Part 2 The European Union’s Energy Acquis in:

Cansu D. Burkhalter

Legal and Regulatory Framework of European Energy Markets, page 31 - 88

Competition Law and Sector-Specific Regulations

1. Edition 2020, ISBN print: 978-3-8288-4429-2, ISBN online: 978-3-8288-7440-4,

Series: Wissenschaftliche Beiträge aus dem Tectum Verlag: Rechtswissenschaften, vol. 127

Tectum, Baden-Baden
Bibliographic information
The European Union’s Energy Acquis Origins of the Energy Acquis European Coal and Steel Treaty In the past, coal constituted the most important resource fulfilling Europe’s energy needs in the decade of 1950s.97 During the period following World War II, Germany’s neighbouring nations were concerned that Germany would again come to dominate the steel and coal industry, thus disrupting their access to steel and coal necessary for the rebuilding of their economies. Taking advantage of the occupation of Germany, allied powers established the International Authority for the Ruhr (IAR) in 1949 to control the coal and steel industry of the Ruhr Area and to regulate steel and coal production as well as trade practices in West Germany. Accordingly, in a press conference in 1950, Robert Schuman suggested establishing a community which would end Germany’s domination of the coal and steel industry.98 It was also stated that other European countries would be free to join this community creating a single authority to control the coal and steel production of Germany and France. The objective of this plan was to build a peaceful Europe and prevent the conflict between Germany and other European countries, especially France.99 Schuman expressed this aim in his speech as follows: “by pooling basic production and by instituting a new High Authority, whose decisions will bind France, Germany and other member countries, this proposal will lead to the realisation of the first concrete Part 2 § 3. I. 97 Kohl, 1978, pp. 111–121. Lang, 1957, p. 761. 98 Germany’s market dominance over Europe was feared, especially due to the scarcity of steel in the market at that time. Such dominance would have caused difficulties for other countries which yearned to rebuild their own economies. 99 Reynolds, 1952, p. 282. 31 foundation of a European federation indispensable to the preservation of peace.”100 Another important reason was to undertake an initial step in facilitating the economic and political integration in Europe. The coal sector was organised in a different manner in each nation. While Germany, France and Belgium were predominantly the main producers, Italy and Luxembourg had limited local production. West Germany and France could be considered the largest producers of coal, followed by Belgium and the Netherlands. Furthermore, the Netherlands were de facto self-sufficient in the days leading up to the war. However, after World War II, the Netherlands became dependent on imports of coal. Ownership concepts differed from nation to nation. For example, in France the mining industry was nationalised. The nationalisation of the French coal mines began in 1944 and was completed in 1946.101 Private coal companies were reorganised into the public mining company Charbonnages de France. Due to general political reasons, the coal prices were pegged at a low level and the resulting deficits were covered by subsidies. In the Netherlands, two-thirds of the mines belonged to the state, and, based on the 1908 Law, the state-owned companies controlled the industry.102 In Italy, the coal industry was partially nationalised. Furthermore, the coal industry in France, Italy and the Netherlands was immensely concentrated, and it was characterised by a number of large companies and a few smaller firms.103 In Belgium104 and Germany105 with little-to-no nationalisation, coal mines were controlled by small to medium-size private companies and by relatively 100 The Schuman Declaration, 9 May 1950. 101 On May 1946, the Coal Mines and Mineral Fuels Nationalisation Act was adopted, and nationalization became effective for the entire coal mining industry. Coal Mines Committee, 1947, p. 37. 102 Schmitt, 1964, p. 103. 103 Poelmans, 2012, p. 17. 104 Belgium alone boasted undiluted private ownership of its mines, half of the production of which, however, was controlled by two enterprises, the Société Générale and Launoit. In addition, a sales cartel, the Comptoir Beige des Charbons (COBECHAR), controlled 60% of the national output and the prices of the remaining independents as well. 105 “While the overwhelming majority of Ruhr shafts remained in private hands, at least 80 per cent of their product fell under the control of a sales cartel founded in 1893 with the approval of the German government. In 1934, the same organisation Part 2 The European Union’s Energy Acquis 32 few large or very small companies. The coal industry was not particularly concentrated.106 The authors of the Schuman Plan thus sought to establish a common, competitive market for coal and steel. Upon the suggestion of Schuman, Jean Monnet undertook the preparation of a draft treaty in order to establish the ECSC. During the Treaty negotiations in Paris, it was in fact taken into account that the real purpose of the countries was not the establishment of a coordinated sectoral structure; rather, their main intention was to access the resources which would in the future help them to rebuild their economies and their local industries. While production companies in France were fighting for easier access to German coal107, the companies from Belgium, the Netherlands and Italy requested adjustment subsidies and asked for more time to rebuild their own industries.108 The Netherlands was wholly against the independent supranational institution proposed by Monnet and insisted on establishing a Council of Ministers to control the High Authority. After several negotiations lasting for more than one year, the final Treaty exhibited a different picture as compared to the first draft which was prepared by Schuman.109 The Treaty of Paris, which founded the ECSC, was signed on 18 April 1951 and became effective on 23 July 1952. It was to be valid for 50 years, and it was superseded by the EC Treaty on 23 July 2002. Alongside France and Germany, Italy, Belgium, the Netherlands and (Rheinisch-Westfalisches Kohlensyndikat) extended its sway over the output of the Aachen area.” Schmitt, 1964, p. 104. 106 Poelmans, 2012, p. 17. 