

1.3. 

Third country aspects 

The present proposal requires the effective unbundling of transmission system operators and 
supply and production activities not only at national level but throughout the EU. It means in 
particular  that  no  supply  or  production  company  active  anywhere  in  the  EU  can  own  or 
operate  a  transmission  system  in  any  Member  State  of  the  EU.  This  requirement  applies 
equally to EU and non-EU companies.  

The  package  contains  safeguards  to  ensure  that  in  the  event  that  companies  from  third 
countries wish to acquire a significant interest or even control over an EU network, they will 
have  to  demonstrably  and  unequivocally  comply  with  the  same  unbundling  requirements  as 
EU companies. The Commission can intervene where a purchaser cannot demonstrate both its 
direct and indirect independence from supply and generation activities.  

Furthermore, well functioning markets and networks are essential for the competitiveness of 
the  economy  and  for  the  well-being  of  the  citizens.  The  goal  of  the  current  proposal  is  to 
promote competition in the European energy markets and to promote the proper functioning 
of  these  markets.  In  this  light  it  is  imperative  -  without  prejudice  to  the  international 
obligations  of  the  Community  –  to  ensure  that  all  economic  operators  active  on  European 
energy markets respect and act in accordance with market investor principles. Therefore, the 
Commission  proposes  a  requirement  that  third  country  individuals  and  countries  cannot 
acquire  control  over  a  Community  transmission  system  or  transmission  system  operator 
unless  this  is  permitted  by  an  agreement  between  the  EU  and  the  third  country.  The  aim  is 
guarantee that companies from third countries respect the same rules that apply to EU based 
undertakings  in  both  letter  and  spirit  -  not  to  discriminate  against  them.  Finally,  the 
Commission  will  also  hold  a  rapid  and  in-depth  review  of  the  wider  aspects  of  the  EU’s 
external policy in energy, and will make the results of that work public.  

Concluding  on  the  important  question  of  unbundling,  the  present  proposals  for  effective 
unbundling are a necessary and decisive step to achieving EU-wide market integration. It may 
ultimately help to create supra-national transmission system operators as the operators are no 
longer  held  back  by  mutual  distrust.  But  at  the  same  time,  if  supra-national  transmission 
operators  were  created  without  ensuring  their  full  independence,  competition  between 
affiliated  supply  and  production  companies  would  likely  be  weakened  due  to  the  risk  of 
collusion. In the absence of effective unbundling such cooperation would therefore give rise 
to competition concerns. Notably, the present proposals include several additional measures to 
promote  EU  market  integration,  relating  in  particular  to  improved  cooperation  among 
transmission system operators. 

2. 

ENHANCED POWERS AND INDEPENDENCE OF NATIONAL REGULATORS 

2.1. 

Strong national regulators to oversee the running of electricity and gas markets 

The  existing  electricity  and  gas  Directives  require  Member  States  to  establish  regulatory 
authorities. In several Member States, Regulatory authorities are well-established bodies with 
substantial powers and resources, allowing them to ensure proper market regulation. In other 

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Member  States,  regulatory  authorities  have  only  recently  been  established  and  their  powers 
are weaker or dispersed over different bodies. The comprehensive country reviews carried out 
by the Commission have revealed this lack of uniformity and in many cases the weakness of 
the regulatory authority.  

The  experience  of  Member  States  whose  markets  have  been  open  for  several  years,  and  of 
other utility sectors open to competition, clearly indicates that strong regulators are necessary 
for a properly functioning market, in particular as regards the use of network infrastructures. 

For  these  reasons,  the  present  proposal  aims  to  strengthen  the  powers  of  the  regulatory 
authorities. First, they would be given a clear mandate to cooperate at European level, in close 
cooperation with the Agency for the Cooperation of Energy Regulators and the Commission, 
to  ensure  competitive,  secure  and  environmentally  sustainable  internal  electricity  and  gas 
markets  within  the  European  Union,  and  effective  market  opening  for  all  consumers  and 
suppliers. 

Second,  it  is  proposed  to  strengthen  their  market  regulation  powers,  in  particular  in  the 
following areas: 

–  monitoring compliance of transmission and distribution system operators with third party 
rules,  unbundling  obligations,  balancing  mechanisms,  congestion  and 

access 
interconnection management; 

–  reviewing the investment plans of the transmission system operators, and providing in its 
annual report an assessment of how far the transmission system operators' investment plans 
are  consistent  with  the  European-wide  10-year  network  development  plan;  monitoring 
network security and reliability, and reviewing network security and reliability rules; 

–  monitoring transparency obligations; 

–  monitoring  the  level  of  market  opening  and  competition,  and  promoting  effective 

competition, in cooperation with competition authorities; and 

–  ensuring that consumer protection measures are effective. 

Electricity  and  gas  differ  fundamentally  from  other  traded  goods  because  they  are  network-
based  products  that  are  impossible  or  costly  to  store.  This  makes  them  sensitive  to  market 
abuse and regulatory oversight over undertakings active in the electricity and gas market need 
to  be  increased.  Regulators  therefore  need  to  have  access  to  information  on  the  operational 
decisions  of  the  companies.  It  is  proposed  to  oblige  companies  to  keep  record  of  the  data 
related  to  their  operational  decision  for  five  years  at  the  disposal  of  national  regulatory 
authorities, as well as at the disposal of competition authorities and the Commission, so that 
these authorities are able to control effectively allegations of market abuse. This will limit the 
scope  of  market  abuse,  increase  the  trust  in  the  market,  and  thereby  stimulate  trade  and 
competition.  

Some  types  of  traders  (e.g.  banks)  already  have  such  obligations  under  the  Markets  in 
Financial Instruments Directive, and they should not have double obligations. Therefore the 
record keeping obligations should be without prejudice to, and compatible with, the existing 
Community  legislation  on  financial  markets.  Regulators  of  the  energy  market  and  the 
financial markets, need to cooperate in order to enable each other to have an overview over 

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the markets concerned. Prior to adoption of guidelines defining record keeping requirements, 
the  Agency  for  the  Cooperation  of  Energy  Regulators  and  the  Committee  of  European 
Securities  Regulators  (CESR)  are  invited  to  cooperate  and  advise  the  Commission  on  the 
content of the guidelines.  

To enable them to perform their duties, regulatory authorities would be given the powers to 
investigate, to request all necessary information and to impose dissuasive sanctions. They are 
also  requested  to  take  full  account  of  energy  efficiency  objectives  while  performing  their 
regulatory functions.  

2.2. 

Demonstrable independence of regulators brings market confidence 

The  independence  of  regulatory  authorities  is  a  key  principle  of  good  governance  and  a 
fundamental  condition  for  market  confidence.  Existing  legislation  calls  for  regulatory 
authorities  to  be  wholly  independent  of  the  interests  of  the  gas  and  electricity  industry. 
However,  it  does  not  specify  how  such  independence  can  be  demonstrably  ensured,  and  it 
does not guarantee independence from short-term political interests.  

As  underlined  by  the  2007  Spring  European  Council  conclusions  and  by  the  European 
Parliament, strengthening national energy regulators' independence is therefore a priority.  

It is proposed that the regulatory authority be legally distinct and functionally independent of 
any  other  public  or  private  entity,  and  that  its  staff  and  any  member  of  its  decision-making 
body act independently of any market interest and neither seek nor take instruction from any 
government or other public or private entity. For that purpose, it is proposed that regulatory 
authorities  have  legal  personality,  budgetary  autonomy,  appropriate  human  and  financial 
resources and independent management.  

3. 

3.1. 

AN  INDEPENDENT  MECHANISM  FOR  NATIONAL  REGULATORS  TO  COOPERATE  AND 
TAKE DECISIONS: THE AGENCY FOR THE COOPERATION OF ENERGY REGULATORS 

The positive experience of ERGEG needs to develop into a formal cooperation 
structure  

Although the internal market for energy has developed considerably, a regulatory gap remains 
on cross-border issues. In order to tackle this issue, the Commission initiated self-regulatory 
forums like the Florence (electricity) forum and the Madrid (gas) forum. These forums bring 
stake holders together in order to strengthen cooperation. 

In  addition,  an  independent  advisory  group  on  electricity  and  gas,  called  the  "European 
Regulators Group for Electricity and Gas" (ERGEG) was established by the Commission in 
2003 to facilitate consultation, coordination and cooperation between the national regulatory 
authorities in the Member States, and between these authorities and the Commission, with a 
view to consolidating the internal market in electricity and natural gas. ERGEG is composed 
of representatives of the national regulatory authorities.  

ERGEG activities over recent years have made a very positive contribution to the completion 
of the internal market in gas and electricity by issuing non-binding guidelines and addressing 
recommendations  and  opinions  to  the  Commission.  Nevertheless,  the  initiation  of  self-
regulatory  forums  and  setting  up  of  ERGEG  has  not  resulted  in  the  real  push  towards  the 
development  of  common  standards  and  approaches  that  is  necessary  to  make  cross-border 

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trade and the development of first regional markets, and ultimately, a European energy market 
a reality.  

As  time  has  progressed  the  energy  sector  has  become  more  complex  and  detailed,  and 
involves to a greater extent different financial interests. The present approach within ERGEG, 
which  in  practice  usually  requires  the  agreement  of  27  regulators  and  more  than  30 
transmission  system  operators  to  reach  agreement,  is  not  producing  sufficient  results.  It  has 
lead to a number of non-binding codes and efforts to reach agreement on common approaches 
through  "gradual  convergence"  but  has  not  lead  to  real  decisions  on  the  difficult  issues  that 
now need to be taken.  

