Opinion of the European Economic and Social Committee on the Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/54/EC concerning common rules for the internal market in electricity Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/55/EC concerning common rules for the internal market in natural gas Proposal for a Regulation of the European Parliament and of the Council establishing an Agency for the cooperation of energy regulators Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 1228/2003 on conditions for access to the network for cross-border exchanges in electricity Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 1775/2005 on conditions for access to the network for cross-border exchanges in natural gas COM(2007) 528 final — 2007/0195 (COD) — COM(2007) 529 final — 2007/0196 (COD) — COM(2007) 530 final — 2007/0197 (COD) — COM(2007) 531 final — 2007/0198 (COD) — COM(2007) 532 final — 2007/0199 (COD)
Date: 2008-04-22
Institutions: European Economic and Social Committee
Subjects: EU office or agency, approximation of laws, cross-border transport, electrical energy, energy grid, energy transport, market access, natural gas, single market

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Opinion of the European Economic and Social Committee on the

— ‘Proposal for a Directive of the European Parliament and of the Council amending Directive

2003/54/EC concerning common rules for the internal market in electricity’

— ‘Proposal for a Directive of the European Parliament and of the Council amending Directive

2003/55/EC concerning common rules for the internal market in natural gas’

— ‘Proposal for a Regulation of the European Parliament and of the Council establishing an Agency

for the cooperation of energy regulators’

— ‘Proposal for a Regulation of the European Parliament and of the Council amending Regulation
(EC) No 1228/2003 on conditions for access to the network for cross-border exchanges in
electricity’

— ‘Proposal for a Regulation of the European Parliament and of the Council amending Regulation
(EC) No 1775/2005 on conditions for access to the network for cross-border exchanges in
natural gas’

COM(2007) 528 final — 2007/0195 (COD)

COM(2007) 529 final — 2007/0196 (COD)

COM(2007) 530 final — 2007/0197 (COD)

COM(2007) 531 final — 2007/0198 (COD)

COM(2007) 532 final — 2007/0199 (COD)

(2008/C 211/06)

On 18 October 2007 the Council decided to consult the European Economic and Social Committee, under
Articles 44(2), 55 and 95 of the Treaty establishing the European Community, on the

Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/54/EC concerning
common rules for the internal market in electricity

Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/55/EC concerning
common rules for the internal market in natural gas

Proposal for a Regulation of the European Parliament and of the Council establishing an Agency for the cooperation of
energy regulators

Proposal for a Regulation of the European Parliament and of the Council Amending Regulation (EC) No 1228/2003
on conditions for access to the network for cross-border exchanges in electricity

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.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for
preparing the Committee's work on the subject, adopted its opinion on 4 April 2008. The rapporteur was
Mr Cedrone.

At its 444th plenary session, held on 22 and 23 April 2008 (meeting of 22 April), the European Economic
and Social Committee adopted the following opinion by 100 votes to 4 with 7 abstentions.

1. Conclusions and proposals

1.1 Conclusions

The EESC takes a positive view, overall, of the reasons
1.1.1
that have prompted the Commission to present
the third
package on energy — a complex and difficult issue legally and
economically, which has polarised opinion and reaction.

1.1.2
The EESC believes that the current situation in the
energy sector cannot be drawn out any longer. Having launched
the process of integration and deregulation, we are now in mid-
stream and must decide what direction to take. The deregulation
of the energy market has stalled, entailing high transition costs,
which could be greater than the benefits derived. These costs

result from the lack of a harmonised EU regulatory framework
and, in some cases, of a genuine willingness to liberalise and
clear demarcation of responsibilities among the various players.
This lack of regulatory certainty may lead to low levels of invest-
ment and competition in the sector. This has created a frag-
mented EU market, driven in some cases by former monopoly-
holders. It is therefore necessary to strongly reaffirm the need
for the deregulation process to press ahead vigorously.