107 “Monnet’s proposed coal and steel pool has rather to be seen as a means to protect French security and promote economic reconstruction through the international control of Germany’s heartland of heavy industry, the Ruhr. With France being—at the time—the world’s largest importer of coal and coke, a common market for coal and steel promised to ensure sufficient and cheap supply of German combustible for French industry and for the realisation of the French economic modernisation plan. The motivation of the French governing elite to tie Germany’s coal and steel industry to a supranational coal and steel pool was not driven by the sector- or issue-specific demands articulated by organised interests but rather by domestic economic policy objectives which were spelled out in the Monnet Plan.” Gillingham, 1991, p. 229. 108 Alter & Steinberg, 2007, p. 3. 109 “The outlines of Monnet’s original design were left intact in the treaty, with the High Authority remaining the exclusive source of executive power.” Alter, 2007, p. 89. § 3. Origins of the Energy Acquis 33 Luxembourg were participants.110 The Treaty aimed at contributing to the economic expansion, growth of employment and a rising standard of living, through establishing a common market for coal and steel.111 With its comprehensive economic regulations, the ECSC constitutes an important phase of the post-war economic reconfiguration struggles. It has been described as “a new structure in the marches between internal and international law.”112 It can be construed as the first supranational structure established by the European countries.113 Member States transferred a part of their sovereignty to a supranational institution, namely the High Authority. The ECSC did not only form a customs union, but also the production volume and the selling price of coal and steel were decided by the supranational High Authority. The ideas of the Schuman Plan were reflected in the following principles and purposes of the ECSC Treaty114: – to secure the presence of a systematic market, and – to provide a common market freely accessible to all member nations and to promote the development of the coal and steel industry as a whole by abolishing discriminative practices and trade barriers. Since coal and steel require high-cost infrastructure investments, they were considered as immensely sensitive, which, in turn, led to limitative practices and amalgamations. Hence, more than simply creating a competitive environment, the Treaty aimed at producing sustainable results. The removal of national trade barriers could not alone assure the benefits to be gained from competition. The authors of the Treaty subsequently recognised that the introduction of detailed regulations 110 Although Schuman’s proposal was addressed to all European nations which produced coal or steel, including the UK, the UK refused to be part of this plan. The reason for this was that the UK was not ready to sacrifice its national jurisdiction. According to Schuman, another reason is that the UK applies Anglo-Saxon law and does not prefer a written constitution. See: Mason, 1955, p. 9. 111 Article 2 of the ECSC Treaty. 112 Raalte, 1952, p. 74. 113 Belgium and Netherlands rejected the supranational structure proposed in the Schuman Plan at the Paris Conference in 1950; because of this reason the negotiation process lasted longer. See: Hospers & Groenendijk, 2003, p. 96. It could be argued that the High Authority was supranational, but the ECSC as a whole was largely intergovernmental. 114 Hyde-Smith, 1983, p. 176. Part 2 The European Union’s Energy Acquis 34 regarding pricing and competition was indispensable for the creation of an effective competitive environment. Furthermore, the members of the ECSC were aware that without these regulations the coal and steel industries could continue to fix prices, restrict production and technology, and allocate markets and raw materials.115 Politically, one must acknowledge that the ECSC advanced the process of integration. Economically, the ECSC achieved early success. The years 1952 to 1959 can be considered the golden age of the ESCS. It did a significant work removing the trade barriers, controlling pricing practices, harmonising national policies and restricting the development of cartels.116 It can be argued that the ECSC was successful both in the market management and in the struggle against the economic crisis during that particular period. Following the creation of the ECSC, production of steel and iron increased by 75% in Member States, and industrial production increased by 58%. Moreover, when the overproduction of coal (especially in Belgium) became a problem117 and the competitiveness of European coal was jeopardised due to availability of other fuels and imported coal after 1959, the ECSC helped to reduce coal-producing capacity and introduced programmes aiming at retraining miners and developing new industries.118 Although the coal-producing capacity and the employment in this sector decreased, the importance attributed to technological development, security and environmental issues increased. Moreover, security of supply increased along with better prices for consumers. Cross-border collaborations between companies from different countries increased. However, the ECSC failed to achieve several fundamental goals of the Treaty of Paris and also to establish a common market for coal and steel.119 The expectation had been that the ECSC would prevent a resurgence of large coal and steel groups such as the “Konzerne”. Nevertheless, coal and steel industries became more concentrated. Ten 115 Bebr, 1953, pp. 6–7. 116 Cook, 2001, p. 1125. 117 Poelmans, 2012, p. 11. 118 European Commission, Expiry of the European Coal and Steel Community (EC- SC) Treaty: an overview, 2002. 119 Alter & Steinberg, 2007, p. 90. § 3. Origins of the Energy Acquis 35 years after the establishment of the ESCS a shift towards fewer undertakings of all sizes with the larger undertakings accounting for a greater share of the total production could be ascertained.120 In the Cold War trade-offs, the cartels and major companies re-emerged, leading to ostensible price fixing which was intended to be tackled by the ESCS.121 Euratom Treaty The decision to create the Treaty establishing the European Atomic Energy Community (Euratom122) was taken during the Messina Conference in 1955.123 In line with this decision, the intergovernmental committee headed by Henri Spaak was appointed to prepare a draft.124 There were military125 as well as economic and political reasons be- II. 120 Poelmans, 2012, p. 25. 