At  present  the  technical  rules  that  electricity  companies  must  operate  under,  "grid-codes", 
differ  enormously  between  Member  States  and  often  even  within  a  single  Member  State. 
These need to undergo a process of convergence and then harmonisation if we are to integrate 
energy markets in the EU. 

The  Commission  has  evaluated  the  different  options  for  organising  the  required  tasks, 
including  whether  the  Commission  would  be  able  to  pursue  these  tasks  itself.  Harmonising 
these issues, as well as making progress on new infrastructure, is not a task that typically falls 
within the Commission's sphere of activities. The Commission has actually never carried out 
such  an  activity.  It  requires  the  specialist  expertise  in  the  27  national  regulatory  agencies 
(NRAs) to work together; it is they that need to agree on amending their national grid codes. 
In practice, only a body emanating from the national regulators can catalyse all the necessary 
resources of national regulators that is fundamental to achieving success on these issues. The 
Agency can through its Regulatory Board – which consists of NRAs – call upon the staff of 
these NRAs. The Commission is not in that position.  

The  Commission  has  concluded  that  the  tasks  required  could  be  best  fulfilled  by  a  separate 
entity, independent and outside the Commission. Both the European Council in the spring of 
2007 as well as recent European Parliament resolutions, endorsed this conclusion2.  

The  creation  of  a  more  powerful  network  of  national  energy  regulators  was  therefore 
considered. The network of competition authorities created in 2004 under Council Regulation 
(EC)  No  1/2003  provides  a  model.  Nevertheless,  this  would  necessitate  the  creation  of 
autonomous  powers  for  the  Commission  in  the  energy  sector  (currently  these  powers  only 
exist  in  the  area  of  competition  rules).  The  powers  of  the  NRAs  should,  in  any  event,  be 
reinforced and harmonised.  

Furthermore, the model of the system of European Central Banks could be applicable, but it 
lacks  a  legal  basis  in  the  Treaty.  Such  a  model  would  simply  require  an  amendment  of  the 
Treaty. 

2 

The European Council agrees in its conclusions to the establishment of an independent mechanim for 
national  regulators  to  cooperate  and  take  decisions  on  important  cross-border  issues,  whereas  the 
adopted  Vidal  Quadras  report  states  that  the  EP  "Welcomes  the  Commission's  proposal  to  enhance 
cooperation between national regulators at EU level, through a EU entity, as a way to promote a more 
European approach to regulation on cross-border issues; underlines that the Commission should play a 
determining role, whilst not undermining the independence of regulators; believes that decisions by the 
regulators should be made on specifically defined technical and trade issues and on an informed basis 
considering,  when  appropriate,  the  views  of  TSOs  and  other  relevant  stakeholders,  and  should  be 
legally binding;".  

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The  Commission  therefore  came  to  the  conclusion  that  if  an  independent  body  should  be 
established  which  can  make  proposals  to  the  Commission  regarding  decisions  that  involve 
substantive  decisions  and  take  individual  regulatory  decisions  which  are  binding  on  third 
parties  concerning  detailed  technical  issues  that  are  delegated  to  them,  the  only  solution 
would be to establish an Agency.  

The main proposed tasks would complement at European level the regulatory tasks performed 
by the national regulators. The structure should provide a framework for national regulators to 
cooperate, a regulatory review of the cooperation between transmission operators and scope 
for  taking  individual  decisions  concerning  infrastructure  in  the  territory  of  more  than  one 
Member  State.  This  analysis  reflects  the  principles  defined  by  the  Commission  in  the  draft 
inter-institutional  agreement  on  the  operating  framework  for  the  European  regulatory 
agencies3, in particular as regards the power to adopt individual decisions which are legally 
binding on third parties. 

The following proposal draws also on the "ERGEG+" option mentioned in the Commission 
Communication of 10 January 2007 "An Energy Policy for Europe"4.  

3.2.  Main tasks of the proposed Agency for the Cooperation of Energy Regulators 

The Agency would complement at European level the regulatory tasks performed at national 
level by the regulatory authorities by:  

–  Providing a framework for national regulators to cooperate. It is proposed to improve the 
handling of cross-border situations. The Agency will lay down procedures for cooperation 
between national regulators,  in  particular as regards the exchange  of information  and the 
apportionment  of  competence  where  more  than  one  Member  State  is  involved.  This 
framework will also promote regional cooperation between national regulators. 

–  Regulatory  oversight  of  the  cooperation  between  transmission  system  operators.  The 
Agency  will  have  responsibility  for  monitoring  and  reviewing  the  activities  of  the 
European Network of Transmission System Operators for Electricity and of the European 
Network of Transmission System Operators for Gas. In particular, it will be involved in the 
setting of priorities through the Networks' work programme, in the review of their 10-year 
investment plan, and in the preparation of technical and market codes. The review of the 
investment  plan  is  without  prejudice  to  the  transmission  system  operators’  liability  for 
technical failures as defined under national law. As regards the technical and market codes, 
the Agency will be empowered to ask transmission system operators to modify their drafts 
or  to  tackle  more  specific  issues  in  detail.  It  will  also  be  able  to  recommend  that  the 
Commission  make  these  codes  legally  binding  where  voluntary  implementation  by 
transmission system operators proves to be insufficient or not suited to certain issues. The 
Agency  may  recommend  modifying  the  transmission  operators'  draft  or  recommend 
additional provisions to the Commission. In practice, this mechanism will take the form of 
a constructive and continuous dialogue between the Agency, transmission system operators 
and  the  Commission.  The  involvement  of  the  Agency  will  be  the  key  to  ensuring  that 
cooperation among transmission system operators proceeds in an efficient and transparent 
way to the benefit of the internal market.  

3 
4 

COM(2005) 59. 
OJ C , , p. . 

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–  Individual  decision  powers.  With  a  view  to  handling  specific  cross-border  issues,  it  is 
proposed  to  vest  the  Agency  with  individual  decision  powers  on  exemption5  requests 
concerning  infrastructure  assets  of  European  interest  and  to  decide  on  the  regulatory 
regime applicable to infrastructure within the territory of more than one Member State. In 
addition, the Agency would be able to take specific decisions on individual technical issues 
when  these  are  granted  to  the  Agency  under  specific  Guidelines  adopted  pursuant  to  the 
gas and electricity Directives, under a comitology procedure.  

–  General  advisory  role.  The  Agency  would  in  general  have  an  advisory  role  vis-à-vis  the 
Commission as regards market regulation issues and could issue non-binding guidelines to 
publicise good practices among the national regulators. On a case-by-case basis, it would 
also  have  the  power  to  review,  in  the  light  of  implementing  measures  adopted  by  the 
Commission in application of Community legislation in the gas and electricity sector, any 
decisions  taken  by  a  national  regulatory  authority  that  directly  impact  on  the  internal 
market and provide an opinion to the Commission. 

Even though its powers cannot be extended to cover normative decisions (such as the formal 
adoption  of  obligatory  guidelines)  the  new  Agency  will  overall  play  a  crucial  role  in  the 
development and implementation of European gas and electricity market rules. 

3.3. 

Governance of the proposed Agency for the Cooperation of Energy Regulators 

The  institutional  setting  and  governance  principles  of  the  Agency  for  the  Cooperation  of 
Energy  Regulators  are  in  principle  based  on  standard  rules  and  practices  for  Community 
regulatory agencies.  

However, the necessary independence of regulatory functions needs to be taken into account. 
For  that  purpose,  besides  the  Administrative  Board  responsible  for  all  administrative  and 
budgetary  matters,  it  is  proposed  to  create  a  Board  of  Regulators,  responsible  for  all 
regulatory matters and decisions. The Director, appointed by the Administrative Board, after 
consulting the Regulatory Board, will be chosen from a shortlist adopted by the Commission. 
The  Director  will  represent  the  Agency  and  shall  be  responsible  for  the  day-to-day 
management. In addition, the structure of the Agency foresees in a Board of Appeal, which is 
competent to handle appeals against decisions adopted by the Agency. 

3.4. 

Financial aspects 

It  is  proposed  that  the  Agency  should  have,  given  its  tasks,  a  limited  staff  of  40-50  people. 
This  assessment  is  based  on  an  extensive  analysis  of  the  staff  requirements  of  national 
regulatory authorities and a careful analysis of the minimum resources necessary to carry out 
the  tasks  proposed,  in  particular  in  the  light  of  possibilities  for  synergies  in  harnessing  the 
resources within national regulatory authorities to assist the work of the agency. The proposed 
staff is in line with these authorities' needs6. As mentioned above, if the Commission were to 
endeavour to perform the Agencies' tasks, the number of staff required would be much higher.  

The total annual costs of the Agency are estimated at approximately € 6-7 million per year, of 
which € 5 million for staff expenditure (taking as the average per person the cost of European 
Commission staff, i.e. € 0.117 million per year, which includes expenditures associated with 

5 
6 

As defined in Article 22 of Directive 2003/55/EC and in Article 7 of Regulation (EC) No 1228/2003. 
An organigram will be attached to the Explanatory Memorandum.  

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buildings  and  related  administrative  expenditures),  €  1  million  operational  costs  (meetings, 
studies, as well as translation, publication and public relations costs) and the rest for capital 
expenditures (relating to the acquisition of movable property and associated expenditure) and 
mission expenditures.  