1.1.3 The political aspect: the single market

1.1.3.1
The cornerstone of this strategy is achieving the single
European energy market. The EU needs to devise a common

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strategy to allow it to act promptly, unequivocally and with
greater bargaining power at international level. There is a crucial
need for cooperation between Member States, regulators and
TSOs. Structural changes aimed at integrating system operation
and system development at regional
level need to be carried
out. The individual Member States must pool their experience,
knowledge and rules in order to act
together and propose
(impose) their own supply cost policy, and maximise competi-
tiveness so as to secure fairer prices, while preventing financial
speculation. There needs to be more unity among the Member
States and they must comply with jointly agreed rules, in the
interests of users/consumers,
implementing previously agreed
Community legislation at national level.

1.1.4 The economic aspect

The EESC believes that

1.1.4.1
fair competition, properly
regulated (the Commission's current proposal does not provide
this), would facilitate increased alternative energy sources and
investment in energy infrastructure. This would lead in turn to
companies (such as SMEs, for example) increasing their produc-
tivity so as to obtain fair prices, while fostering transparency
and reducing the risk of other companies having a dominant
position.

to developing networks,

1.1.4.2
One of the key aims of the third package is to encou-
rage the investment that is needed in energy infrastructures and
to coordinate the infrastructures at EU level. On this front the
Commission's proposed measures are a step in the right direc-
tion. However, it must be ensured that they permit the necessary
investment in production and instil confidence in investors.
With respect
the measures must
provide for adequate planning that takes all stakeholders into
consideration, and these plans must be implemented at the
appropriate level within the deadlines set. EU-level controls on
this investment will also be needed (by the Agency for the
In the face of a fairly
Cooperation of Energy Regulators).
inelastic market, with companies operating in oligopoly condi-
tions and certain States reluctant to delegate supply powers,
operators and users lose confidence, leading to a liquidity freeze;
these conditions should be removed.

1.1.5 The social aspect

1.1.5.1
Restructuring processes resulting from the effects of
the third package should be supported by an employment
policy, with full involvement of the trade unions and companies,
by means of instruments such as corporate social restructuring
is
and social shock absorbers at national and EU levels.
comforting to note that in countries that have implemented
ownership unbundling in transmission networks,
there have
been no adverse effects on employment.

It

it

is crucial

Although the protection of vulnerable consumers
1.1.5.2
will remain a strictly national matter,
the
Commission recognise the importance of such measures at
level. The Commission must also monitor their
international
implementation to ensure that such measures are in line with
the pre-requisites of an open competitive market. The concept
of energy poverty should be established at EU level (minimum
applied rate) and the public service and general interest obliga-
tions laid down in the current directives should be pursued.

that

1.1.6 Users (business and consumers)

A new energy policy strategy must

1.1.6.1
therefore be
conducive to promoting genuine competition between compa-
nies,
in order to increase choice for users. The transmission
networks must be accessible to all who want to use them. For
the big energy-consuming companies, a European contract
needs to be established for purchasing energy at standard prices
(comparable prices or law of one price), eliminating State aid
(which distorts competition). Consumers should also have their
EU-established rights recognised and have the freedom to
choose the supplier they want at the lowest possible price.

The EESC also considers

1.1.7
the Commission's
proposal must be aimed to preventing inadvertent combined
action to deep the status quo of the big monopolistic compa-
nies, focused to maintain their advantageous position, and by
the trade unions, aimed to preserve employments

that

1.2 The EESC's proposals

1.2.1 Single energy market

To speed progress towards a single energy market,
1.2.1.1
the Commission must amend the proposals of the third energy
package to gain the power to act independently at international
level, particularly regarding energy sources. To this end, the
proposals on regional cooperation, set out in the package, must
be viewed as a stepping stone on the way to achieving the ulti-
mate goal of a single energy market. In addition, Member States
should endeavour
to integrate their electricity markets and
system operators should operate in several Member States. The
EESC believes that the third package's proposal on regional
cooperation among network operators must by no means be
considered a temporary substitute or alternative to the single
market.
It is crucial to have regional cooperation, based on
ownership unbundling, among network operators that are effec-
tively separate from production/sale. The recent regional initia-
tives promoted by the European regulators' group ERGEG
should also be used to check the consistency of the regulation
and of market rules.