121 Mathieu, 1970, p. 874. 122 “Euratom can be defined as a union of sovereign states, based upon an international treaty, with institutions of its own, acting independently from the Member States, endowed in the field of nuclear energy with powers not only within the Community, but also competent to act as an international legal person.” Mathijsen, 1961, p. 438. 123 “The Messina Conference, attended by the Foreign Ministers of the six Member States of the European Coal and Steel Community (ECSC), took place from 1 to 3 June 1955. In Messina, the Foreign Ministers expressed their wish to start negotiations at both levels at once: while forms of new, partial integration — especially in the areas of transport, conventional energy and nuclear energy — needed to be examined, another objective was the creation of a common market. The Six adopted a resolution in which they stated their determination to make ‘further progress […] towards the setting up of a united Europe by the development of common institutions, the gradual merging of national economies, the creation of a common market and the harmonisation of their social policies’.” The Messina Conference (1 to 3 June 1955), (accessed: 1 June 2019). 124 The foundations of EURATOM were laid in the first Spaak Report of 1956. “The Spaak Report proposed to establish in EURATOM a common organisation which would not only promote the formation and rapid growth of the nuclear industry, but which would help with the transition of the whole economy from a coal to nuclear base.” Lucas, 1977, p. 16. 125 It was observed that, compared to the United States or the Soviet Union, Western Europe fell behind in terms of nuclear technology. The fact that this situation had the possibility of putting Western Europe in a bad state in the international military-political arena led Member States to take action in this area. Nanes, 1958, p. 12. See also: Vogelaar, 1960, p. 12. Part 2 The European Union’s Energy Acquis 36 hind the establishment of Euratom. The primary motivation which led Member States to focus intensely upon atomic energy was the energy deficits which occurred due to the existing political problems concerning secure import of petroleum from the Middle East (the main cause was the Suez Crisis126).127 Initially, the main objective of the Treaty was to find alternative energy resources in an effort to prevent the increasing dependency of European countries on Middle East petroleum.128 The Community also gave particular importance to the development of nuclear energy for peaceful purposes. Moreover, in view of the devastating effects of the atomic bombs dropped over Japan during the Second World War, the Community tried to prevent the use of nuclear technology for military purposes. The Euratom Treaty also provided an incentive for Western European nations to place their nuclear development under the supranational authority of the Euratom Commission.129 Treaty on the Functioning of the European Union As mentioned above, the European integration began in the 1950s through the establishment of three treaties: the ECSC Treaty, the Euratom Treaty and the EEC Treaty. The original EEC Treaty has been amended several times. The Single European Act of 1986 (SEA) brought the first major reform as it set the III. 126 “The Suez crisis in November 1956, precipitated by Egyptians seizure of the Canal, accelerated the timetable. Western Europe hoped to find a future source of power to replace Middle Eastern oil. More important the US. role in the crisis tended to confirm the French charge that American interest diverged from those of Europe that Europe could not base its strategic defence on U.S. nuclear weapons and that progress toward genuine European federation based on European interests alone, was imperative. This recognition strengthened French leadership on the Continent.” Nieburg, 1963, pp. 597–622. 127 However, following later agreements, the supply of petroleum from Africa began and petroleum prices did not increase significantly until the 1970. This development created the biggest obstacle for the development of Euratom. 128 In order to realise this goal, the Community has assumed the duty of developing nuclear technology and making it a useful energy source from which all humanity can benefit safely, from the first days of its establishment up until today. 129 Mallard, 2008, pp. 459–477. § 3. Origins of the Energy Acquis 37 objective of achieving the internal market by 1992 and introduced qualified majority voting in the Council, thus facilitating the adoption of internal market harmonising legislation. The SEA also supplemented the EEC Treaty with new provisions on economic and social cohesion, research and technological development. Moreover, it provided a legal basis for the Community. EU action within the environmental area in pursuit of defined policy objectives, such as the “prudent and rational utilisation of natural resources”, became possible. Soon thereafter, the Maastricht Treaty was concluded in 1992. It was significant in several ways. First it brought the three Communities (ECSC, Euratom and EEC) under one umbrella. The original three treaties remained in force, but the EEC was renamed and became the European Community (EC). Secondly, in Article 3(u) of EC Treaty130, the energy area was considered to be in the competency of the Community; hence the authority to make regulations in this content was given to the Community.131 However, other than in this article, the Treaty did not contain any specific chapter about energy except for the regulations on the environment within the SEA.132 Another place where energy was mentioned was the Declaration No. 1 attached to the Treaty on the European Community.133 It stated that the Treaty revision negotiations, to start in 1996, should again consider the question of energy (as well as tourism and civil protection) on the basis of a Commission proposal.134 130 Ex-Article 3(t). 131 Wägenbaur & Wainwright, 1996, p. 60. 132 Due to the fact that Member States have refused and continue to refuse to give up sovereignty over energy issues, the separate energy chapter could not be inserted in the Maastricht Treaty. “The tension between national interests and the EU is the main reason why energy did not formally become a field of common policy during the treaty revisions in Maastricht and Amsterdam. When it was proposed during the negotiations over the Maastricht Treaty, Britain was against it as part of a strategy to limit the scope of supranational authority.” Andersen, 2001, p. 122. 