The  Agency’s  annual  costs  will  be  covered  by  Community  grants.  The  Agency  has  limited 
revenues stemming from fees to be paid by third parties which are charged when the Agency 
takes certain decisions. 

3.5. 

The role of the Commission 

There are in principle three different safeguards to secure the Commission's position and role 
as a guardian of the Treaty.  

First of all, if the Agency takes a decision, such a decision would only be binding for specific 
technical situations explicitly foreseen in the Regulation and Directives or provided on a case-
by-case basis by binding Guidelines. The Agency would have no political discretion outside 
this framework.  

Secondly,  if  TSO  cooperation  or  decisions  by  NRAs  threaten  effective  competition  and  the 
efficient  functioning  of  the  market,  the  Commission  shall  immediately  be  informed  by  the 
Agency  and  can  adopt  subsequently  the  necessary  measures  to  remedy  the  situation.  The 
Commission may also choose to act on its own initiative.  

Third,  where  a  substantive  decision  needs  to  be  taken,  this  can  only  be  done  by  the 
Commission.  In  these  cases  the  Agency  has  a  preparatory  and  advisory  role  only.  The 
Commission Legal Service has scrutinised the text carefully in this respect to ensure that the 
Agency has no power of discretionary substantive decision.  

Furthermore, it would be for the Commission, through the adoption of binding Guidelines to 
further specify and lay down the role of the Agency. 

4. 

EFFICIENT COOPERATION BETWEEN TRANSMISSION SYSTEM OPERATORS 

4.1. 

Strong  cooperation  between  transmission  system  operators  is  necessary  for 
electricity and gas market integration 

For  market  integration  to  take  place,  there  also  needs  to  be  effective  cooperation  among 
transmission system operators (TSOs) and a clear and stable regulatory framework, including 
regulatory  coordination.  Network  access  rules  and  operational  rules  need  to  be  compatible, 
there has to be effective exchange of information between transmission system operators and 
a  good  coordination  of  new  investment  to  increase  interconnection  capacities.  Transmission 
system  operators  in  gas  and  electricity  already  cooperate  voluntarily  in  existing  structures 
such as the European Transmission System Operators (ETSO) and Gas Transmission Europe 
(GTE).  They  cooperate  on  operational  issues  at  regional  level  and  participate  in  technical 
bodies such as the Union for the Co-ordination of Transmission of Electricity (UCTE) and the 
European Association for the Streamlining of Energy Exchange (EASEE-Gas). These multi-
layer  cooperation  initiatives  have  made  a  significant  contribution  to  the  internal  market  and 
have boosted the efficiency and the safety of the networks. 

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However, this voluntary cooperation has shown its limits for example in the form of network 
incidents and electricity black-outs due to poor coordination of network operation or missing 
links  in  the  electricity  and  gas  networks,  and  difficulties  in  proposing  or  agreeing  common 
technical  standards.  It  is  therefore  proposed  to  task  the  transmission  operators  with 
strengthening  their  cooperation  in  a  number  of  key  areas,  focusing  on  the  following  main 
issues. 

–  Development  of  market  and  technical  “codes”.  For  the  integration  of  the  electricity  and 
gas markets a coherent set of technical and market codes are needed. Today, these codes 
exist  on  a  national  basis  or  through  recommendations  of  organisations  such  as  UCTE  or 
EASEE-gas. The problem with the current situation is threefold: firstly the existing rules 
do  not  cover  all  areas  that  need  to  be  harmonised  in  order  to  make  an  integrated  market 
function, secondly the national codes are often not compatible with each other and thirdly 
they  are  often  not  legally  binding  or  enforceable.  Examples  of  these  codes  are  UCTE 
operational  handbook  for  security  and  reliability  of  the  electricity  transmission  networks 
and EASEE-gas recommendations on gas qualities.  

–  The  proposal  preserves  the  voluntary  process  of  the  transmission  system  operators  as  a 
pragmatic  way  of  developing detailed  technical  and  market  codes.  These  codes  are  often 
technically  complicated  and  there  needs  to  be  an  efficient  process  to  amend  them  when 
necessary.  The  proposal  adds  a  strong  regulatory  oversight  on  the  content  and  on 
monitoring  of  compliance  and  enforcement  of  these  rules  by  national  regulatory 
authorities, the Agency, and/or the Commission, depending on the nature of the proposal in 
question.  In  case  the  transmission  system  operators  are  not  able  to  agree  on  necessary 
technical  and  market  codes  or  do  not  implement  them,  these  rules  can  be  proposed  and 
adopted through the comitology procedure on the proposal of the Commission.  

–  In  total,  the  present  proposal  defines eleven main  areas of cooperation. The annual work 
programmes of the European Network of transmission system operators (see Chapter 1.2), 
prepared in consultation with all stakeholders and the new Agency for the Cooperation of 
Energy  Regulators  (see  Chapter  3),  will  set  priorities  and  specify  in  more  detail  what 
technical  and  market  codes  are  needed.  Cooperation  between  transmission  system 
operators  should  also  include  implementation  monitoring  of  the  technical  and  market 
codes.  

–  Research and innovation activities of common interest: TSO cooperation should establish a 
framework  to  identify,  finance  and  manage  research  and  innovation  activities  necessary 
driving the sound technical development and evolution of the European electricity and gas 
networks, in particular to promote security of supply and energy efficiency and to enable 
penetration of low carbon technologies. 

–  Coordination  of  grid  operation.  TSO  cooperation  includes  the  common  operation  of 
networks according to the agreed market and technical codes. It also refers to the exchange 
of  network  operational  information  and  the  coordinated  publication  of  information  on 
network access, for example through a common transparency platform.  

–  Investment  planning.  So  as  to  make  sufficient  transmission  capacity  available  to  meet 
demand and to integrate national markets, network operators would need coordinated long-
term  planning  of  system  development  with  a  view  to  planning  network  investments  and 
monitoring  the  development  of  transmission  network  capacities.  The  idea  is  that  the 
European  Networks  of  transmission  system  operators  will  publish  network  development 

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plans,  to  include  the  integrated  network  modelling,  scenario  development  and  an 
assessment of the resilience and deliverability of the integrated system. These development 
plans should be sufficiently forward looking (e.g. at least 10 years) so as to allow for the 
early  identification  of  investment  gaps,  more  especially  with  cross  border  capacities  in 
mind.  

For the last two of these tasks in particular, regional initiatives play a positive role in market 
integration.  The  cooperation  of  transmission  system  operators  at  European  level  should 
indeed be complemented at regional level, in order to ensure real practical progress, optimum 
management  of  the  network7  and  appropriate  investment  planning  and  delivery.  The 
regulatory  framework  should  promote,  coordinate  and  develop  regional  initiatives  between 
transmission  system  operator  and  regulatory  authorities,  as  happens  with  the  Regional 
Initiatives led by ERGEG and initiatives such as the Pentalateral forum in Northwest Europe 
and as recommended by major stakeholders like Eurelectric.  

4.2. 

An improved cooperation mechanism 

It  is  important  for  the  transmission  system  operators'  cooperation  structures  to  be  fully 
recognised  at  European  level  as  having  the  authority  to  carry  out  the  above  tasks.  For  that 
purpose,  the  Commission  will  formally  designate  the  European  Networks  of  (gas  and 
electricity) transmission system operators in charge of these tasks.  

As  companies,  transmission  system  operators  must  be  transparent  about  the  way  they 
cooperate. They may build on existing structures such as GTE and ETSO. However, the tasks 
and  responsibilities  required  of  the  transmission  system  operators  will  mean  a  need  for  a 
central and permanent cooperation structure both in terms of organisation and practical tools 
for planning and operating the networks.  

The  Agency  for  the  Cooperation  of  Energy  Regulators  will  monitor  how  the  European 
Network of transmission system operators carries out the tasks conferred upon it.  

Involvement  and  consultation  of  stakeholders,  such  as  producers,  suppliers,  customers  and 
distribution  system  operators  will  be  developed  as  standard  practice  by  the  transmission 
system  operators  from  the  beginning  of  their  work  on  a  specific  subject.  For  that  purpose, 
stakeholders  will  be  consulted  on  any  draft  market  and  technical  code  prepared  by  the 
transmission  system  operators  and  they  will  be  able  to  comment  on  the  annual  work 
programme of the transmission system operators. The Agency will oversee that consultation is 
done properly. 

5. 

IMPROVING THE FUNCTIONING OF THE MARKET 

The present proposal also aims at improving the legislative framework to facilitate third party 
access  to  key  infrastructures,  to  increase  transparency  on  the  market,  to  enhance  market 
integration and to improve access to retail customers. 

7 

For example, in electricity, it is clear that the setting of technical codes needs to be determined for each 
synchronous area for some issues.  

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5.1. 

Exemption regime 

The  current  legislation  allows  major  new  infrastructure  to  be  exempt  from  regulated  third 
party access rules for a pre-determined period. Several infrastructures have been completed or 
are  under  way,  including  gas  and  electricity  interconnectors  and  LNG  facilities  that  have 
made use of this possibility. This has helped to take forward projects which benefit security of 
supply  and  competition.  At  the  same  time,  experience  so  far  shows  that  project  developers, 
regulators and the Commission could benefit  from a streamlined procedure  for applying for 
and granting  exemptions  as well as  a clarification  of  some  of  the  conditions. Therefore,  the 
Commission proposes to formulate guidelines to assist applicants and regulators in applying 
the conditions for an exemption. To ensure that exempted infrastructure can nevertheless be 
used optimally by the market, it is proposed to make general the minimum requirements for 
the  allocation  of  capacity  and  congestion  management  provisions  for  the  new  infrastructure 
that have so far been applied on a case-by-case basis. 

