1 european commission dg tren / c: conventional energy 05.03.2002 the regional electricity market in...

1European Commission DG TREN / C: Conventional Energy 05.03.2002

““The Regional Electricity Market in South The Regional Electricity Market in South East Europe: Mechanisms and Aims in East Europe: Mechanisms and Aims in

Unified European Energy Market”Unified European Energy Market”

Pedro de Sampaio NunesPedro de Sampaio Nunes

Director of Conventional EnergyDirector of Conventional Energy

Brussels, March 5, 2002

Extraordinary Co-ordination MeetingExtraordinary Co-ordination Meeting


Structure of the presentationStructure of the presentation

Where are we? - description of the main Where are we? - description of the main feature of the status quo of market opening feature of the status quo of market opening

Where do we want to go? - measures needed Where do we want to go? - measures needed to complete the internal market-main to complete the internal market-main elements of Commission initiativeselements of Commission initiatives

Conclusions Conclusions


Market Opening: Market Opening: Theory and practiceTheory and practice

• Shows variations in:• market opening- network access - tariffs /conditions- effectiveness of regulation- market structure- customer switching- prices

Completing the Internal Market

“Benchmarking” Report SEC(2001)1957


Electricity market opening State of play

0 10 20 30 40 50 60 70 80 90 100

AustriaBelgium

DenmarkFinlandFrance

GermanyGreeceIreland

ItalyLuxembourgNetherlands

PortugalSpain

SwedenUnited Kingdom

Legal minimum in 2000:30%

EU average in 2000: 66%

%

Legal minimum in 2003: 35%

Ben

chm

arki

ng


MarketMarket concentration in electricity generation

Concentration Minimummarket opening

Fast marketopening

Nearly fullmarket opening

Low NL,LU NO,DE,UK

Medium AT,ES,IT SE,FI

High BE,GR,FR,IE,PT DK


Customer switching supplier Customer switching supplier B

ench

mar

king

Estimated switching: electricityDeclaredmarketopening2000

Large industrialusersswitchrenegotiate

Small commercial/domesticswitch

renegotiateAustria 100% 5-10% naBelgium 35% 5-10% naDenmark 90% na 86%Finland 100% 30% 70% 10-20% 50%France 30% 5-10% naGermany 100% 10-20% 50% <5% 20%Greece 30% nil nilIreland 30% 30% 35%Italy 45% 10-20% naNetherlands 33% 10-20% naPortugal 30% <5% naSpain 45% <5% naSweden 100% 100% na 15% 15%UK 100% 80% na >30% nasource: Oxera, Eurostat, Information provided by survey


Completing the internal market: Commission proposals

A revision of the Electricity and Gas Directives

The draft Directive proposes qualitative as well as quantitative measures to create a truly operational internal energy market

A Regulation on cross-border exchanges in electricity

The draft Regulation sets rules for cross-border trade in electricity: tarification and congestion management.

A Communication: “Completing the internal energy market”The Communication takes stock of the progress of the internal energy market: degree of opening, prices, environment, security of supply and employment.


Revision of the Directives:Objectives

Quantitative

Greater opening of the market

• higher level of unbundling • regulated third-party access • independent regulators• improve public service provisions• safeguard security of supply

Full opening of national markets by 2005Revision of the

existing Electricity and Gas Directives

Qualitative

Better functioning of the market


QuantitativeFull opening of the energy market

All EU consumers free to choose electricity and gas suppliers

All EU companies free to choose electricity supplier

All EU companies free to choose gas supplier

2005

2004

2003

A new timetable for market opening

Revision of the existing Electricity and Gas

Directives


Qualitative Unbundling and third party access

Member States to ensure that transmission is carried out via an independent system operator, legally and functionally separate from energy generation and sales activities.

Independent Distribution System OperatorsAlso a legally and functionally separate undertaking. But Member States may exclude small distribution companies (100 000 consumers)

Tariffs to be published and regulated for transmission, distribution and access to LNG


Directives

Unbundling

Independent Transmission System Operators

Third party access


Qualitative Effective regulation


Directives

Regulatory authorities

Independent regulators are pivotal in ensuring non-discriminatory access to the network. Nearly all Member States have established regulatory authorities, save Germany.