133 Lyons, 1998, p. 9. 134 On 3 April 1996, the Commission published a report regarding civil protection, tourism and energy. It was concluded that the Community does have a policy (as regards coal and nuclear energy) and specific or general instruments for implementing that policy; however, these instruments are scattered across the three treaties. Therefore, there was a need for the consolidation of this policy and these instruments. Report from the Commission to the Council on civil protection, tourism and energy. SEC (96) 496 final, 3 April 1996. Part 2 The European Union’s Energy Acquis 38 Moreover, Article 129b135 of the EC Treaty authorised the EC to create Trans-European networks including energy and to support them financially. Both electricity lines and energy pipelines in liquid and gas state are also considered within the scope of Trans-European networks. The objectives cited in the EC Treaty might only be imposed on Member States, while the concept of Trans-European networks refers to the need to create networks across all of Europe. Within this scope, cooperation with third-party countries was also officially ensured. Following the Maastricht Treaty, the Treaty of Amsterdam was signed in October 1997 and came into force in May 1999. It further increased the powers of the EU, including amendments to the EC. It simplified and renumbered the articles of the treaties. The Treaty of Amsterdam was followed in 2001 by the Treaty of Nice with the main purpose being to reform the institutions, so that the EU could function efficiently after growing to 25 Member States. Although these treaties did not include specific energy provisions, they did contain provisions which have had an impact on the energy sector, such as the services of general economic interest and the principles of subsidiarity and proportionality. Subsequently, a body of European energy and environmental legislation emerged, covering a broad range of energy-related matters. According to the Commission, the overall energy acquis more than doubled in size during the five-year period from 31 December 1999 to 31 December 2004.136 Despite various deficiencies in the legal framework becoming readily apparent, the overall experience demonstrated that it has been possible to elaborate and update a fairly thorough legislative framework relating to the energy sector without having to rely upon the formality of an “energy chapter” in the Treaty. Nevertheless, there was an apparent need for a more formal approach, and the aim was to replace the founding Treaties of the EU with a European Constitution. The Constitutional Treaty for Europe included a provision on the EU energy policy. It was signed in Rome on 29 October 2004. In 2007, the European Council decided to convene an Intergovernmental Conference (IGC) to adopt a new Treaty. The IGC concluded 135 New Article 170 TFEU. 136 Directorate General of Energy and Transport, Repertoire of the Acquis Communautaire, 2004. § 3. Origins of the Energy Acquis 39 its work in October 2007. The Treaty of Lisbon was signed at the European Council of Lisbon on 13 December 2007 and was ratified by all Member States. The Treaty, entered into force on 1 December 2009, did not replace the founding Treaties but only amended them, as did the Amsterdam Treaty and the Nice Treaty. Therefore, two founding Treaties of the EU still remain: The Treaty on the European Union (TEU) and the Treaty establishing the European Community. However, at Lisbon, the latter was renamed the Treaty on the Functioning of the European Union. It thus brought an end to the “European Community”. It also provided for a new allocation of competencies between the EU and Member States, aiming at improvements of the decision-making process. Moreover, it reformed several of the EU’s internal and external policies. The Lisbon Treaty has led to profound reforms in the EU, especially to changes in the EU’s institutional and organisational structure, and it has widened the boundaries of European integration pushing them to the next level. In particular, the energy policy has been subject to fundamental changes. The introduction of its own chapter in Article 194 TFEU, titled XXI “Energy”, can be considered the cornerstone on the way to the creation of the common energy policy.137 Firstly, the topic of energy is addressed in Article 4, which provides a “shared” competence138 between the EU and Member States in the energy sector. Secondly, energy is discussed in Article 194. According to this Article, the EU’s energy policy has the following four main objectives: – ensuring the functioning of the energy markets, – encouraging the development of energy efficiency, energy savings, new and renewable energy resources, 137 Pielow & Lewendel, 2012, p. 147. 138 “Shared competence” means that, when the Treaties confer on the EU a competence shared with Member States in a specific area, the EU and Member States may legislate and adopt legally binding acts in that area (Article 2(2) TFEU). However, Member States exercise their own competence to the extent that the EU does not exercise, or has decided not to exercise, its own competence. European Commission, Division of competences within the European Union, 2016. Under the principle of conferral, the EU may only act within the limits of the competences conferred upon it by the EU countries in the Treaties to attain the objectives provided therein (Article 5 of the TEU). Part 2 The European Union’s Energy Acquis 40 – ensuring the security of energy supply in the EU, and – supporting the connections of energy networks with each other. Article 194(1) puts forth two important changes. Firstly, a clear statement was added which declared that the energy policy would be formulated “in a spirit of solidarity between Member States.” This addition was largely made as a result of the Polish delegation’s insistence. However, background reasons included: – the dependency on Russia, which exports energy to Central and Eastern European countries; – concrete dispute situations due to reasons such as the disruption of natural gas transport to Central European countries in 2007 because of the showdown between Russia and Ukraine; and – the Baltic Sea Pipeline Project. Secondly, it can be seen that encouraging the intermediary connections of energy networks is an objective of the European energy policy.139 This change is essential for creating an energy internal market and ensuring energy supply security across the EU.140 Article 194(2) specifies how competence is to be shared and gives authority to the EU for fulfilling the objectives specified in the first paragraph. Hence, the EU becomes obliged to take necessary measures. In the view of the provisions of Articles 4 and 122 TFEU, these objectives are to be implemented in a spirit of solidarity between Member States and the EU. Accordingly, as a rule, the EU and Member States can act together in the legislative area; however, Member States can only use their authorities when the EU does not use its authority or when it decides that it will not use its authority anymore.141 However, Member States still have the opportunity for opting out of the EU’s energy policy.142 According to Article 194(2) and (3), the measures to be taken by the EU should not affect a Member State’s right to determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply. 139 Article 194(1)(d) TFEU. 140 Kahl, 2009, p. 608. 141 Ibid., p. 607. 142 Pielow & Lewendel, 2011, p. 153. § 3. Origins of the Energy Acquis 41 Despite the aforementioned changes, the Article has been criticised since it lacks a provision regarding third parties.143 Contrary to Article 191144, which sets out the legal basis for environmental policy, Article 194 does not put in place any regulation for the cooperation of the EU and Member States with third countries. Energy Acquis on Sectoral Base Coal General Expiry of the European Coal and Steel Community Treaty The ECSC Treaty has been of historical importance because it emphasised the necessity of the tenets of cooperation and common interest in terms of coal as an energy resource. The Treaty marked the establishment of the EC and included the first steps for creating a common energy policy. Articles 1 and 2 of the ECSC Treaty highlighted the cooperation envisaged among members with common interests. The ECSC has stated its objectives which go beyond cooperation in terms of coal and steel. These included the following: – providing more rational production and distribution, – creating a single market in six Member States by combining coal and steel markets, – increasing productivity and reducing costs, – leaving the control of coal and steel production and consumption to a supranational organ, – enabling the continuity of peace among Member States, and – pioneering similar unities in other areas of Europe. § 4. I. A. 1. 143 Pielow & Lewendel, 2012, p. 264. 144 Article 191 TFEU: “Within their respective spheres of competence, the Union and the Member States shall cooperate with third countries and with the competent international organisations. The arrangements for Union cooperation may be the subject of agreements between the Union and the third parties concerned.” Part 2 The European Union’s Energy Acquis 42 According to Article 97 of the ECSC Treaty, “the Treaty is concluded for a period of 50 years as of its entry into force”. In Council Resolutions of 20 July 1998145 and 21 June 1999146, the Council and the Representatives of Member States decided not to renew the ECSC Treaty and instead to continue operating the coal and steel sectors under the EC Treaty.147 Following the Protocol attached to the Nice Treaty148, the assets and liabilities of the ECSC were transferred to the European Union. The net worth of these assets was allocated to the new “Research Fund for Coal and Steel” (RFCS).149 The RFCS’s legal basis is the Council Decision 2008/376/EC of 29 April 2008. The Commission, Directorate-General for Research and Innovation, implements the fund’s activities with the assistance of a programme committee and several advisory committees consisting of experts from Member States, industry as well as academia. The RFCS programme’s main objective is to establish a correlation between research, innovation and industrial applications by using a network of researchers and producers. Thus, it aims at increasing the competitiveness of the European coal and steel industry, contributing to its sustainable development and promoting the exchange of information and rapid transfer of technology. In order to guarantee the economic, 145 OJ C 247, 7.8.1998, p. 5. 146 OJ C 190, 7.7.1999, p. 1. 147 Ubertazzi, 2004, p. 2. 148 Protocol on the financial consequences of the expiry of the ECSC Treaty and on the research fund for coal and steel, OJ C 80, 10.3.2001, pp. 67–68. 149 According to the Protocol added to the Nice Treaty, net assets of ECSC and liabilities conveyed to the EU are allocated to the new “Research Fund for Coal and Steel”. As of the termination date of the Treaty, the total amount of the fund was 1.6 billion Euros. The yearly interest of this amount reaches 60 million Euros. 72.8% of it is allocated to steel researches. This amounts to more than 43 million Euros for the research conducted in 2003 and 2004. The Research Fund for Coal and Steel aims to create a reciprocal relationship between research, renovation and industrial practices by using a network of researchers and producers. For this reason, it encourages information exchange and rapid transfer of technology. Although ECSC ended in July 2002, this programme still continues. The Council Decision 2008/376/EC adopted on 29 April 2008 is the legal basis of this programme. The commission made a proposal for amending this decision on 18 February 2016. For more information, see: Research Fund for Coal and Steel, (accessed: 1 June 2019). § 4. Energy Acquis on Sectoral Base 43 clean and safe production of steel products, the RFCS programme focuses on the development of new or improved technologies.150 Concerning coal, research projects supported by the fund aim at enhancing the entire coal production chain including the optimisation of coal mining production, improvement of coal preparation techniques and development of clean combustion processes. In addition, these projects focus on climate change issues as well as on health and safety issues in mines.151 State-Aid Regulations for Coal State incentives for the coal industry play a significant role in the EU’s sectorial policies. The basic provision regarding state aids is contained in Article 4(c) of the ECSC Treaty. According to Article 4 (c), subsidies or state assistance, or special charges imposed by the state, in any form whatsoever shall be abolished and prohibited, as they are recognised to be incompatible with the common market for coal. Although Article 4 prohibited granting state aid to the coal industry, it becomes clear that, when the Treaty as a whole is systematically interpreted, aids can be granted to the coal sector under some conditions.152 Commission Decision 3632/93/ECSC153, adopted in 1993, established community rules concerning state aid to the coal sector and remained effective from 1994 until 2002 when the ECSC Treaty expired.154 Then, it was replaced by Council Regulation 1407/2002 (the socalled Coal Regulation)155 on 24 July 2002.156 The Coal Regulation allowed state aids in the coal sector (until 31 December 2010). 