5.2. 

Transparency 

The internal electricity and gas market is suffering from a lack of liquidity and transparency 
hindering the efficient allocation of resources, limiting risk hedging possibilities and blocking 
new entrants. Trust in the market, its liquidity and the number of market participants need to 
increase, by increasing the information that is available to the market. 

Current requirements on transparency focus on publication of capacity of the network, so that 
market participants are able to see if capacity is available and if all available capacity is being 
offered  to  the  market.  However,  market  participants  also  need  to  have  equal  access  to 
information that determines wholesale price movements.  

Currently, incumbents who are responsible for the largest part of the gas and electricity flows, 
and  who  own  the  majority  of  the  assets  in  the  market,  have  more  and  better  access  to 
information than new entrants. In electricity, there are requirements in the form of guidelines 
attached  to  the  regulation  setting  out  transparency  requirements  on  the  generation  of 
electricity, but they are not sufficient, and in gas no such requirements exist at the moment. 
Therefore it is proposed to extend the transparency requirements to cover gas stocks, forecasts 
of demand and supply, costs for balancing the network and trading.  

The correct and full application of these requirements needs to be controlled and monitored 
by the national regulatory authorities, so their powers need to be strengthened accordingly. 

On the issue of transparency regarding derivatives and financial instruments with respect to 
which  these  proposals  do  not  provide  for  additional  requirements  on  the  companies 
concerned, the Commission will examine this issue in detail and reach a conclusion towards 
the middle of 2008. The Agency for the Cooperation of Energy Regulators and the Committee 
of European Securities Regulators are invited to cooperate to further investigate and advise on 
the  question  whether  transactions  in  gas  and  electricity  supply  contracts  and  gas  and 
electricity derivatives should be subject to pre and/or post-trade transparency requirements.  

5.3. 

Access to storage 

The existing Directive on the internal gas market provides that where storage is an essential 
facility in order to be able to supply customers, storage operators have to give access to third 
parties.  Member  States  have  the  choice  to  ensure  access  to  these  storage  facilities  either 

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through  conditions  defined  by  the  regulator  or  by  obliging  storage  system  operators  to 
negotiate access conditions with customers. The requirements in the Directive are limited to 
the  principles,  and  leave  a  great  deal  of  freedom  to  the  Member  States  in  defining  their 
regulatory  framework.  Body  was  subsequently  given  to these principles through  the Madrid 
Forum, where all stakeholders agreed to voluntary 'Guidelines for Good Third Party Access 
Practice  for  Storage  System  Operators'  (GGPSSO).  However,  ERGEG  has  concluded  that 
overall implementation of these guidelines is poor.  

For them to be effectively applied, the Commission proposes four measures: 

–  Make the principles in the guidelines legally binding and allow for detailed implementation 

of the guidelines through comitology; 

–  Establish  legal  and  functional  unbundling  of  storage  system  operators  who  are  part  of 

supply undertakings; 

–  Enhance the powers of national regulatory authorities to oversee access to storage; 

–  Require clarity on the regulatory regime that is applied to storage facilities. 

To make the guidelines legally binding, the Regulation will be extended to define how storage 
system operators must offer third party access services, and how they should allocate capacity 
and  manage  congestion.  It  will  also  define  the  transparency  requirements  and  propose 
measures  to  enable  a  secondary  market  in  storage  capacity  to  develop.  These  rules  should 
ensure  that  all  storage  that  is  available  to  third  parties  is  offered  to  the  market  in  a  non-
discriminatory  and  transparent  manner,  and  that  capacity-hoarding  is  strongly  discouraged. 
These rules shall also serve to ensure consistency with the proposed minimum requirements 
on exempted infrastructure.  

By requiring legal and functional unbundling of storage system operators, effective access to 
storage  will  be  greatly  enhanced.  The  fact  that  currently,  when  suppliers  need  storage,  they 
have  to  contact  their  competitors  to  contract  their  storage  need,  does  not  enhance  market 
confidence  and  is  a  serious  barrier  for  new  entrants.  Requiring  unbundled  storage  operators 
will  improve  this  situation  and  it  will  enable  competitors  and  regulators  to  check  that  all 
available storage capacity is offered to the market.  

The  Commission  proposes  to  erase  the  ambiguity  that  exists  on  the  proportion  of  storage 
capacity that is offered to the market, requiring that all Member States need to define criteria 
when  and  how  third  party  access  to  storage  applies  and  this  has  to  be  made  public.  The 
regulator  consequently  has  the  task  to  control  if  these  criteria  are  applied  correctly  to  all 
storages.  

5.4. 

Access to LNG terminals 

The  role  of  LNG  in  the  supply  of  gas  to  the  European  Union  is  becoming  ever  more 
important, and a lot of investment in LNG terminals is planned or under way. For that reason, 
transparent rules on access to LNG terminals are needed. Regulators have identified the need, 
and  ERGEG  has  prepared  guidelines  with  a  goal  create  a  common  approach  to  third  party 
access for LNG terminals.  

Although many LNG terminals constructed have used the possibilities to be exempted from 
third party access and regulatory intervention under Article 22 of the Directive, there are also 

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LNG  terminals  for  which  third  party  access  rules  apply.  -Since  the  current  Directive  only 
imposes a general requirement that access has to be regulated, this leaves room to diverging 
interpretations  among  Member  States.  Moreover,  an  exemption  under  Article  22  is  always 
temporary, and when the exempted period has passed, LNG terminals will become regulated. 
Therefore the Commission proposes to impose more clearly defined third party access rules to 
LNG  terminals.  To  make  the  guidelines  legally  binding,  the  Regulation  will  be  extended  to 
define  how  LNG  terminal  operators  should  offer  third  party  access  services,  and  how  they 
should  allocate  capacity  and  manage  congestion.  It  will  also  define  the  transparency 
requirements  and  propose  measures  to  enable  a  secondary  market  in  terminal-capacity  to 
develop.  These  rules  shall  also  serve  to  ensure  consistency  with  the  proposed  minimum 
requirements on exempted infrastructure.  

5.5. 

Long-term supply agreements 

Downstream bilateral supply agreements provide an opportunity to energy intensive industries 
to obtain more predictable prices. However, such agreements risk foreclosing the downstream 
market  by  preventing  consumers  from  switching  and  thus  limiting  competition.  To  reduce 
uncertainty on the market, the Commission will, in the coming months, provide guidance in 
an appropriate form on the compliance of downstream bilateral long-term supply agreements 
with EC competition law. 

5.6. 

A framework for the gradual establishment of a European retail market 

Neither  in  the  electricity  nor  the  gas  market  is  it  yet  possible  to  speak  of  a  European  retail 
market  (households  and  small  enterprises),  as  customers,  assuming  they  have  a  choice,  are 
still obliged to choose a supplier established in the same country. Establishing a true European 
end-user market is the ultimate goal of the internal electricity and gas markets: it is necessary 
for creating competitive markets and for achieving maximum efficiency. Liberalisation in the 
retail market is important to ensure that all EU citizens are able to benefit from competition. If 
liberalisation applied only to large customers, European households would end up subsidising 
their industry and investment signals for new generation and supply would be distorted. From 
1 July 2007, all retail markets in the EU have opened up to competition, but in practice many 
consumers are tied to their historic suppliers because an appropriate legal framework had not 
been  put  in  place  as  required.  A  European  retail  market  can  only  be  created  gradually.  To 
stimulate this process the Commission is considering setting up a retail forum by analogy with 
the positive experience of the Florence and Madrid Forums. This forum would allow to focus 
on specific retail issues, and it should serve as a platform for all stakeholders to promote the 
establishment  of  an  EU  wide  retail  market.  The  forum  would  provide  guidance  for  the 
proposed  obligations  on  the  Member  States  and  the  regulatory  authorities  to  establish  clear 
rules  on  competition  in  the  retail  market,  with  a  view  to  gradually  harmonising  the  market 
rules to allow cross-border retail markets.  

Well-functioning  retail  markets  will  also  play  a  very  important  role  in  increasing  people's 
awareness of domestic energy consumption and the cost of energy, as all measures to reduce 
CO2-emissions  and  increase  energy  efficiency  require  action  from  households.  Competition 
over  supply  to  households  will  enhance  people's  energy-awareness.  However,  current 
practices whereby consumers only receive the final bill for their consumption after a year do 
not  create  such  awareness,  neither  does  it  enable  suppliers  to  develop  competitive  services 
that  distinguish  between  households  with  specific  needs.  Suppliers  therefore  need  to  give 
more  information  to  ensure  that  customers  get  more  frequent  information  on  their  energy 
consumption and costs. 

EN 

18 

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It is obvious that freedom of choice for consumers must be accompanied by strong guarantees 
on the rights of the customers. Vulnerable customers have already a high degree of protection 
in the current directive to ensure that they will have access to the energy they need to lead a 
normal life. These measures have however been incorrectly applied in some countries, and to 
clarify  the  framework,  the  Commission  proposes  to  define  binding  guidelines.  At  the  same 
time,  the  Commission  proposes  to  strengthen  the  rights  of  all  customers,  among  others  by 
giving them the right to change supplier at any time and requiring energy companies that bills 
are settled within a month after a consumer switches supplier. 

