Electricity unbundling pits Parliament against Council
By Dafydd ab Iago | Wednesday 23 July 2008
The European Parliament adopted, on 18 June and on 9 July, a series of reports on the internal energy market. In contrast to the position taken by the Energy Council, on 6 June, for a third alternative, the plenary followed the proposal, contained in the report by Eluned Morgan (PES, UK) on the internal market in electricity, to solely propose ownership unbundling. This repeats Parliament’s preference for ownership unbundling shown when adopting a report by Alejo Vidal-Quadras (EPP-ED, Spain) of 10 July 2007. However, with respect to gas markets, MEPs adopted a report by Romano Maria La Russa (UEN, Italy) that allows for two options of full ownership unbundling and independent transmission operators.
By following rapporteur Morgan in opting for full ownership unbundling for electricity markets, MEPs are then raising the stakes for the second reading that should be achieved with the Council under the French Presidency. “I am disappointed with the informal agreement in Council, because it has bent too much to the will of the minority,” Morgan has warned. She also sees the Commission as having “backtracked”. Austria, Bulgaria, France, Germany, Greece and Luxembourg, according to Morgan, are building Chinese walls to protect their national champions. Such companies, Morgan notes, are “happy to invest in other markets, but are reluctant to allow others into their markets”.
MEPs also explicitly rejected attempts to include a third option (independent transmission operator, ITO) for electricity. Energy Committee (ITRE) Chair Angelika Niebler (EPP-ED, Germany), Catherine Trautmann (PES, France) and others, had sought (in Amendments 165-6) a similar ITO solution to that of the Energy Council of 6 June. This amendment would have seen a detailed report on the ITO option, no later than six years after implementation (the Council agreed upon two years). Where appropriate, and no later than seven years (three years according to the Council), Commission proposals would ensure full effective independence of TSOs.
FEWER DIFFERENCES ON GAS
Despite these essential differences, final agreement may be in sight by the end of the year. As regards gas markets, MEPs effectively took over the so-called ITO model (albeit adding an independent trustee) alongside the Commission’s original proposal of full ownership unbundling. The stricter form of an independent system operator (ISO) was rejected. ITO appears sufficiently modelled after the alternative proposal by eight member states to allow for additional derogations from full ownership unbundling. MEPs may also be open to the Council’s option of allowing unbundled countries to adopt “proportionate, non-discriminatory and transparent” measures to ensure a level playing field with respect to non-ownership unbundled companies.
For both electricity and gas, MEPs specify that member states shall take appropriate measures against “energy poverty”. This especially means protecting vulnerable customers such as pensioners and disabled people. As regards consumer protection, Parliament added to the Commission’s proposals more detailed rights for instance on terminating contracts, compensation if service quality levels are not met, greater information on consumption and rights, smart meters within ten years, rights to “easily” change supplier, and independent redress
(1). MEPs extended the universal service obligation for personal consumers and small business. To ensure the provision of universal service, member states may appoint a supplier of last resort.
For both electricity and gas, MEPs voted for the promotion of energy efficiency by pricing formulas, mandated by national regulatory authorities, with higher prices for greater use. Whilst the Commission’s original proposal assumes a general system goal of “ensuring penetration of renewables and dissemination of low carbon technology,” MEPs specify that renewables should be given priority access. For the Council, though, a member state “may” require the system operator, when dispatching generating installations, to give priority to renewables (or combined heat and power).
Both the gas and electricity directives deal extensively with regulation, calling for strengthened powers and greater independence for national regulatory bodies. Both MEPs and the Council accept a call for national regularity authorities not to seek or take direct instructions from any government or other entity when carrying out the regulatory tasks. However, the Council’s general agreement notes that this requirement is without prejudice to “close cooperation” or to “general policy guidelines” issued by the government.
More distinctly, the Council calls for an exemption on ownership unbundling provisions for vertically integrated companies in small and isolated markets. For electricity, this means companies serving less than 100,000 connected customers or serving small isolated systems. For gas, the Council excludes “emergent and isolated” markets. Exemptions could then be claimed for both gas and electricity in small states such as Cyprus, Luxembourg and Malta, and only gas in the “isolated” markets Estonia, Latvia, and Finland.
A further notable difference relates to cross-border and regional cooperation. MEPs stipulate that national regulatory authorities shall cooperate to harmonise the market design and integrate national markets. This should take place at one or more regional levels and is seen as a first step towards a fully liberalised internal market. For the Council, it is the member states that shall cooperate or drive regional cooperation. Another significantly different solution concerns the use of comitology to adopt guidelines. The Parliament generally deleted such provisions, whilst the Council makes the comitology procedure optional and limited to fewer articles than in the Commission proposals.
As regards the third country clause, the Council differs from both the Commission and MEPs in that the Commission should make a recommendation to force a reciprocity agreement. Such an agreement is no longer automatic when a third country company or individual wishes to acquire control over a network.
The reports on electricity and on natural gas, and the Parliament resolution ‘Towards a European charter on the rights of energy consumers’ are available at
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(1) MEPs further adopted a report by Mia De Vits (PES, Belgium), calling for the Commission to establish a charter listing the rights of energy consumers.