2. 150 CPS, 2011, p. 47. 151 Research Fund for Coal and Steel, ogies/rfcs_en.html (accessed: 1 June 2019). 152 Kühne, 1994, p. 85. 153 Commission Decision No 3632/93/ECSC of 28 December 1993 establishing Community rules for State aid to the coal industry, OJ L 329, 30.12.1993, pp. 12–18. 154 Quigley, 2009. 155 Council Regulation (EC) No 1407/2002 of 23 July 2002 on State aid to the coal industry, OJ L 205, 2.8.2002, pp. 1–8. 156 The most striking basic difference between these two regulations is that Council Regulation 1407/2002 gives its weight to energy security. Recital 3, 11 and 12 of the Directive mentioned energy security. While Recital 3 gives importance to the diversity of the energy resources for ensuring security of supply, according to Part 2 The European Union’s Energy Acquis 44 According to Article 3(1), only the aid granted to the coal industry which complies with the provisions of Chapter 2 of the Coal Regulation could be considered compatible with the proper functioning of the common market, without prejudice to state aid schemes concerning research and technological development, the environment and training. The Coal Regulation allowed for closure aid157, investment aid158 and operating aid.159 The coal industry was forced to undertake substantial restructuring measures involving major cutbacks in activity due to the competitive imbalance between the Community coal and imported coal. To overcome this imbalance, Council Regulation 1407/2002 allowed Member States to grant state aid to the coal sector.160 Under the Coal Regulation, 11 Member States continued to produce coal. These countries can be divided into the following three groups161: – countries which stopped coal subsidies for mines in operation (Italy, France, and the Czech Republic) – countries which granted investment aid (the United Kingdom, Slovakia, and Poland) – countries which granted operating aid (Spain, Germany, Bulgaria, Romania, Hungary and Slovenia) Since the Coal Regulation expired on 31 December 2010162, the Council adopted a new Decision, the so-called Coal Decision163, on 10 December 2010. The Coal Decision should not be considered a continuation of the Coal Regulation since the two pursue different aims. The Decision aims at facilitating the transition for the coal sector, from the application of sector-specific rules to the enforcement of general State Recital 1 production of subsidised coal must be limited to what is strictly necessary to make an effective contribution to the objective of energy security. Johnston & Block, 2012, p. 360. 157 Article 4 of Regulation 1407/2002. 158 Article 5(2) of Regulation 1407/2002. 159 Article 5(3) of Regulation 1407/2002. 160 Recital 2 of Regulation 1407/2002. 161 European Commission, Commission Report on the Application of Council Regulation (EC) No 1407/2002 on State Aid to the Coal Industry, 2007, p. 3. 162 Article 14(3) of Regulation 1407/2002. 163 Council Decision 2010/787/EU on State aid to facilitate the closure of uncompetitive coal mines, OJ L 336, 21.12.2010, pp. 24–29. § 4. Energy Acquis on Sectoral Base 45 aid rules.164 According to the Decision, “aid must be degressive”. In other words, it was contemplated that the aid provided by the State should be decreased gradually and be totally abolished by 31 December 2018. There are several technical, social and environmental reasons for the aforementioned gradual plan of the Commission. As for the enumeration of the technical reasons, after closing a mine staggered measures such as the removal of mining equipment, the cleaning-up of the site, underground safety work, the removal of wastewater and other measures are needed for rehabilitating the mining area. As for the social reasons, after closing a mine, many workers would become unemployed. Therefore, Member States should be able to take measures to alleviate the social consequences of the closure of mines.165 Member States should provide financial support to workers who have lost or will lose their jobs due to closure of the mines by funding severance packages and social security benefits166, such as paying social welfare benefits resulting from the pensioning-off of workers before they reach statutory retirement age, paying pensions and allowances outside the statutory system, supplying free coal and covering former miners’ health insurance.167 The Coal Decision regulates the state aid granted to the coal industry within the framework of the closing of mines which are no longer competitive. The state aid may be deemed compatible with the internal market only if the aid is granted to cover costs concerning coal used for the electricity generation, the combined production of heat and electricity, the production of coke and the fuelling of blast furnaces in the steel industry, where such use takes place in the Union. With respect to the said scope, Member States can solely provide state incentives upon the closure of the production units with a deadline which does not extend beyond 31 December 2018. Beyond that date, it was decided that aid for exceptional costs of closure related to social welfare benefits, such as site rehabilitation or removal of wastewater, can be given until 31 December 2027 by Member States. 164 Recital 6 of Council Decision 2010/787/EU. 165 Recital 5 of Council Decision 2010/787/EU. 166 Case SA.34332, European Union v Spain, Aid to facilitate the closure of coal mines in Spain; Hancher & Klasse, 2018, p. 229. 