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1.2.2 Unbundling

— present recommendations and opinions to the European

Parliament, the Council and the Commission;

The EESC maintains that

1.2.2.1
the Commission should
favour ownership unbundling, which is undoubtedly preferable
to the independent system operator option in terms of encoura-
ging investment. This would improve transparency and operator
confidence, would increase the system's security and would
allow to monitor monopolies, preventing discriminatory
conduct, and optimising the use and maintenance of
the
networks.

— consult market operators;

— coordinate the work of the national authorities; and

— promote transparency, including in the appointment proce-

dures for its steering group.

1.2.2.2
Further consideration and analysis will be needed on
the strategic implications of network ownership and on the
need to guarantee independence in this regard inter alia in rela-
tion to possible third-country interests and including the choice
relating to network ownership (public or private). The Commis-
sion's proposal on implementing ownership unbundling does
not require the privatisation of transmission networks that are
currently publicly owned.

There are not sufficient differences between the elec-
1.2.2.3
the USA,
tricity and gas sectors (consider the examples of
Denmark, the Netherlands, Portugal, the UK, Spain and Sweden)
to warrant different treatment in terms of ownership unbund-
ling. Ownership unbundling of production/sale and transmis-
sion is needed in both sectors. The discriminatory conduct that
may derive from an insufficient degree of vertical separation is
the same. Companies selling gas should not be interested in
who transports the gas, they should only be concerned to deal
with reliable and financially sound companies which will be
able to sell their gas.

1.2.3 European agency

The EESC strongly believes that the European Agency for the
Cooperation of Energy Regulators (ACER) must be given more
powers to:

— play an independent regulatory role;

— monitor the activities of ENTSO and, together with ENTSO
and the Standing Market Panel, assist the European Commis-
sion in drawing up a list of necessary rules to draft and
approve technical and market guidelines and codes;

— establish criteria and approve technical and market codes;

— establish tariff-setting procedures and set

the
compensation procedure for costs incurred by network
operators in cross-border electricity transmission;

tariffs for

— draft guidelines on grid development principles and approve

the 10-year investment plan proposed by ENTSO;

1.2.4 National author ities

1.2.4.1
The national regulators play a key role in promoting
competition and ensuring proper implementation of the direc-
level, particularly regarding compliance with
tives at national
the rules on the impartial use of
the infrastructure. Their
powers should therefore be harmonised and their independence
of national and energy companies increased to enable them to
monitor and prevent abuses of dominant positions. A more
independent regulator will create confidence in the market and
be able to cooperate more actively with ACER.

1.2.5 The

European Networks

of

Transmission

System Operators — ENTSOs

1.2.5.1
The EESC advocates a more effective coordination of
national network operators to implement investment and opti-
mise the infrastructure management needed to develop an inte-
grated European grid. The agency should have a greater role
than is envisaged, to propose, draw up, monitor and approve
the codes, in order to ensure that the public interest is given
due consideration. ENTSO's role should not exceed its skills and
competences. Accordingly, ACER, should have the responsibility
to draft guidelines and codes.

1.2.6 European networks and investment

The EESC believes that

1.2.6.1
the EU should anticipate
future developments in network use, through an investment
programme aimed at creating a system of public and/or private
EU-regulated European networks, accessible to all, both for
transmission and energy use. To this end, it must be ensured
that procedures for managing interconnections are really trans-
parent, based on market systems, and thus maximise trade.
Investment should be made where it brings socio-economic
benefits from a regional perspective. All market stakeholders
should be duly involved in the decision-making process
concerning the development of codes and the 10-year invest-
ment plan.

