Communication from the Commission to the European Parliament pursuant to the second subparagraph of Article 251(2) of the EC Treaty concerning the common position of the Council on the adoption of a Regulation of the European Parliament and of the Council establishing an Agency for the Cooperation of Energy Regulators
Date: 2009-01-12
Institutions: European Commission
Subjects: EU office or agency, energy grid, energy transport, operation of the Institutions

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 12.1.2009 
COM(2008) 908 final 

2007/0197 (COD) 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT 

pursuant to the second subparagraph of Article 251(2) of the EC Treaty 

concerning the 

common position of the Council on the adoption of a Regulation of the European 
Parliament and of the Council establishing an Agency for the Cooperation of Energy 
Regulators 

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2007/0197 (COD) 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT 

pursuant to the second subparagraph of Article 251(2) of the EC Treaty 

concerning the 

common position of the Council on the adoption of a Regulation of the European 
Parliament and of the Council establishing an Agency for the Cooperation of Energy 
Regulators 

1. 

BACKGROUND 

Proposal transmitted to the European Parliament and the Council 
(document COM(2007) 530 - 2007/0197/COD) on: 

19.09.2007 

European Economic and Social Committee opinion delivered on: 

22.04.2008 

Committee of the Regions opinion delivered on: 

European Parliament opinion (first reading) delivered on: 

Common position adopted by unanimity on: 

10.04.08 

18.06.2008 

[09.01.2009] 

2. 

AIM OF THE COMMISSION PROPOSAL 

This  proposal  is  part  of  the  third  legislative  package  for  an  internal  EU  gas  and  electricity 
market ("Third Package"), which includes two Directives and three Regulations. 

The main objective of the package is to put in place the regulatory framework needed to make 
market opening fully effective and create a single EU gas and electricity market in the interest 
of the citizens and of the industry of the European Union. This will help to keep prices as low 
as possible and increase standards of service and security of supply. 

This is done through the following main measures: 

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more effective regulatory oversight by independent national regulators; 

establishment  of  an  Agency  to  ensure  effective  cooperation  between  national 
regulators and take decisions on all relevant cross-border issues; 

compulsory cooperation between network operators to harmonise all rules relating to 
the transport of energy across Europe and to coordinate investment planning; 

effective unbundling of the generation and transmission of energy so as to eliminate 
any conflict of interests, promote network investment and prevent any discriminatory 
behaviour; 

increased transparency and better functioning of the retail market; 

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– 

increased  solidarity  and  regional  cooperation  between  Member  States  to  ensure 
greater security of supply. 

3. 

COMMENTS ON THE COMMON POSITION 

3.1. 

General comments 

The  common  positions  adopted  by  the  Council  on  the  five  texts  that  make  up  the  Third 
Package contain all the essential components of the Commission's proposal that are needed to 
ensure the proper functioning of the internal gas and electricity market and, more generally, to 
achieve the essential objectives set out above. It can therefore be generally supported by the 
Commission (see 3.2 below). 

The  first  reading  focused  on  obtaining  agreement  within  the  Council.  The  amendments 
adopted  by  the  European  Parliament  were  therefore  not  formally  incorporated  into  the 
common  position.  Negotiations  to  this  end  will  take  place  during  the second  reading.  Some 
amendments  adopted  by  the  European  Parliament  are  however  taken  into  account  in  the 
common  position  (see  3.3  below).  The  Commission  considers  that  a  number  of  the 
amendments that are not covered should be taken into account in the second reading (see 3.4 
below). 

3.2. 

Specific comments 

The main changes from the Commission’s proposal are as follows: 

The common position includes provisions designed to balance working relations between the 
Agency,  the  European  Networks  of  Transmission  System  Operators  (ENTSOs)  and  the 
Commission as regards the establishment and monitoring of network codes.1  

1. 

2. 

Article  6(4),  second  subparagraph:  The  Agency  shall  submit  a  draft  non-binding 
framework  Guideline  to  the  Commission,  setting  out  clear  and  objective  principles 
for  the  development  of  network  codes.  This  Guideline  frames  the  network  codes 
without taking away the autonomy of the ENTSOs to draft the codes.  

Article  6(4),  third  and  fourth  subparagraphs:  The  Agency  shall  provide  a  justified 
opinion to the ENTSOs on the draft network codes prepared by the latter. Once the 
Agency  is  satisfied  that  the  network  codes  adhere  to  the  relevant  framework 
Guideline,  it  shall  submit  them  to  the  Commission  and  may  recommend  their 
adoption. Where the ENTSOs fail to develop a network code the Commission may 
ask the Agency to prepare a draft network code.  

3. 

Article 6(5)  and  (6):  The  Agency  shall  monitor  the  implementation  of  the  network 
codes by the ENTSOs and report to the Commission.  

Under the Commission proposal, the Agency could take individual decisions on the basis of 
Guidelines adopted by the comitology procedure after entry into force of the Third Package, 

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The overall system of establishing network codes is set out in Article 6 of the common position on a 
Regulation  on  conditions  for  access  to  the  network  for  cross-border  exchanges  in  electricity  and  the 
corresponding common position on cross-border exchanges in gas. 

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i.e. on issues not initially envisaged in the Directives and/or the Regulations. This should give 
a  certain  amount  of  flexibility  to  the  assignment  of  the  Agency  in  the  context  of  a  steadily 
evolving  internal  gas  and  electricity  market.  The  common  position  deletes  the  reference  to 
Guidelines in Article 7(1) and thereby restricts the scope of the Commission and the Agency 
to react to market developments. 