167 Annex of Council Decision 2010/787/EU. Part 2 The European Union’s Energy Acquis 46 According to the Council Resolution, aids pertaining to the current production losses of production units are considered as compatible with the internal market solely if the conditions determined in Article 3 are met.168 Article 7 of the Coal Decision states that Member States having an intention to grant closure aid must notify the Commission of their intention. Through this decision, the closure of uncompetitive mines is supported in a socially and politically acceptable way.169 Since the Coal Decision entered into force, the Commission has dealt with a number of cases, some of which solely concerned aid for exceptional costs (Slovenia170 and Poland171). However, the more significant aid volumes were in relation to the closure of coal mines which were no longer economically feasible, and they were related to covering production costs.172 As the deadline was approaching (31 December 2018), there was an increase in decisions concerning closure aid, including in relation to mines whose restructuring had proven unsuccessful in the past.173 For instance, in May 2016 the Commission approved Spanish plans to grant €2.13 billion aid to support the operators of 26 coal mines that were supposed to be shut down by 2018.174 However, since Spain could not reach its goal of having a subsidy-free coal sector, amendments were made to the Framework Plan in 2017.175 Spain implemented an amended plan to gradually reduce coal mining subsidies by 2019. 168 Article 3 of Council Decision 2010/787/EU. 169 European Commission, Frequently Asked Questions – Coal Regulation, 2010. 170 Case SA.30907, Slovenia Closure of mine Trbovlje Hrastnik Ltd, [2011] OJ C294/3. 171 Case SA.33013, Poland Coal plan for the period 2011–2015, [2013] OJ Cl22/6. 172 Case SA.24642, German Coal mine closure plan 2008–2018, [2012] OJ C284/6 and Case SA.33033, National Hard Coal Company Petrosani, [2013] C23/3. 173 Hancher & Klasse, 2018, pp. 218–222. 174 Under Spain’s National Coal Plan (2006–2012) this aid was initially expected to be phased out by the end of 2010. However, in 2013 the Spanish government reached an agreement with the domestic coal industry regarding the reduction of subsidies to the coal mining sector until the end of 2018. This plan only received approval by the European Commission in 2016. Case SA.34332, Aid to facilitate the closure of coal mines in Spain, [2016] OJ C471/1. 175 Financial measures under the amended Framework plan include the following (Decision 2010/787/EU): closure aid: for uncompetitive coal mines (2013–2018); exceptional aid: social aid for labour costs to cover lost working days and for advanced age workers, but also environmental aid for the rehabilitation of mining land (2013–2021); economic stimulation aid: financing of infrastructure and job creation projects for an alternative economic development of mining regions § 4. Energy Acquis on Sectoral Base 47 In November 2016, the Commission agreed upon granting state aid of €1.8 billion to ensure the orderly closure of coal mines in Poland.176 Similar to the Spanish scheme, the new aid was partially an extension of schemes that had been approved by the Commission but had meanwhile expired.177 Even though the deadline (31 December 2018) passed, some countries (i.e. Romania) continue to grant state aid to the coal sector.178 Directive 2009/31/EC179 Carbon Capture and Storage Technologies In order to reduce the environmental problems due to coal usage, to increase the competitive capacity of coal and to enable its acceptance environmentally, large financial resources are allocated to R&D studies in the areas of developing modern, more efficient clean coal technologies and their implementation. For this purpose, during the ECSC period the budget of “Research and Technology Development Programme”, which operated between 1957 and 2002, was dedicated to R&D studies. Certain short-term and mid-term studies in the area of clean coal technologies have focused on decreasing current coal-based thermal power plant emissions by using control technologies (SO2 and NOx technologies, combined SO2/NOx technologies and dust emission reducing technologies), improving coal preparation technologies, supporting the launch of new thermal power plants based on highly-effi- B. 1. (2013–2021). Cutting Europe’s lifelines to coal, uk/files/resource-documents/11488.pdf (accessed: 1 August 2019). 176 Case SA.41161, State Aid to Polish coal mining in the period 2015–2018, [2017] OJ C51/1. 177 Case SA.33013, Coal plan for the period 2011–2015, [2013] OJ Cl22/6; Hancher & Klasse, 2018, p. 222. 178 Romania keeps giving state aid to coal even as it holds EU presidency, https:// al-even-as-it-holds-eu-presidency/ (accessed: 1 August 2019). 179 Directive 2009/31/EC of the European Parliament and of the Council of 23 April 2009 on the geological storage of carbon dioxide and amending Council Directive 85/337/EEC, European Parliament and Council Directives 2000/60/EC, 2001/80/EC, 2004/35/EC, 2006/12/EC, 2008/1/EC and Regulation (EC) No 1013/2006; OJ L 140, 5.6.2009, pp. 114–135. Part 2 The European Union’s Energy Acquis 48 cient coal and bringing in CO2 capture and storage technologies. The long-term aim is to commercially launch – with ongoing R&D studies – highly efficient thermal power plants which have nearly zero emission and to launch technologies of CO2 capture and storage. Generally, the concept of “clean coal technologies” refers to the efficiency and environmental dimensions of coal production, preparation and usage processes. These technologies aim at reducing emissions and wastes on the one hand and to increase the energy obtained from a unit of coal on the other hand. The main areas upon which the global coal industry recently has focused include increasing the efficiency of coal-based thermal power plants and decreasing the CO2 emissions of these power plants. The expectation is for coal to obtain its leading position in the realm of energy and become once again a preferred fuel option as a result of technological developments.180 It can be observed that research efforts progress according to the general strategic framework adopted by industrialised Western countries which try to increase the efficiency of coal-based thermal power plants while limiting CO2 emissions. Moreover, such efforts are based on the following three objectives: – reaching the 44–45% efficiency level by enabling the use of the latest technologies (supercritical, ultra-supercritical) in current or newly established coal-based power plants (obtaining more efficiency from a unit of coal) and reducing CO2 emissions by 1/3; – reaching the 50–55% efficiency level by means of more advanced thermal power plant technologies and again reducing CO2 emissions by 1/3; and – reaching the 52–55% efficiency level by launching CO2 capture and storage (CCS) technologies, and bringing to zero CO2 emissions. In this framework, the EU’s energy policy bases the future of coal almost entirely on the development of CCS technologies.181 In line with this policy, the accelerating development of the CCS demonstration facilities and the establishment of the infrastructure in this area have been important priorities for the EU. In this regard, a precondition for investing in CCS technologies seems to be the commercial-scale success 180 Kavalov & Peteves, 2007, p. 8. 