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1.2.7 Democracy and representation

The EESC maintains that, on the basis of current or
1.2.7.1
forthcoming provisions, consumers should be represented on
the board of the agency. The same applies to all other interested
parties (workers, trade unions, companies) which, as well as
being on the board, could also be represented on a special over-
sight body, so that there is maximum agreement on and invol-
vement in new legislation, from its inception rather than in the
final phases of its drafting.

2. Introduction

2.1
About ten years ago the Commission took the first steps
(very belatedly) towards a European regulatory framework for a
single market in electricity and gas. The Committee thus had the
opportunity to express its views, occasionally at odds with those
of the Commission, on an issue that over the years has become
ever more important and controversial.

legislative
2.2 With the adoption of the third package of
proposals on the electricity and gas market, the Commission is
seeking to complete the process, in an international context that
has changed profoundly and is a source of new problems for all.
Not all Member States are in agreement on the proposals and
this in turn delay the adoption and application of the new
proposals and jeopardises the completion of
the European
single market in energy.

The EESC's task is one of great responsibility: drafting an
2.3
opinion on one of the most central (and controversial) issues of
recent years — an issue on which hangs not only the single
market in energy, but the fate of European companies in the
sector, of Europe's consumers, and of non-EU companies.

2.4
The EESC takes a positive view of the impact assessment
(q.v.) carried out by the Commission, which offers some good
pointers on the efficacy of liberalisation and ‘fair’ competition.

To provide effective measures against the market frag-
3.3
mentation along national borders, existing vertical
integration
and high market concentration which has in practice prevented
genuine competition and the establishment of a single energy
market.

3.4
To simplify cross-border trade, setting up an Agency
with the task of coordinating national regulatory authorities and
providing a level playing field for European companies operating
in the sector;
this should ensure that a genuine European
network is set up to guarantee security and supply diversifica-
tion. National authorities should become really more indepen-
dent.

3.5
To encourage cooperation on the basis of new rules to
be established by European network operators and ensure
greater cooperation between the various domestic markets
where supply is under threat.

To increase transparency by streamlining market rules
3.6
and keeping consumers informed, so as to ‘increase’ user confi-
dence in the intrinsic value of the free market (but has there
really consistently been confidence thus far?).

Next year,

to give consumers energy users'

3.7
rights
enshrined in a special (binding) ‘Charter’ including information
on suppliers, the various market options, cutting red tape, fuel
poverty etc (1).

4. The proposals for directives (electricity and gas)

4.1
Effective (legal and operational) unbundling in all the
Member States of the electricity and gas supply and transmis-
sion system by creating not vertically integrated systems. This is
a key element in resolving possible conflicts of interest and in:

— ensuring proper investment in a more efficient supply and
in the
including

improvements

transmission system,
management of cross-border transfers;

3. The rationale of the Commission's proposals

3.1
To ensure that consumers be really free to choose their
supplier from a wide range of possibilities and to enjoy the
‘benefits’ which that choice ‘should’ bring. The need to ensure
these optimum conditions for users must be a common goal for
third countries' companies operating in the EU.

To unbundle production and transmission from owner-
3.2
ship and operation of
the electricity and gas transmission
networks. Moreover, a second option is described — that of
‘Independent System Operator’ — which allows vertically inte-
grated companies to retain ownership of networks only if their
fixed capital
is managed by an independent body or another
undertaking; this should encourage investments in infrastruc-
ture.

— avoiding privileges or preferential treatment for companies
and subsidiaries that arein vertically integrated transmission
and production systems;

— ensuring fair and transparent access to information for all
market players and not only those connected with the
company in question.

The creation of an Independent System Operator (ISO)
4.2
represents a solution when dealing with vertical
integrated
companies with reluctance to embark upon an effective owner-
ship separation. This operator may allow companies to retain
ownership of the network, but does not allow them to run it.
Independence can only be achieved within an effective regula-
tory system.