The Council has limited substantially the powers of the Agency as laid down in Article 9, to 
the effect that the Agency should grant exemptions (e.g. from the unbundling requirements of 
cross-border  transmission  systems)  only  as  a  last  resort.  This  change  limits  the  regulatory 
oversight of the Agency on cross-border issues substantially.  

According  to  the  common  position,  the  Administrative  Board  (AB)  will  have  6 members 
(5 Council, 1 Commission) rather than the 12 members (6 Council, 6 Commission) proposed 
by the Commission. This change does not observe the principle of equal representation of the 
two  branches  of  the  Community  executive  within  the  AB.  The  respective  European 
Parliament amendment (No 44) is more balanced. 

The  Council  enhances  the  powers  of  the  Board  of  Regulators  (BoR)  at  the  expense  of  the 
Director  (Articles  15(2),  14(1)  and  16(3)).  The  Agency  is  an  independent  Community  body 
represented by the Director. The Director should have the necessary authority and powers to 
head  the  Agency.  These  powers  would  be  substantially  limited  if  the  BoR,  representing  the 
national regulatory authorities, had the powers conferred upon it by the common position. 

3.3. 

Aspects  of  the  common  position  reflecting  the  European  Parliament’s 
amendments 

The  substance  of  the  following  amendments,  or  parts  of  them,  is  taken  into  account  by  the 
common  position:  No 19  on  issuing  recommendations  to  Transmission  System  Operators 
(TSOs),  No 23  regarding  the  drafting  of  guidelines  establishing  principles  for  the 
harmonisation  of  network  rules  and  the  recommendation  to  the  Commission  where  TSOs 
have  failed  to  implement  a  network  code,  No 40  on  the  consultation  of  market  participants, 
consumers and end-users, No 44 on the downscaling of the Administrative Board (AB) from 
12  to  6  members,  No 45  on  the  Director  of  the  Agency  and  the  Chairman  of  the  Board  of 
Regulators (BoR) attending meetings of the AB, Nos 47 and 48 on the independence of the 
members  of  the  AB,  No 49  on  the  incompatibility  of  membership  of  the  AB  and  the  BoR, 
No 51 on the role of the BoR when appointing the Director, No 53 regarding the publication 
of the work programme of the Agency, No 54 regarding the disciplinary power of the AB in 
consultation  with  the  BoR  over  the  Director,  No 58  regarding  the  voting  rules  of  the  BoR, 
No 59 on the content of the rules of procedure of the BoR, No 64 regarding the assessment 
preceding the possible extension of the Director’s term of office  and the requirement  of the 
AB to consult the BoR before extending the Director’s term of office, No 65 strengthening the 
role of the BoR, No 66 regarding the right of the European Parliament to call on the Director 
of the Agency to report on the performance of his duties, and No 68 on the stipulation that the 
call for interest to become a member of the Board of Appeal has to be made public. 

3.4. 

European  Parliament  amendments  approved  by  the  Commission  but  not 
endorsed by the Council 

The Commission can accept – in some cases subject to more precise wording or redrafting – 
in  full  or  at  least  in  part  the  majority  of  the  European  Parliament’s  amendments.  This 
concerns the following key issues: 

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interregional  cooperation  between  energy  markets  (No 19), 

Parliament proposes to include the following in the list of tasks of the Agency: the promotion 
the  coordination  of 
of 
communication  between  EU  TSOs  and  third-country  TSOs  (No 24),  the  provision  of  an 
opinion to the Commission, the Member States and the regulatory authorities in question on 
the compliance of a decision of a regulatory authority with EC energy legislation (Nos 32 and 
33) and the monitoring of certain developments in the gas and electricity markets (Nos 35 and 
41). 

Parliament  also  proposes  that  the  Agency  should  take  suspensory  decisions  in  relation  to 
TSOs which fail to implement network codes (No 26), that it should monitor the authorisation 
process  for  the  construction  of  new  cross-border  infrastructure  (No 27)  and  that  it  should 
calculate the capacity of TSOs for such systems (No 28). The Commission could in principle 
accept  the  assignment  of  the  above  powers  to  the  Agency,  provided  these  powers  are  not 
genuine  discretionary  and  provided  the  Agency  only  adopts  individual  decisions  applying 
Community  standards  to  specific  cases  and  exercises  these  powers  under  clearly  defined 
conditions. 

The Commission  accepts  the  task  of  the Administrative Board to adopt an annual report on 
developments in the gas and electricity markets (No 43). 

4. 

CONCLUSIONS 

The common position preserves the key points of the Commission’s proposal. On substantive 
issues it strikes a good balance and makes a viable compromise, which will enable the internal 
gas and electricity market to operate smoothly. A stronger oversight role should, however, be 
given  to  the  Commission  and  to  the  Agency  to  ensure  harmonised  application  of  the  Third 
Package  and  to  guarantee  a  smooth  functioning  internal  market.  The  Commission  therefore 
supports  the  common  position  but  strongly  recommends  that  the  Commission’s  and  the 
Agency’s  supervisory  role  be  reinforced.  The  Commission  also  considers  that  a  number  of 
amendments adopted by the European Parliament on first reading should only be incorporated 
on second reading. 

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