Finally, the Commission has come  to the  conclusion that for Distribution System Operators 
(DSOs) the current legal and functional unbundling rules are sufficient. It does not therefore 
propose to extend the ownership unbundling rules outlined in Chapter 4 above to DSOs. 

6. 

COOPERATION TO REINFORCE SECURITY OF SUPPLY 

6.1. 

Security of supply monitoring by transmission system operators 

It is important to ensure that the electricity and gas systems can meet demand even in peak 
times. In the case of electricity, this is only possible when there is enough generation capacity 
(generation adequacy) and the network is capable of transporting the energy from generators 
to  final  consumers  (network  adequacy).  In  the  case  of  gas,  sufficient  import  and  storage 
capacity need to be in place.  

Directive  2005/89/EC  requires  the  national  regulators,  with  the  help  of  the  transmission 
system  operators,  to  report  yearly  to  the  Commission  on  security  of  electricity  supply. 
Directive 2004/67/EC requires Member States to report on the security of gas supply situation 
and  on  the  regulatory  framework  to  enhance  investment  in  infrastructure.  The  proposed 
amendments  to  Regulations  (EC)  No  1228/2003  and  (EC)  No  1775/2005  give  the  task  of 
making system adequacy forecasts for every summer and winter as well for the long term to 
the Network of European Transmission System Operators. A European outlook is necessary 
to take into account the possibilities to export and import electricity and gas in peak demand 
conditions.  Due  to  the  cross-border  electricity  and  gas  flows  within  the  internal  market,  the 
outlook needs to be carried out at the European level. 

6.2. 

Cooperation of Member States 

EU  legislation  has  two  instruments  dealing  with  security  of  gas  supply.  First,  Directive 
2003/55/EC  introduced  general  monitoring  obligations  for  the  Member  States.  Second, 
Directive  2004/67/EC  specifically  concerns  measures  to  safeguard  security  of  gas  supply. 
This  later  directive  establishes  the  Gas  Coordination  Group  and  defines  a  "Community 
mechanism" in the event of supply disruption.  

These  instruments  provide  for  a  coordination  platform.  They  do  not  define  quantitative 
objectives  as  regards  security  of  supply,  nor  do  they  impose  any  obligation  as  regards  gas 
stocks.  Finally,  they  do  not  provide  a  framework  for  regional  cooperation  in  case  of  severe 
supply disruptions.  

Directive  2004/67/EC  was  only  recently  transposed  by  the  Member  States.  Its  Article  10 
provides  for  the  Commission  to  report  by  19  May  2008  on  its  implementation  and  in 
particular  on  the  effectiveness  of  its  instruments  and  that  it  may  issue  further  proposals 

EN 

19 

   EN 

 
concerning  security  of  supply.  In  particular,  this  report  will  address  security  of  supply 
measures in relation to gas stocks.  

For that reason, as a first step, the present proposals do not modify Directive 2004/67/EC and 
only address two issues: 

–  Increased  transparency  obligations  on  the  level  of  commercial  stocks.  Each  storage 
operator would have the obligation to publish on a daily basis the amount of working gas it 
has  in  its  facilities.  This  obligation  would  considerably  increase  mutual  confidence  for 
regional and bilateral assistance in case of severe supply disruptions.  

–  Solidarity  It  is  proposed  that  Member  States  cooperate  in  order  to  promote  regional  and 
bilateral solidarity. This cooperation is intended to cover situations which would be likely 
to  result  in  severe  disruptions  of  gas  supply  affecting  a  Member  State.  Examples  of  this 
coordination  are  the  streamlining  of  national  measures  to  deal  with  emergencies  and  the 
elaboration  of  practical  modalities  for  mutual  assistance.  The  Commission  will  adopt 
guidelines for regional solidarity cooperation, if needed. 

EN 

20 

   EN 

 
2007/0199 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Regulation (EC) No 1775/2005 on conditions for access to the natural gas 
transmission networks 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
95 thereof, 

Having regard to the proposal from the Commission8, 

Having regard to the opinion of the European Economic and Social Committee9, 

Having regard to the opinion of the Committee of the Regions10, 

Acting in accordance with the procedure laid down in Article 251 of the Treaty11, 

Whereas: 

(1) 

(2) 

The  internal  market  for  gas,  which  has  been  progressively  implemented  since  1999, 
aims at delivering real choice for all consumers in the Community, be they citizens or 
business,  new  business  opportunities  and  more  cross-border  trade,  so  as  to  achieve 
efficiency gains, competitive prices, higher standards of service, and to contribute to 
security of supply and sustainability. 

Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 
concerning  common  rules  for  the  internal  market  in  natural  gas  and  repealing 
Directive 98/30/EC12 and Regulation (EC) No 1775/2005 of the European Parliament 
and of the Council of 28 September 2005 on conditions for access to the natural gas 
transmission  networks13  have  made  significant  contributions  towards  the  creation  of 
such an internal market for gas. 

(3) 

However, at present, the right to sell gas in any Member State on equal terms, without 
discrimination  or  disadvantage  cannot  be  guaranteed  to  any  company  in  the 

8 
9 
10 
11 
12 
13 

OJ C , , p. . 
OJ C , , p. . 
OJ C , , p. . 
OJ C , , p. . 
OJ L 176, 15.7.2003, p. 57. 
OJ L 289, 3.11.2005, p. 1. 

EN 

21 

   EN 

 
                                                 
(4) 

(5) 

(6) 

(7) 

Community. In particular, non-discriminatory network access and an equally effective 
level of regulatory supervision in each Member State do not yet exist.  

The Communication of the Commission to the European Parliament and the Council 
entitled "An Energy Policy for Europe"14 highlighted the importance of completing the 
internal market in natural gas and to create a level playing field for all gas companies 
in  the  Community.  The  Communication  from  the  Commission  to  the  European 
Parliament and to the Council on prospects for the internal gas and electricity market15 
and  the  Communication  from  the  Commission  "Inquiry  pursuant  to  Article  17  of 
Regulation  (EC)  No  1/2003  into  the  European  gas  and  electricity  sectors  (Final 
Report)"16  showed  that  the  present  rules  and  measures  do  not  provide  the  necessary 
framework to achieve the objective of a well functioning internal market. 

Regulation (EC) No 1775/2005 needs to be adapted in line with these communications 
to improve the regulatory framework of the internal market in gas. 

In  particular,  increased  cooperation  and  coordination  among  transmission  system 
operators  is  required  to  ensure  progressive  compatibility  of  the  technical  and 
commercial  codes  for  providing  and  managing  effective  access  to  the  transmission 
networks  across  borders,  and  to  ensure  coordinated  and  sufficiently  forward  looking 
planning and sound technical evolution of the transmission system in the Community, 
with due regard to the environment, and promote energy efficiency and research and 
innovation  notably  with  respect 
to  ensuring  penetration  of  renewables  and 
dissemination  of  low  carbon  technology.  Transmission  system  operators  should 
operate their networks according to these compatible technical and market codes.  

In  order  to  ensure  an  optimal  management  of  the  gas  transmission  network  in  the 
Community  a  European  network  of  the  transmission  system  operators  should  be 
established. Its tasks should be carried out in compliance with Community competition 
rules  which  remain  applicable  to  the  decisions  of  the  European  network  of  the 
transmission  system  operators.  Its  tasks  should  be  well-defined  and  their  working 
method  should  be  such  as  to  ensure  efficiency,  representativity  and  transparency. 
Given that more effective progress may be achieved through an approach at regional 
level,  transmission  system  operators  should  set  up  regional  structures  within  the 
overall  cooperation  structure,  whilst  ensuring  that  results  at  regional  level  are 
compatible with codes and investment plans at Community level. Cooperation within 
such  regional  structures  presupposes  effective  unbundling  of  network  activities  from 
production and supply activities in the absence of which regional cooperation between 
transmission system operators gives rise to a risk of anti-competitive conduct. 

(8) 

All market participants have an interest in the work expected of the European network 
of  transmission  system  operators.  The  consultation  process  is  therefore  essential  and 
existing structures set up to facilitate and streamline the consultation process, such as 
EASEE—gas  (the  European  Association  for  the  Streamlining  of  Energy  Exchange), 
should play an important role. 

14 
15 
16 

COM(2007) 1. 
COM(2006) 841. 
SEC(2006) 1724. 

EN 

22 

   EN 

 
                                                 
(9) 

To enhance competition through liquid wholesale gas markets, it is vital that gas can 
be traded independently of its location in the system. The only way to do this is to give 
network  users  the  freedom  to  book  entry  and  exit  capacity  independently,  thereby 
creating gas transport through zones instead of along contractual paths. The preference 
for  entry-exit  systems  to  facilitate  the  development  of  competition  was  already 
expressed by most stakeholders at the 6th Madrid Forum. 

(10)  There  is  substantial  contractual  congestion  in  the  gas  networks.  The  congestion 
management and capacity allocation principles for new or newly negotiated contracts 
are therefore based on the freeing-up of unused capacity by enabling network users to 
sublet or re-sell their contracted capacities and the obligation of transmission system 
operators  to  offer  unused  capacity  to  the  market,  at  least  on  a  day-ahead  and 
interruptible  basis.  Given  the  large  proportion  of  existing  contracts  and  the  need  to 
create  a  truly  level  playing  field  between  users  of  new  and  existing  capacity  these 
principles need to be applied to all contracted capacity, including existing contracts.  

(11)  Market monitoring undertaken over recent years by the national regulatory authorities 
and by the Commission has shown that current transparency requirements and rules on 
access to infrastructure are not sufficient. 