(1) See the EESC opinion on the Communication from the Commission —
Towards a European Charter on the Rights of Energy Consumers,
CESE 71/2008.

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4.2.1
The independence of the network operator holds for
both public and private companies, as does the ownership
unbundling of
transmission network and production
systems.

the

5. The proposals for regulations (creation of the Agency
for the Cooperation of Energy Regulators, access to the
network for cross-border exchange of electricity and
access to gas transport networks)

4.2.2
The main goal is for companies operating in the electri-
city and gas production and supply sector in all EU countries to
operate completely separately.

4.2.3
The proposed directive provides for temporary deroga-
tions from ownership unbundling rules if companies invest in
energy infrastructure.

Consolidation of internal markets, with common rules
5.1
and approaches, is a core element in the development of the
European energy market and in bringing about the cross-border
exchanges needed. Current provisions (such as the technical
rules, or grid codes, that electricity companies must operate
under) need to be harmonised between the various countries.
Thus far this does not appear to have been carried out with the
help of ERGEG. This harmonisation can only be implemented
by a separate, independent body, which the Treaty requires to be
established as an Agency.

4.3
The separation of supply and production from system
operators is envisaged not just at national level, but throughout
the EU. No energy production company is allowed to manage
or own a transmission system in another Member State. Each
operator entering and becoming a part of the system must
demonstrate its independence from supply and production
activities.

5.2

The Agency's main tasks should be to:

— improve management of cross-border situations;

4.4
Ownership unbundling must lead to a properly func-
tioning market and network, ultimately resulting in correct elec-
tricity and gas price setting, possibly followed by a price reduc-
tion, with obvious benefits for consumers and investors in the
sector.

4.5
The Independent System Operator will function properly
and the separation of ownership of the production and supply
system be effective only in presence of the independent and
operational regulatory authority. Regulatory authorities must be
legally discrete and functionally independent from any other
public or private entity and must act independently of any
market interests. They must have full powers and be able to
cooperate with one another across Member States in order to:

— verify that the various operators in the market meet their

transparency obligations;

— ensure the efficacy of consumer protection measures;

— verify the sound operation of electricity and gas transmis-

sion;

— monitor the investment plans of transmission system opera-

tors and check they are mutually compatible;

— monitor

the activity of electricity and gas transmission

system operators;

— verify the efficacy of ten-year investment plans for networks;

— ensure that cooperation between operators is conducted
effectively and transparently to benefit the single market;

— intervene with decisions on particular technical aspects and

on applications for derogations;

— perform an advisory role on market regulation issues and
support moves to improve practices adopted by national
regulatory bodies.

5.3
The organisational structure will follow the typical model
for Community agencies, with particular care given to guaran-
teeing the independence of regulatory functions. To this end, a
Board of Regulators could be set up, in addition to the Adminis-
trative Board appointed by the director of
the Agency,
which would be responsible for all questions of regulation, as
well as a Board of Appeal which would handle appeals against
decisions taken by the Agency. The Agency may comprise at
most 40 to 50 people and cost at most between EUR 6 and
7 million per annum, covered by Community grants.

— monitor for market abuses or dominant operators that frus-

trate correct price setting.

The external agencies (the CESR, Agency for the Cooperation of
Energy Regulators) have a consultative role to play with the
Commission on the implementation of the rules set out.

The Commission has the role of guardian of the treaties
5.4
and ‘inspector of
the inspector’. The Agency has decision-
making powers and discretion only on specific technical ques-
tions. The Commission may decide to intervene to further coop-
eration or the correct operation of the market either in the light
of information from the Agency or on its own initiative.