Regulators will need to:

be independent of the electricity/gas industry

have a set of minimum competencies including the terms on conditions for network access (tariffs)


QualitativeSecurity of supply

• obligatory pool• prohibition of bilateral agreements to hedge risks• no tendering for new capacity• excessively strict planning procedures (7 years)• no internal market in the US• no effective trading arrangements

The situation in California resulted from inappropriate structures:

Such structures do not exist in the EU market

• careful monitoring at EU and national level• tenders where necessary• internal market• harmonised network security standards

Additional safeguards in new proposals

Comparison California/EU


Directives Security of supply


Universal serviceobligation to supply electricity to all at reasonable prices Protection of vulnerable consumersBetter protection of consumer rightscontractual terms, disputes settlementContinuous benchmark exercise of service levels in Member States

Qualitative Improving standards of service


Directives

Public service

The impact so far on service standards has been positive: standards have gone up.

The Commission proposes to increase their level further:


Regulation: New cross-border trade rules

Tarification rules

Compensation between Transmission System Operators TSOs• TSOs will receive compensation or pay for transit flows• Cost-reflective compensation• Fragmented national cross-border tariffs and pancaking abolished• Detailed implementing rules through comitology procedureRegulation on

cross-border exchange in electricity

Interconnection capacityInformation on available interconnection capacity to be made publicBetter information exchanges between TSOs

Allocation of capacity in case of congestionHarmonised market-based approaches to reduce trade distortions

Congestion management


• Number of customers having switched suppliers

UK

Finland

20%

30%

FranceGermanyPortugal

5%

Most opt for another national supplier

Highest where market

opening started early

Still 15 separate national markets

• Trade in electricity:around 8% of electricity production

• Cross border trade tarification rules • Congestion management rules• Increased interconnection capacity, where

Missing elements

Regulation: objectives

Regulation on cross-border exchange in electricity

Create a single EU energy marketCreate a single EU energy market

Spain

economically justified


Infrastructure package

A. Energy infrastructure: identifying the challenge

Improved use of existing infrastructureEnsuring a stable regulatory environment favourable to infrastructure investmentsCommunity political and financial support of priority projectsPolitical commitmentGas supplies to Europe

Reporton the implementation of TEN Energy guidelines

1996-2001

Draft decision

Revising TEN Energy guidelines

Communication

B. Main findings

C. Proposed actions

European energy infrastructure


Main findings and conclusions

Infrastructures could be used more efficiently. An increased interconnection level is needed for electricity in a number of Member States

Electricity infrastructure suffer in varying degrees from congestion or missing links which hamper the smooth functioning of the internal market and security of supply.

2. Obstacles

3. A

cti

on

s

The Commission proposes to take urgent action in 5 main areas.

1. Assessment

In line with good governance principles, actions have been allocated at the most appropriate levels, including industrial. Where necessary Community actions will support and provide a legal basis to give effect to the achieved results.

This process will require efforts at both EU and national level.


Five broad areas of action

Ensuring a stable and favourable regulatory Ensuring a stable and favourable regulatory environment for new infrastructureenvironment for new infrastructure

Five main areas of actionsImproving the use of existing infrastructureImproving the use of existing infrastructure

Re-focusing Community financial support on priority Re-focusing Community financial support on priority projectsprojects

Political awareness and commitment at the Political awareness and commitment at the Community and national levelCommunity and national level

Encourage gas supplies to EuropeEncourage gas supplies to Europe


ConclusionsConclusions

Experience thus far is generally positive but further measures are Experience thus far is generally positive but further measures are necessary to complete the internal markets for electricity and gas .necessary to complete the internal markets for electricity and gas .

The Completion of the internal market requires both quantitative The Completion of the internal market requires both quantitative and qualitative elements, in order to create a level playing field and qualitative elements, in order to create a level playing field and make market opening effective in practice.and make market opening effective in practice.

Rules on public service and security of supply are necessary, to Rules on public service and security of supply are necessary, to ensure that the competitive market is secure.ensure that the competitive market is secure.

Rules on cross-border trade, a more efficient use and the extension Rules on cross-border trade, a more efficient use and the extension of infrastructure are needed to ensure that the completed market of infrastructure are needed to ensure that the completed market is a real internal Community market is a real internal Community market

The Commission proposals are aimed at achieving these objectives The Commission proposals are aimed at achieving these objectives - their timely adoption is vital - their timely adoption is vital


THE REM IN SOUTH EAST EUROPETHE REM IN SOUTH EAST EUROPE

To create a functioning regional internal market compatible to the To create a functioning regional internal market compatible to the EU EU

To adopt the Community acquis in the most appropriate manner To adopt the Community acquis in the most appropriate manner Ensure security of supply at regional and individual national Ensure security of supply at regional and individual national

systemssystems

1 european commission dg tren / c: conventional energy 05.03.2002 the regional electricity market in...

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european commission

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