(12)  Equal access to information on the physical status of the system is necessary to enable 
all market participants to assess the overall demand and supply situation and identify 
the  reasons  for  movements  in  the  wholesale  price.  This  includes  more  precise 
information  on  supply  and  demand,  network  capacity,  flows  and  maintenance, 
balancing and availability and usage of storage. The importance of this information for 
the functioning of the market requires the lifting of the limitations to publication for 
confidentiality reasons.  

(13)  To enhance trust in the market, its participants need to be sure that abusive behaviour 
can be sanctioned. Competent authorities should be enabled to effectively investigate 
allegations of market abuse. Therefore access to data by the competent authorities is 
necessary  that  provides  information  on  operational  decisions  made  by  supply 
undertakings.  In  the  gas  market  all  these  decisions  are  communicated  to  the  system 
operators in the form of capacity reservations, nominations and realised flows. System 
operators  should  keep  this  information  available  to  the  competent  authorities  for  a 
fixed period of time.  

(14)  Competition  for  household-consumers  requires  that  suppliers  not  be  blocked  when 
they want to enter  new retail markets. Therefore  rules and responsibilities  governing 
the  supply  chain  need  to  be  known  to  all  market  parties,  and  they  need  to  be 
harmonised with a view to enhancing Community market integration. 

(15)  Access to gas storage facilities and LNG facilities is insufficient, and therefore rules 
need  to  be  improved.  Monitoring  by  the  European  Regulators'  Group  for  electricity 
and gas (ERGEG) concluded that the voluntary guidelines for good third party access 
practice for storage system operators, agreed by all stakeholders at the Madrid Forum, 
are being insufficiently applied and therefore need to be made binding.  

EN 

23 

   EN 

 
(16)  Regulation  (EC)  No  1775/2005  provides  that  certain  measures  are  to  be  adopted  in 
accordance  with  Council  Decision  1999/468/EC  of  28  June  1999  laying  down  the 
procedures for the exercise of implementing powers conferred on the Commission17. 

(17)  Decision 1999/468/EC has been amended by Decision 2006/512/EC, which introduced 
a regulatory procedure with scrutiny for measures of general scope designed to amend 
non-essential elements of a basic instrument adopted in accordance with the procedure 
referred to in Article 251 of the Treaty, including by deleting some of those elements 
or by supplementing the instrument by the addition of new non-essential elements. 

(18) 

In accordance with the joint statement of the European Parliament, the Council and the 
Commission18  on  Decision  2006/512/EC,  for  this  new  procedure  to  be  applicable  to 
instruments adopted in accordance with the procedure laid down in Article 251 of the 
Treaty  which  are  already  in  force,  those  instruments  must  be  adjusted  in  accordance 
with the applicable procedures. 

(19)  As  regards  Regulation  (EC)  No  1775/2005,  power  should  be  conferred  on  the 
Commission in particular to establish or adopt the guidelines necessary for providing 
the minimum degree of harmonisation required to achieve the aim of this Regulation. 
Since  those  measures  are  of  general  scope  and  are  designed  to  amend  non-essential 
elements  of  Regulation  (EC)  No  1775/2005  and  to  supplement  Regulation  (EC)  No 
1775/2005  by  the  addition  of  new  non-essential elements, they should be adopted in 
accordance with the regulatory procedure with scrutiny provided for in Article 5a of 
Decision 1999/468/EC. 

(20)  Regulation (EC) No 1775/2005 should therefore be amended accordingly, 

HAVE ADOPTED THIS REGULATION: 

Article 1 

Regulation (EC) No 1775/2005 is amended as follows: 

(1) 

 Article 1 is replaced by the following: 

"Article 1 
Subject matter and scope 

This Regulation aims at: 

(a) 

to  natural  gas 
setting  non-discriminatory  rules  for  access  conditions 
transmission  systems  taking  into  account  the  specificities  of  national  and 
regional markets with a view to ensuring the proper functioning of the internal 
gas market;  

17 

18 

OJ  L  184,  17.7.1999,  p.  23.  Decision  as  amended  by  Decision  2006/512/EC  (OJ  L  200,  22.7.2006, 
p. 11). 
OJ C 255, 21.10.2006, p. 1. 

EN 

24 

   EN 

 
                                                 
(b) 

(c) 

setting  non-discriminatory  rules  for  access  conditions  to  LNG  facilities  and 
storage facilities; 

facilitating  the  emergence  of  well  functioning  and  transparent  cross-border 
retail  markets  and  a  well  functioning  and  transparent  wholesale  market;  it 
provides  mechanisms  to  harmonise  these  rules  in  order  to  allow  trading  and 
supplying gas to retail customers across borders. 

This  Regulation,  with  the  exception  of  Article  6a(4),  shall  only  apply  to  storage 
facilities falling under Article 19(3) or (4) of Directive 2003/55/EC. 

The  objectives  referred  to  in  the  first  subparagraph  shall  include  the  setting  of 
harmonised principles for tariffs, or the methodologies underlying their calculation, 
for  access  to  the  network,  the  establishment  of  third  party  access  services  and 
harmonised  principles  for  capacity  allocation  and  congestion  management,  the 
determination  of  transparency  requirements,  balancing  rules  and  imbalance  charges 
and facilitating capacity trading." 

(2) 

Article 2 is amended as follows: 

(a) 

in paragraph 1, the following definitions are added: 

"24.  'LNG-facility capacity' means capacity at an LNG-terminal for the liquefaction 
of  natural  gas  or  the  importation,  offloading,  ancillary  services,  temporary 
storage and re-gasification of LNG, 

25. 

26. 

27. 

28. 

29. 

'space' means the volume of gas which a user of a storage facility is entitled to 
use for the storage of gas ;  

'deliverability' means the rate at which the storage user is entitled to withdraw 
gas from the storage facility;  

'injectability' means  the  rate at which the storage user is entitled to inject gas 
into the storage facility;  

'storage  capacity'  means  any  combination  of  space, 
deliverability 

injectability  and 

'Agency'  means  the  Agency  for  the  Cooperation  of  Energy  Regulators 
established by Regulation (EC) No …19 " 

(b)  paragraph 2 is replaced by the following: 

"2.  Without  prejudice  to  the  definitions  in  paragraph  1  of  this  Article  the 
definitions contained in Article 2 of Directive 2003/55/EC, which are relevant 
for the application of this Regulation, shall also apply with the exception of the 
definition of transmission in point 3 of that Article. 

19 

OJ L ….. 

EN 

25 

   EN 

 
 
 
 
                                                 
The  definitions  in  points  3  to  23  in  paragraph  1  of  this  Article  in  relation  to 
transmission shall apply by analogy in relation to storage and LNG facilities." 

(3) 

The following Articles 2a to 2h are inserted: 

"Article 2a 
European Network of Transmission System Operators for Gas 

All  transmission  system  operators  shall  cooperate  at  Community  level  through 
establishing  the  European  Network  of  Transmission  System  Operators  for  Gas  in 
order  to  ensure  the  optimal  management  and  sound  technical  evolution  of  the 
European gas transmission network 

Article 2b 
Establishment of the European Network for Transmission System Operators for Gas 

1. 

2. 

3. 

4. 

By  […]  at  the  latest  the  transmission  system  operators  for  gas  shall  submit  to  the 
Commission  and  to  the  Agency  the  draft  of  statutes,  a  list  of  future  members  and 
draft rules of procedure, including the rules of procedure on the consultation of other 
stakeholders, of the European Network for Transmission System Operators for Gas 
to be established.  

Within  six  weeks  from  receipt,  the  Agency  shall  provide  an  opinion  to  the 
Commission on the draft statutes, list of members and draft rules of procedure.  

The Commission shall deliver an opinion on the draft statutes, list of members and 
draft  rules  of  procedure  within  3  months  from  the  receipt  of  the  opinion  of  the 
Agency. 

Within  3  months  from  the  receipt  of  the  Commission's  opinion,  the  transmission 
system  operators  shall  establish  the  European  Network  for  Transmission  System 
Operators for Gas, adopt its statutes and rules of procedure and publish them.  

Article 2c 
Tasks of the European Network of Transmission System Operators for Gas 

1. 

The European Network of Transmission System Operators for Gas shall adopt: 

(a) 

technical and market codes in the areas mentioned in paragraph 3; 

(b) 

common network operation tools and research plans;  

(c) 

a 10-year investment plan every two years; 

(d) 

an annual work programme; 

(e) 

an annual report; 

(f) 

annual summer and winter supply outlooks. 

EN 

26 

   EN 

 
 
 
2. 

3. 

4. 

5. 

6. 

The  annual  work  programme  referred  to  in  paragraph  1(d)  shall  contain  a  list  and 
description of the technical and market codes, a plan on coordination of operation of 
the network and research and development activities, to be drawn up in that year and 
an indicative calendar. 

The detailed technical and market codes shall cover the following areas, according to 
the priorities defined in the annual work programme: 

(a) 

security and reliability rules; 

(b)  grid connection and access rules; 

(c) 

data exchange and settlement rules; 

(d) 

interoperability rules; 

(e) 

operational procedures in an emergency; 

(f) 

capacity allocation and congestion management rules; 

(g) 

rules for trading; 

(h) 

transparency rules; 

(i) 

balancing rules including rules on nominations procedures, rules for imbalance 
charges  and  rules  for  operational  balancing  between  transmission  system 
operators systems; 

(j) 

rules regarding harmonised transportation tariff structures; 

(k) 

energy efficiency regarding gas networks. 