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5.5
Efficient cooperation between transmission system opera-
tors is vital to achieve a true integration of the market. The only
cooperation at present is voluntary and has failed to produce
satisfactory results, especially when network incidents and black-
outs have occurred. Integration of system operation at regional
level would help to:

— define a coherent set of technical and market codes that are

valid internationally;

— define technical codes where there is no genuine coopera-

tion between networks;

— guarantee non-discriminatory behaviour
network operation and development;

in relation to

— facilitate market

thus enabling price conver-
gence, lowering concerns over market concentration, stimu-
lating liquidity etc.; and

integration,

— promote the funding and management of research and inno-

vation.

The structures of cooperation between transmission
5.6
system operators must be fully recognised at European level.
Existing structures such as GTE and ETSO can be used or new
central, permanent structures set up in terms of both organisa-
tion and practical
for network planning and
management.

instruments

6. General comments

The main problem with networks, especially electricity
6.1
networks, is not only that of liberalisation but that of enabling
public and companies to use them. Thought could be given, for
example, to European networks that are public or regulated by
the Union and accessible to all.

6.2
The Commission should promote investment into the
creation of a completely innovative transmission system that
would enable the use of electricity at European level, using an
this
to the internet,
interactive network. Similar
intelligent
network would harness smart meter
technology and allow
energy to flow in both directions.

6.5
It will be difficult to meet the goals pursued by the
Commission (reinforcing national authorities, boosting coopera-
tion between transport operators (ISO, TSO), increasing market
transparency, and so on) without overcoming narrow national
mindsets, not only where networks are concerned, but also in
terms of supply, investment and so on. Though this will not be
enough to keep prices down, these are the only measures that
can ensure better quality of service.

6.6
The concentration of oil reserves in just a few areas of
the world (61,8 % in the Middle East, 11,7 % in Europe and
Russia, 9,4 % in Africa, 8,5 % in South America, 5,1 % in North
America and 3,5 % in the Far East (F. Profumo, Politecnico di
Torino) should prompt the Commission to exercise a common
policy that has to be more incisive towards these areas and in
international organisations where agreements are drawn up and
decisions taken. Otherwise, pure and simple liberalisation could
become a trap for the unwary that is not enough to hold down
prices, which are frequently pushed up as a result of monopolies
that dictate conditions even to the politic body.

6.7
The EU must pursue regulated competition and transpar-
ency to make the economic system more competitive and trans-
parent. The victories over Microsoft and Volkswagen are an
encouraging precedent for competition, though not sufficient in
themselves. At the same time, more effective measures should
also be devised to mitigate the impact and consequences on
employment, as well as measures and investment to make the
economic system more dynamic and to create opportunities for
workers and young people and hence reduce the need for
‘protection’. Indeed, the reason why the most recent figures on
Europe's economic growth are not encouraging (see the
Commission's Communication) is not just the strength of the
euro, but also the poor competitiveness of companies and the
‘protection’ many of them enjoy. The dismantling of monopolies
undertaken in the wake of the Single European Act absolutely
has to succeed, as any failure would ride roughshod over the
interests of ordinary consumers because of the resultant market
dislocation and the possible need once again to pump in public
money to secure network survival, as has happened in the case
of the British railway system.

6.3
This would greatly encourage investment and would lead
to the creation of new jobs and make the old slogan ‘power to
the people’ a reality: exchanging energy to meet everybody's
needs with networks open to all, and the same rules applied
throughout the countries of the Union without exception (as is
already the case with the internet).

These are the reasons why one could move towards a
6.4
complete separation of the electricity transmission system and
to a choice between separation and ‘independent
system
operator’ for gas networks.

The debate on this package must not be confined to the
6.8
auditoria of institutions or to insiders. The Commission and the
EESC must take the issue to the outside world and that argu-
ment must involve the public as consumers, workers and busi-
nesses, to prevent decisions being influenced solely by the big
energy companies, which are often monopolies. (For example, a
blog on the matter could be set up for the public, there should
be open hearings in most of the Member States and in some
European cities and the results brought together in a major
public conference at Community level.) Moreover, the Commis-
sion's monitoring of the European regulatory agencies should
also have a democratic dimension and should be corroborated
by European Parliament checks.

