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 withdrawing Regulation (EC) No 1228/2003 of the European Parliament and of the Council on conditions for access to the network for cross-border exchanges in electricity
Date: 2009-01-12
Institutions: European Commission
Subjects: cross-border transport, electrical energy, energy grid, market access, transport network

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 12.1.2009 
COM(2008) 904 final 

2007/0198 (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 withdrawing Regulation (EC) No 1228/2003 of the 
European Parliament and of the Council on conditions for access to the network for 
cross-border exchanges in electricity 

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2007/0198 (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 withdrawing Regulation (EC) No 1228/2003 of the 
European Parliament and of the Council on conditions for access to the network for 
cross-border exchanges in electricity 

1. 

BACKGROUND 

Proposal transmitted to the European Parliament and the Council 
(document COM(2007) 531- 2007/0198/COD) on: 

19.09.2007 

European Economic and Social Committee opinion delivered on: 

22.04.08 

Committee of the Regions opinion delivered on: 

10.04.08 

European Parliament opinion (first reading) delivered on: 

18.06.2008 

Common position adopted by unanimity on: 

9.01.2009 

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; 

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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; 

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: 

3.2.1 

Establishment and change of network codes 

The common position changes the Commission proposal regarding the process of establishing 
and  changing  the  network  codes.  It  introduces  a  new  concept  of  framework  guidelines, 
prepared  by  the  Agency,  which  have  to  be  applied  by  the  TSOs  when  drafting  European 
network codes. (see 3.3 for Commission's assessment) 

3.2.2 Network Investment Plan 

The Commission proposed that ENTSO for Electricity should draw up a network investment 
plan  every  two  years.  The  Council  has  changed  this  into  a  non-binding  indicative  network 
development plan. (see 3.3 for Commission assessment) 

3.2.3 

Tariffs 

The  Commission  proposed  that  tariffs  be  approved  by  the  regulators  ex  ante.  The  Council 
included  the  possibility  that  only  the  methodology  should  be  established  ex  ante,  which  is 
acceptable to the Commission. 

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3.2.4  Guidelines  

The  Commission  proposed  an  extensive  list  of  guidelines,  which  covered  both  the  existing 
guidelines, some new topics, and guidelines that will be based on network codes.  

The  Council  has  first  of  all  deleted  all  explicit  references  to  guidelines  that  are  already 
mentioned in the list of network codes. The Commission can agree with this choice of legal 
drafting.  

However, the Council also deleted the possibility of establishing guidelines. The Commission 
proposed the possibility of establishing guidelines for retail markets. Member States are asked 
to define procedures of data exchange and switching, but the Council has moved the article to 
the Directive. At the same time it has deleted the possibility of establishing guidelines. The 
Commission  can  agree  to  both  but  considers  that  it  is  necessary  to  keep  all  remaining 
guidelines  so  as  to  ensure  that  the  system  of  setting  legally  binding  rules  for  the  internal 
electricity market works properly. 

3.3. 

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

A number of amendments of the European Parliament are reflected in the common position, 
either with the same wording or in substance. These are as follows:  

3.3.1 

Power of the Agency to develop framework guidelines and codes 

Both  the  common  position  of  the  Council  and  the  amendments  by  the  European  Parliament 
(amendment  32)  change  the  Commission  proposal  regarding  the  process  of  establishing 
network codes. It introduces a new concept of framework guidelines, prepared by the Agency, 
which have to be applied by the TSOs when drafting European network codes. 

The  Commission  supports  a  more  clearly  defined  role  for  the  Agency  in  the  rule-making 
process.  Instead  of  giving  its  opinion  only  after  a  code  has  been  drafted  by  the  TSOs,  the 
Agency will define the requirements for codes ex ante in the form of framework guidelines in 
a specific area.  

The European Parliament also proposes that the Agency should adopt binding network codes 
(amendment  14),  whereas  the  Council  maintains  that  only  the  Commission  can  make  the 
codes  binding.  The  Commission  cannot  support  Parliament's  attempt  to  make  the  Agency 
stronger, since it is contradictory to the ruling of the European Court of Justice in the Meroni 
case, which stated that the Commission cannot delegate discretionary powers to another body. 

3.3.2  Consultation and monitoring by ENTSO 

Both  the  common  position  and  the  amendments  of  the  European  Parliament  change  the 
Commission proposal regarding  consultation  and  monitoring by  ENTSO for electricity. The 
Common  position  clarifies  the  role  of  ENTSO  compared  to  consultation  and  monitoring  by 
the  Agency.  Parliament’s  amendments  are  in  the  same  direction  but  are  too  restrictive  to 
maintain sufficient scope for ENTSO consultation and monitoring. 

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3.3.3  Costs of ENTSO 

Both  the  common  position  and  the  amendments  of  the  European  Parliament  add  the 
requirement that the regulatory authorities must  approve the costs of ENTSO provided they 
are reasonable and proportionate. 

3.3.4  Use of congestion rents 

The  Commission  proposal  provided  for  mandatory  use  of  congestion  rents  for  either 
confirming  cross-border  capacity  or  for  network  investment.  This  is  also  proposed  by  the 
amendment 23 of the Parliament, adding the approval by the Agency for the use of congestion 
rents  for  tariff  reduction.  The  common  position  reintroduced  the  possibility  of  using 
congestion rents to reduce tariffs. 

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In  the  Commission’s  view,  the  use  of  congestion  rents  for  tariff  reduction  weakens  the 
incentive to build new infrastructure using congestion rents. However, the common position 
establishes a clear priority for the use of congestion rents for confirming cross-border capacity 
or  for  network  investment  over  a  reduction  in  network  tariffs.  The  amendment  of  the 
Parliament goes into the right direction. The common position combined with the amendment 
of the Parliament is acceptable to the Commission as a compromise solution. 

3.4. 

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

3.4.1 Power of the Agency regarding investment plans 

Under the common position, ENTSO adopts an indicative 10-year network development plan. 
This  plan  is  reviewed  by  the  Agency,  which  can  propose  changes  to  the  plan  to  the 
Commission and ENTSO. The European Parliament proposes that the Agency should adopt a 
binding network investment plan, to be prepared by ENTSO. The Commission cannot agree 
to  the  Agency’s  being  granted  discretionary  power  to  adopt  a  binding  investment  plan.  The 
Commission could however support the Agency’s adopting a non-binding investment plan, or 
playing a role in monitoring consistency between the national investment plans as approved 
by the national regulators and the 10-year network development plan of ENTSO.  

3.4.2 Technical cooperation with third countries 

Parliament’s  amendments  propose  monitoring  of  technical  cooperation  with  third-country 
transmission system operators by the national regulatory authorities and the Agency. 

3.4.3 Removal of administrative barriers to increase capacity 

Parliament’s amendments propose that Member States should review their procedures for the 
removal of administrative barriers to increase interconnection capacity.  

4. 

CONCLUSIONS 

The  Commission  takes  the  view  that  the  common  position  maintains  the  key  points  of  the 
Commission's  proposal.  The  Commission  finds  that,  on  substantive  issues,  the  common 
position generally strikes a good balance and makes a viable compromise, which will enable 
the  internal  gas  and  electricity  market  to  operate  smoothly.  The  Commission  considers, 
however, that a number of amendments adopted by the European Parliament on first reading 
should be only be incorporated on second reading. 

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