The European Network of Transmission System Operators for Gas shall monitor the 
implementation  of  the  technical  and  market  codes  and  include  the  results  of  its 
monitoring activities in the annual report referred to in paragraph 1(e). 

The  European  Network  of  Transmission  System  Operators  for  Gas  shall  publish  a 
Community-wide 10-year network investment plan every two years. The investment 
plan shall include the modelling of the integrated network, scenario development, a 
supply  and  demand  adequacy  report  and  an  assessment  of  the  resilience  of  the 
system. The investment plan shall, in particular, build on national investment plans 
and  on  the  Guidelines  for  Trans-European  energy  networks  in  accordance  with 
Decision  No  1364/2006/EC  of  the  European  Parliament  and  of  the  Council20.  The 
investment plan shall identify investment gaps, notably with respect to cross border 
capacities.  

Upon  request  of  the  Commission,  the  European  Network  of  Transmission  System 
Operators for Gas shall advise the Commission on the adoption of Guidelines as laid 
down in Article 9.  

20 

OJ L 262, 22.9.2006, p. 1. 

EN 

27 

   EN 

 
                                                 
1. 

2. 

1. 

2. 

Article 2d 
Monitoring by the Agency 

The Agency shall monitor the  execution  of the  tasks  referred  to  in  Article 2c(1) of 
the European Network of Transmission System Operators for Gas. 

The European Network of Transmission System Operators for Gas shall submit the 
draft  technical  and  market  codes,  the  draft  10-year  investment  plan  and  the  draft 
annual  work  programme,  including  the  information  regarding  the  consultation 
process, to the Agency 

The  Agency  may  provide  an  opinion  to  the  European  Networks  of  Transmission 
System Operators for Gas within 3 months.  

The  Agency  shall  provide  a  duly  justified  opinion  to  the  Commission  where  it 
considers that the draft annual work programme or the draft 10-year investment plan 
do not ensure non-discrimination, effective competition and the efficient functioning 
of the market. 

Article 2e 
Establishment and evaluation of technical and market codes 

After consulting the Agency, the Commission may invite the European Network of 
Transmission  System  Operators  for  Gas,  within  a  reasonable  period  of  time,  to 
prepare codes in the areas listed in Article 2c(3) where it considers that such codes 
are necessary for the efficient functioning of the market. 

The  Agency  shall  provide  a  duly  justified  opinion  to  the  Commission  where  it 
considers that: 

(a) 

(b) 

(c) 

a technical or market code adopted by the European Network of Transmission 
System  Operators  for  Gas  in  the  areas  listed  in  Article  2c(3)  does  not  ensure 
non-discrimination,  effective  competition  and  the  efficient  functioning  of  the 
market; .  

the European Network of Transmission System Operators for Gas fails to agree 
within a reasonable period of time on a technical or market code in the areas 
listed in Article 2c(3); 

the transmission system operators fail to implement a technical or market code 
adopted by the European Network of Transmission System Operators for Gas 
in the areas listed in Article 2c(3). 

3. 

The  Commission  may  adopt,  on  its  own  initiative  or  upon  recommendation  of  the 
Agency, guidelines on the areas listed in Article 2c(3) when it considers that: 

(a) 

a technical or market code adopted by the European Network of Transmission 
System  Operators  for  Gas  in  the  areas  listed  in  Article  2c(3)  does  not  ensure 
non-discrimination,  effective  competition  and  the  efficient  functioning  of  the 
market;  

EN 

28 

   EN 

 
 
 
 
(b) 

(c) 

the European Network of Transmission System Operators for Gas fails to agree 
within a reasonable period of time on a technical or market code in the areas 
listed in Article 2c(3); 

the transmission system operators fail to implement a technical or market code 
adopted by the European Network of Transmission System Operators for Gas 
in the areas listed in Article 2c(3). 

Those  measures  designed  to  amend  non-essential  elements  of  this  Regulation  by 
supplementing it shall be adopted in accordance with the regulatory procedure with 
scrutiny referred to in Article 14(2). 

Paragraph 3 shall be without prejudice to the Commission's right to adopt and amend 
guidelines as laid down in Article 9. 

Article 2f 
Consultations 

In  carrying  out  its  tasks,  the  European  Network  of  Transmission  System  Operators 
for  Gas  shall  consult  extensively,  at  an  early  stage  and  in  an  open  and  transparent 
manner, in particular while preparing the technical and market codes and its annual 
work  programme  referred  to  in  Article  2c(1)  and  (3),  with  all  appropriate  market 
participants;  the  consultation  shall  include  supply  undertakings,  customers,  system 
users,  distribution  system  operators,  LNG  system  operators  and  storage  system 
operators, 
technical  bodies  and 
including 
stakeholder platforms. 

(industry)  associations, 

relevant 

All documents and minutes of meetings related to the issues referred to in paragraph 
1 shall be made public. 

Before  adopting  the  annual  work  programme  and  the  technical  and  market  codes 
referred to in Article 2c(1) and (3), the European Network of Transmission System 
Operators  for  Gas  shall  indicate  the  observations  received  in  the  consultation  and 
how these observations have been taken into consideration. It shall provide reasons 
where observations have not been taken into account.  

4. 

1. 

2. 

3. 

Article 2g 
Costs 

The  costs  related  with  the  activities  of  the  European  Network  of  Transmission 
System  Operators  for  Gas  mentioned  in  Articles  2a  to  2h  shall  be  borne  by  the 
transmission  system  operators  and  shall  be  taken  into  account  in  the  calculation  of 
tariffs. 

Article 2h 
Regional cooperation of transmission system operators 

1. 

Transmission  system  operators  shall  establish  regional  cooperation  within  the 
European  Network  for  Transmission  System  Operators  for  Gas  to  contribute  to  the 

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2. 

3. 

tasks  mentioned  in  Article  2c(1).  In  particular,  they  shall  publish  a  regional 
investment  plan  every  two  years,  and  may  take  investment  decisions  based  on  the 
regional investment plan. 

The  regional  investment  plan  may  not  be  contradictory  to  the  10  year  investment 
plan referred to in Article 2c(1)(c). 

Transmission  system  operators  shall  promote  operational  arrangements  in  order  to 
ensure  optimum  management  of  the  network,  and  promote  the  development  of 
energy  exchanges,  the  allocation  of  cross-border  capacity  through  implicit  auctions 
and the integration of balancing mechanisms. 

The  geographical  area  covered  by  each  regional  cooperation  structure  may  be 
defined  by  the  Commission.  That  measure,  designed  to  amend  non-essential 
elements of this Regulation by supplementing it, shall be adopted in accordance with 
the regulatory procedure with scrutiny referred to in Article 14(2).  

For  that  purpose,  the  Commission  may  consult  the  European  Network  of 
Transmission System Operators for Gas and the Agency." 

(4) 

In Article 3(1) the following fourth subparagraph is added : 

"Tariffs for network users shall be set separately and independently per entry point 
into  or  exit  point  out  of  the  transmission  system.  Network  charges  shall  not  be 
calculated on the basisof contract paths." 

(5) 

The title of Article 4 is replaced by the following: 

"Third party access services concerning transmission system operators;" 

(6) 

The following Article 4a is inserted: 

1. 

(a) 

(b) 

(c) 

"Article 4a 
Third Party Access services concerning storage and LNG facilities 

LNG and storage system operators shall: 

ensure that they offer services on a non-discriminatory basis to all network users that 
accommodate  market  demand;  in  particular,  where  an  LNG  or  storage  system 
operator  offers  the  same  service  to  different  customers,  it  shall  do  so  under 
equivalent contractual terms and conditions; 

offer  services  that  are  compatible  with  the  use  of  the  interconnected  gas 
transportation  systems  and  facilitate  access 
the 
transmission system operator; 

through  cooperation  with 

make  relevant  information  public,  in  particular  data  on  the  use  and  availability  of 
services,  in  a  time  frame  compatible  with  the  storage  and  LNG  facility  users' 
reasonable commercial needs. 

2. 

Storage system operators shall: 

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(a) 

provide  both  firm  and  interruptible  third  party  access  services;  the  price  of 
interruptible capacity shall reflect the probability of interruption; 

(b)  offer to storage facility users both long- and short-term services; 

(c) 

offer to storage facility users both bundled and unbundled services of storage 
space, injectability and deliverability. 

3. 

LNG and storage facility contracts shall not result in arbitrarily higher tariffs in cases 
in which they are signed 

(a) 

outside of a natural gas year with non-standard start dates or 

4. 

5. 

(b)  with  a  shorter  duration  than  a  standard  transportation  and  storage  contract  on 

an annual basis. 

Where appropriate, third party access services may be granted subject to appropriate 
guarantees  from  network  users  with  respect  to  the  creditworthiness  of  such  users. 
Such  guarantees  must  not  constitute  any  undue  market  entry  barriers  and  must  be 
non-discriminatory, transparent and proportionate. 

Contractual  limits  on  the  required  minimum  size  of  LNG  facility  capacity  and 
storage  capacity  shall  be  justified  on  the  basis  of  technical  constraints,  and  shall 
permit smaller storage users to gain access to storage services." 