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7. Specific comments

7.1
Separation of ownership of the various activities in the
chain — of supply and production from network operation —
through ownership unbundling. These measures are a prerequi-
site for reducing barriers to market entry. The aim is to prevent
integrated companies, carrying out several activities in the chain,
being able to ‘transfer’ some of the costs of the liberalised activ-
ities to regulated activities and thus enjoy an undue competitive
advantage over those carrying out solely the activities subject to
competition. The Member States' adoption of the directives on
the natural gas and electricity markets has not been uniform, in
some cases enabling vertically integrated transmission network
operation companies and production and supply companies to
be formed.

to be ensured,

information needs
so that, without ever
neglecting the importance of corporate strategic/business confi-
dentiality,
interpretations
which jeopardise genuine market transparency.

there is no room for inconsistent

Guaranteeing access to information for all market opera-
7.6
tors with a view to instilling trust and enabling the market to
develop properly. Many operators have little confidence in the
price formation mechanism. Gas import contracts are concluded
on the basis of price indexes derived from a basket of oil-
derived products, and so prices rigorously follow oil market
trends. This relationship is reflected in wholesale prices, which
are not formed via the market supply and demand mechanism,
to the detriment of security of supply. As regards long-term
import contracts, there are no clear trends towards price forma-
tion mechanisms based on market dynamics.

Enhancing the powers of national energy regulators,
7.2
which ensure both unbiased network operation and unbiased
licensed infrastructure operation in general. This is essential for
liberalisation (transmission, transmission and measuring in the
energy sector; transport, transmission, measuring, storage and
regasification, in the gas sector).

Establishing particularly detailed requirements to ensure
7.7
transparency in electricity and gas production. Accurate short-
term forecasts of supply and demand must be provided. These
requirements should be met by the electricity producers; to this
end, more power must be given to national regulators.

Key role of the Agency for the Cooperation of Energy
7.3
independent national
Regulators, overseeing the activities of
bodies. Setting up a supranational
regulatory body with
authority to oversee the activities of the individual countries
involved would lead to clearly-defined cooperation on regu-
lation, reducing the disparities between the prospects of the EU
as a whole and the prospects of individual countries, to facilitate
solutions geared towards an integrated energy market.

7.4
Establishment of transmission system operators that are
independent of the production system, cooperating together to
deal efficiently with transmission issues. Transmission system
operators from vertically integrated companies tend to favour
associated companies, leaving new competitors severely under-
informed.
Investment within highly integrated companies is
often distorted as the dominant company has no interest in
improving the network as this would mainly benefit competi-
tors. Formal, substantial separation of transmission operators
would provide the same network access guarantees for all trans-
mission undertakings, enabling the technological improvements
to be made which are necessary to ensure more efficient
running and, ultimately, lower prices for users.

7.8
Introducing derivatives markets. Derivatives not only
represent an effective means of price risk management but they
are also a natural instrument for developing the electricity and
gas markets. Although the electricity markets have been nego-
tiating derivatives contracts directly or indirectly, with the result
that some steps have already been taken towards uniformity,
work still remains to be done. Clear disparities are present in
the European natural gas market.
Indeed, while a relatively
high degree of liberalisation can be observed in some markets
(e.g. United Kingdom), in other countries there is not even a
cash market for natural gas (e.g. Italy).

7.9
Regulating storage fields to ensure that all storage that is
available to third parties is offered to the market in a transparent
capacity-
and non-discriminatory manner
hoarding.

prevents

that

7.10
Unambiguous criteria in the public domain establishing
when and how third party access applies to storage capacity
that is offered to the market.

