Central to the third energy liberalisation package is the Agency for the Cooperation of Energy Regulators (ACER). This body will take the place of the European Commission’s independent advisory group, the European Regulators Group for Electricity and Gas (ERGEG). The new agency will retain ERGEG’s advisory role towards the Commission as well as other Community institutions and national regulatory authorities. ACER will, however, ensure that the regulatory functions performed by the national regulatory authorities under the EU’s new internal energy market rules are “properly coordinated” and, where necessary, “completed” at EU level. The Council, however, has insisted that these monitoring tasks do not “duplicate” or “hamper” monitoring by national authorities, in particular national and EU competition authorities.

It remains to be seen whether European regulators have actually been given sufficient powers to deal with many issues they have pinpointed as problems. One telling example was given just days after the informal deal between the EP and Council. ERGEG complained publicly that the removal of end-user prices regulation is not a decision taken by regulators. This will not change under the third liberalisation package. Price regulation is just one of many factors seen by regulators as distorting energy markets. Regulators have also consistently argued for ownership unbundling as the best solution for energy markets. Without it, they previously claimed it would be difficult to achieve the benefits of a truly European energy market. Now, ownership unbundling, or the forced separation of energy production and distribution from network activities, is just one of three options available in the third package. Even in practical matters, the functioning of the agency may be impeded by a protracted contest over its location. Currently, Romania, Slovakia and Slovenia are in the running. Regulators, though, may take comfort in the fact that the agency should be located in Brussels until a final decision is made. This would make hiring the director easier.

The non-binding essence of the agency is evident by the fact that it will mostly issue only opinions and recommendations to transmission system operators (TSOs), national regulatory authorities. If not respected, however, ACER may in turn resort to issuing further opinions and recommendations to the European Parliament, Council or Commission. In terms of individual decisions, the agency is clearly limited to the notable areas of cooperation of national regulatory authorities, access conditions and operational security of cross-border infrastructure (if the competent national regulatory authorities have not been able to reach an agreement within a period of six months), and exemptions to access rules for new cross-border infrastructure. The agency also only provides an opinion on the draft ten-year network development plans and draft annual work programmes submitted by the European Network of Transmission System Operators for Electricity (ENTSO for electricity) and the European Network of Transmission System Operators for Gas (ENTSO for gas).

The agency has a more important role in developing, analysing and monitoring the non-binding ‘framework guidelines’ by which network codes must abide. This requires consulting interested parties on issues such as tariff structures, grid connection and access, capacity allocation and congestion management, security and reliability rules, emergency procedures, balancing and transparency. The guidelines will be adopted by the Commission to push market integration, non-discrimination, effective competition and the efficient functioning of both the gas and electricity markets.

COOPERATION BETWEEN TSOS

The agency monitors regional cooperation between transmission system operators (TSOs) in the electricity and gas sectors as well as the operation of the ENTSO for electricity and the ENTSO for gas. The agency should ensure that cooperation between TSOs is efficient and transparent and benefits the internal markets in electricity and natural gas. It is accountable - “where appropriate” - to the Parliament, Council and Commission. However, the agency can only “inform” the Commission if it concludes that cooperation between TSOs is not effective or a national regulatory authority has taken a decision that is not in compliance with the framework guidelines or does not adequately follow up an opinion, recommendation or decision of the agency.

Concerning situations involving more than one member state, the agency has the power to adopt individual decisions, for instance, on technical issues, the regulatory regime for electricity and gas infrastructure and exemptions from the internal market rules for new electricity inter-connectors and new gas infrastructure (located in more than one member state). Agency decisions require a favourable opinion issued by the Board of Regulators. In adopting such opinions, the Board of Regulators should “not seek or take instructions and not accept recommendations” from member states, the Commission or other public or private entity. The decisions of the Board of Regulators must, at the same time, be compliant with Community legislation concerning energy, the environment, the internal energy market and competition. Interested parties can appeal to the Board of Appeal, an independent part of the agency.

Background

The agency will be financed from the EU budget, but also by fees and ‘voluntary’ contributions.It consists of 1. a nine-member Administrative Board (with five members appointed by the Council, two each by the Parliament - no MEPs - and the Commission); and 2. the Board of Regulators (with senior regulatory experts from each member state as well as one non-voting representative of the Commission). Aside from the director, there is a six-member Board of Appeal (appointed by the Administrative Board). The Administrative Board (for ‘administrative’ issues, such as the ACER budget, internal rules and appointing the director), Board of Regulators (for ‘regulatory’ decisions) and Board of Appeal vote by a two-thirds majority of their respective members. Appeals can be made against decisions by the Board of Appeal. Decisions of the agency’s Board of Appeal may in turn be subject to appeal before the Court of First Instance or the Court of Justice of the European Communities. A balanced participation of member states’ representatives on the Administrative Board should be ensured by rotation.