(7) 

Article 5 is amended as follows; 

(a) 

the title is replaced by the following: 

"Principles  of  capacity  allocation  mechanisms  and  congestion  management 
procedures concerning transmission system operators"; 

(b) 

paragraph 3 is replaced by the following:  

"3.  Transmission  system  operators  shall  implement  and  publish  non–
discriminatory and transparent congestion management procedures which 
are based on the following principles: 

(a) 

in the event of contractual congestion, the transmission system operator 
shall offer unused capacity on the primary market at least on a day-ahead 
and interruptible basis; 

(b)  network  users  who  wish  to  re-sell  or  sublet  their  unused  contracted 
capacity  on  the  secondary  market  shall  be  entitled  to  do  so.  Member 
States may require notification or information of the transmission system 
operator by network users." 

(c) 

paragraph 4 is deleted;.  

(d) 

the following paragraph 6 is added: 

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"6.  Transmission system operators shall regularly assess market demand for 
new  investment.  When  planning  new  investments,  transmission  system 
operators shall assess market demand." 

(8) 

The following Article 5a is inserted: 

"Article 5a 
Principles of Capacity allocation mechanisms and congestion management procedures 
concerning storage facilities and LNG facilities 

1. 

2. 

The maximum storage and LNG facility capacity shall be made available to market 
participants, taking into account system integrity and operation. 

LNG  and  storage system operators shall implement and publish  non-discriminatory 
and transparent capacity allocation mechanisms which shall: 

(a) 

provide  appropriate  economic  signals  for  the  efficient  and  maximum  use  of 
capacity and facilitate investment in new infrastructure; 

(b)  be compatible with the market mechanism including spot markets and trading 
hubs,  while  being  flexible  and  capable  of  adapting  to  evolving  market 
circumstances; 

(c) 

be compatible with the connected network access systems. 

3. 

LNG  and  storage  facility  contracts  shall  include  measures  to  prevent  capacity-
hoarding, by taking into account the following principles, which shall apply in cases 
of contractual congestion: 

(a) 

the system operator shall offer unused LNG facility and storage capacity on the 
primary market; for storage facilities this shall be at least on a day-ahead and 
interruptible basis,  

(b)  LNG and storage facility users who wish to re-sell their contracted capacity on 

the secondary market shall be entitled to do so." 

(9) 

Article 6 is amended as follows: 

(a) 

the title is replaced by the following: 

"Transparency requirements concerning transmission system operators" 

(b) 

paragraph 5 is deleted; 

(c) 

the following paragraph 7 is added; 

"7.  Transmission  system  operators  shall  make  public  ex-ante  and  ex-post  supply 
and demand information, based on nominations, forecasts and realised flows in and 
out  of  the  system.  The  level  of  detail  of  the  information  that  is  made  public  shall 
reflect the information available to the transmission system operator. 

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Transmission  system  operators  shall  make  public  measures  taken  as  well  as  costs 
incurred and revenues generated to balance the system. 

The  market  participants  concerned  shall  provide  the  transmission  system  operators 
with the data referred to in this Article." 

(10)  The following Articles 6a and 6b are inserted: 

1. 

2. 

3. 

4. 

"Article 6a 
Transparency requirements concerning storage facilities and LNG facilities 

LNG and storage system operators shall make public detailed information regarding 
the services they offer and the relevant conditions applied, together with the technical 
information necessary for LNG and storage facility users to gain effective access to 
the LNG and storage facilities. 

For the services provided, each LNG and storage system operator shall make public 
information  on  contracted  and  available  storage  and  LNG  facility  capacities  on  a 
numerical  basis  on  a  regular  and  rolling  basis  and  in  a  user-friendly  standardised 
manner.  

LNG and storage system operators shall always disclose the information required by 
this Regulation in a meaningful, quantifiably clear and easily accessible way and on 
a non-discriminatory basis. 

All LNG and storage system operators shall make public the amount of gas in each 
storage  or  LNG  facility,  inflows  and  outflows,  and  the  available  storage  and  LNG 
facility  capacities,  including  for  those  facilities  exempted  from  third  party  access. 
The information shall also be communicated to the transmission system operator who 
shall make it public on an aggregated level per system or subsystem defined by the 
relevant points. The information shall be updated at least every day. 

Article 6b 
Record keeping for system operators 

Transmission system operators, storage system operators and LNG system operators 
shall  keep  at  the  disposal  of  the  national  regulatory  authority,  the  national 
competition  authority  and  the  Commission  all  information  referred  to  in  Article  6 
and 6a, and in part 3 of the Annex for a period of five years." 

(11)  Article 7 is amended as follows: 

(a) 

the  following  sentence  is  added  at  the  end  of  paragraph  1:  "Balancing  rules 
shall be market based."; 

(b)  paragraph 2 is replaced by the following: 

"2. 
In order to enable network users to take timely corrective action, transmission 
system  operators  shall  provide  sufficient,  well-timed  and  reliable  on-line  based 
information on the balancing status of network users.  

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33 

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The  information  provided  shall  reflect  the  level  of  information  available  to  the 
transmission system operator and the settlement period for which imbalance charges 
are calculated.  

No charge shall be made for the provision of such information." 

(c) 

paragraphs 4, 5 and 6 are deleted.  

(12)  Article 8 is replaced by the following: 

"Article 8 
Trading of capacity rights 

Each transmission, storage  and LNG system operator  shall take  reasonable steps to 
allow  capacity  rights  to  be  freely  tradable  and  to  facilitate  such  trade.  Each  such 
operator shall develop harmonised transportation, LNG facility and storage contracts 
and  procedures  on  the  primary  market  to  facilitate  secondary  trade  of  capacity  and 
recognise the transfer of primary capacity rights where notified by system users.  

The  harmonised  transportation,  LNG  facility  and  storage  contracts  and  procedures 
shall be notified to the regulatory authorities." 

(13)  The following Article 8a is inserted: 

"Article 8a 
Retail markets 

In order to facilitate the emergence of well functioning and transparent cross border 
retail markets on a regional and Community scale, Member States shall ensure that 
the  roles  and  responsibilities  of  transmission  system  operators,  distribution  system 
operators,  supply  undertakings  and  customers  and  if  necessary  other  market 
participants  are  defined  with  respect  to  contractual  arrangements,  commitment  to 
customers,  data  exchange  and  settlement  rules,  data  ownership  and  metering 
responsibility.  

These rules shall be made public, be designed with the aim of harmonising access to 
customers across borders and be subject to review by the regulatory authorities." 

(14) 

In article 9, paragraphs 1 and 2 are replaced by the following: 

"1.  Where appropriate, guidelines providing the minimum degree of harmonisation 

required to achieve the aim of this Regulation shall specify: 

(a) 

details of third party access services including the character, duration and 
other  requirements  of  these  services,  in  accordance  with  Articles  4  and 
4a; 

(b)  details  of  the  principles  underlying  capacity  allocation  mechanisms  and 
on the application of congestion management procedures in the event of 
contractual congestion, in accordance with Articles 5 and 5a; 

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(c) 

details  on  the  provision  of  information  and  definition  of  the  technical 
information  necessary  for  network  users  to  gain  effective  access  to  the 
system  and  the  definition  of  all  relevant  points  for  transparency 
requirements,  including  the  information  to  be  published  at  all  relevant 
points and the time schedule according to which this information shall be 
published, in accordance with Articles 6 and 6a; 

(d)  details on tariff methodology, in accordance with Article 3; 

(e) 

details on balancing rules, in accordance with Article 7; 

(f) 

details  on  procedures  on  the  primary  market  to  facilitate  trading  of 
capacity  on  the  secondary  market  and  the  transfer  of  primary  capacity 
rights between network users, in accordance with Articles 8; 

(g)  details on the retail market issues covered by Article 8a;  

(h)  details on the topics listed in Article 2c(3). 

2.  Guidelines on the issues listed in paragraph 1(a), (b) and (c) are laid down in 

the Annex with respect to transmission system operators. 

The  Commission  may  amend  the  guidelines  referred  to  in  the  first 
subparagraph  and  adopt  guidelines  on  the  issues  listed  in  paragraph  1.  Those 
measures  designed  to  amend  non-essential  elements  of  this  Regulation  inter 
alia  by  supplementing  it,  shall  be  adopted  in  accordance  with  the  regulatory 
procedure with scrutiny referred to in Article 14(2)." 

(15)  Article 14, paragraph 2 is replaced by the following: 

"2.  Where reference is made to this paragraph, Article 5a(1) to (4), and Article 7 of 
Decision 1999/468/EC shall apply, having regard to the provisions of Article 8 
thereof." 

(16)  Article 16, point (b) is replaced by the following: 

"(b)  interconnectors  between  Member  States,  LNG  and  storage  facilities  and 
significant increases of capacity in existing infrastructures and modifications of 
such  infrastructures  which  enable  the  development  of  new  sources  of  gas 
supply  as  referred  to  in  Article  22(1)  and  (2)  of  Directive  2003/55/EC  which 
are exempted from the provisions of Articles 7, 18, 19, 20 or 25(2), (3) and (4) 
of that Directive as long as they are exempted from the provisions referred to in 
this subparagraph, with the exception of Article 6a.4 of this Regulation; or" 

(17)  The Annex is amended as follows: 

(a) 

the title of point 1. is replaced by the following: 

"Third party access services concerning transmission system operators"; 

(b) 

the title of point 2. is replaced by the following: 

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"Principles  of  capacity  allocation  mechanisms  and  congestion  management 
procedures  concerning  transmission  system  operators  and  their  application  in 
the event of contractual congestion, and". 

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

Article 2 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, […] 

For the European Parliament 
The President 

For the Council 
The President 

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