Creating greater

transparency and facilitating market
7.5
access to increase the liquidity of the electricity and gas markets.
There is a lack of information regarding reliability and timeliness
on the market (between parties involved in the chain). The infor-
mation imbalance between the incumbent companies and their
competitors is marked. Greater transparency would minimise
entry risks for new market players and also reduce barriers,
boosting confidence in wholesale markets and therefore in price
In any case, a certain uniformity/correspondence of
signals.

7.11
Establishing transparent, detailed rules on access to
LNG terminals that will allow identification of exempted infra-
structure. Proper rules need to be established for implementa-
tion of the ‘open season’ procedure. This procedure, providing
for a mechanism for reserving capacity before it is built, may
not be sufficient to guarantee greater access for operators since,
as part of the procedure itself, priority allocation of transport
capacity on the national transport grid, has in any case, to be
given to the gas pipeline or LNG Terminal builder company
which is the holder of the exemption. Moreover, the procedure
for allocating the remaining 20 % of capacity could be a barrier

C 211/30

EN

Official Journal of the European Union

19.8.2008

to development of competition on the supply market, as it
favours those trying to saturate this 20 % with long-term
contracts to the detriment of both spot markets and flexibility
of supply.

industrial

end-users

Identifying downstream bilateral

7.12
long-term supply
agreements that comply with EU competition law. The degree of
competition on retail markets is very limited. The cumulative
effect of long-term contracts, open-ended contracts, contracts
with tacit renewal clauses and long termination periods could
be a substantial barrier to competition. Contractual obligations
binding
(incumbent
companies) in the long term differ from country to country.
However, there is growing demand for more competitive supply,
from companies other than the incumbent companies; a pan-
European supply is lacking and needs to be looked at seriously.
The current level of competition (few suppliers) is particularly
unsatisfactory in a number of Member States where concentra-
tion is high (Austria, Belgium). The constraints on how gas can
be supplied to consumers, together with suppliers' restrictive
practices at delivery points, raise numerous concerns as regards
competition.

producers

and

Urging the electricity and gas retail markets to complete
7.13
the deregulation process. Only with a genuine retail market can
Europeans benefit from competition. This means introducing
simplified market access rules so that small producers and distri-
butors can participate, encouraging market liquidity and making
prices more competitive. Securing liquidity is essential to boost
operators' confidence in price formation in both electricity
marketplaces and gas hubs, in that, particularly where the latter
are concerned, it makes it possible to break free of ties with
products.

7.14
The key role played by deregulated electricity and gas
markets in increasing public and business awareness of intelligent

Brussels, 22 April 2008.

energy consumption would allow cost savings and monitoring.
That
involves educating the public about energy sources
currently available and alternative sources of energy develop-
ment (renewable energy) to make them understand the vital
importance of
this commodity given the current shortage.
Offering end users contracts which can be customised according
to consumption patterns is essential
in terms of both energy
and the costs saving.

7.15
As responsible end users, the public will also have to be
informed of whether regulatory institutions observe or abuse
the rules, so that they can enforce their rights, not least through
consumer protection associations.

7.16
Ensuring that demand is met even at peak times. In the
case of electricity, problems arise in terms of generation capacity
and of transmission network size, the capability of the network
to transport the energy; in the case of gas, sufficient import and
storage capacity needs to be in place. In any case,
it is well
known that import capacity is particularly limited, as transport
of capacity is reserved by incumbent companies with contracts
with terms of up to 20 years or more. This means that new
projects and projects for restructuring/extending electricity and
natural gas (gas pipelines) infrastructure must proceed with all
levels. Regasification
speed at both European and national
plants
in the
Mediterranean, they play a key role as a link with the main
producer countries (Libya, Algeria).

importance: particularly

are of primary

Increasing solidarity: EU countries need to promote, at
7.17
cooperation agreements
both regional and bilateral
providing for mutual assistance and cooperation when an EU
Member State finds itself with an energy deficit arising from
circumstances for which it is not directly to blame.

level,

The President

of the European Economic and Social Committee

Dimitris DIMITRIADIS