181 Euracoal, 2011, p. 3. § 4. Energy Acquis on Sectoral Base 49 of the trials which will establish the full chain defining CO2 capture, compression, transport and proper storage and which will demonstrate the technical, economic and environmental performance of these technologies. The CCS Directive Directive 2009/31/EC (so-called: CCS Directive) constitutes the legal basis of CCS. The objectives of the CCS Directive can be specified as follows182 – providing a legal framework for the environmentally safe application of CO2 storage; – preventing or eliminating as far as possible negative effects and any risk to the environment and human health; – ensuring that CCS technology would be deployed in an environmentally safe way; – providing clarity, coherence and the stability necessary to enable market operators to invest in CCS facilities across the EU under comparable regulatory conditions; – ensure the security of transport networks and storage spaces; – minimising the risk of leakage and address the liability issues for leakage from storage sites during operation and post-closure. The CCS Directive covers all the conditions that a storage space will need throughout its lifecycle. It also contains rules concerning extraction and transport together with the conditions of storage spaces. The CCS Directive assigns the EU the duty of reviewing the implementation of the Directive with Article 38. Member States submitted reports on how the Directive would be applied between July 2011 and April 2013. As of September 2013, all Member States completed the transposition of the CCS Directive into their domestic laws. Some Member States found it sufficient to amend their current laws, while the rest preferred to create new regulations within their national legal framework. On 18 November 2015, the Commission prepared a report about the CCS Directive. In this report, it is concluded that the CCS 2. 182 Johnston & Block, 2012, p. 366. Part 2 The European Union’s Energy Acquis 50 Directive properly serves its purpose and that it creates a regulatory framework for CO2 capture, transport and storage.183 Natural Gas Directives concerning Natural Gas Directive 91/296/EEC Directive 91/296/EEC184, the so-called Natural Gas Transit Directive, entered into force with the aim of creating a common market in gas in order to accomplish the objective of establishing the European Common Market. It intended to make the energy trade between the various European States more efficient185 and required Member States to take the measures necessary to facilitate the transit of natural gas between high-pressure transmission grids.186 According to the Directive, contracts concerning the natural gas transit between grids were to be negotiated between the undertakings responsible for those grids and the undertakings responsible for importing and exporting natural gas in Member States.187 These contracts must not contain unfair clauses or unjustified restrictions and cannot include any provision which might endanger security of supply or quality of service.188 Moreover, the conditions of transit should be non-discriminatory and fair for all parties concerned. The Directive noted that greater natural gas transfers between grids can minimise the cost of investment involved in services related to this transit and ensure optimum use of the means of production and infrastructure.189 Moreover, it stated that increased natural gas transfers between grids would also provide an incentive for natural gas II. A. 1. 183 European Commission, Climate action progress report, 2015. 184 Council Directive 91/296/EEC of 31 May 1991 on the transit of natural gas through grids, OJ L 147, 12.6.1991, pp. 37–40. 185 Capece et al., 2007, p. 418. 186 Article 1 of Directive 91/296/EEC. 187 Article 3(1) of Directive 91/296/EEC. 188 Article 3(2) of Directive 91/296/EEC. 189 Haghighi, 2007, p. 127. § 4. Energy Acquis on Sectoral Base 51 transmission undertakings to cooperate in order to find ways of improving natural gas transmission equipment which could lower the costs and consequently bring down the prices.190 Directive 98/30/EC Directive 98/30/EC191 came into force on 19 August 1998. It envisaged the implementation of common rules regarding transmission, distribution, supply and storage of the natural gas in Member States. It contained the essential provisions on the structure and the functioning of the natural gas markets, including access to the market, the operation of systems and procedures applicable to the granting of authorisations for transmission, distribution, supply and storage of natural gas.192 Member States were expected to transpose Directive 98/30/EC into their internal laws within a two-year time frame.193 Unbundling: According to Directive 98/30/EC, vertically194 or horizontally integrated195 natural gas undertakings were required to keep separate accounting records for each of their activity areas.196 Furthermore, where appropriate, they were to keep consolidated accounts for their non-natural gas related activities. The purpose of such a practice was to prevent integrated undertakings from discriminating and crosssubsidising and to avoid the distortion of competition.197 Moreover, the Directive included further provisions regarding confidentiality of commercially sensitive information, which is known as the 2. 190 Recital 11 of Directive 91/296/EEC. 191 Directive 98/30/EC of the European Parliament and of the Council of 22 June 1998 concerning common rules for the internal market in natural gas, OJ L 204, 21.7.1998, pp. 1–12. 192 Article 1 of Directive 98/30/EC. 193 Article 29 of Directive 98/30/EC. 194 Article 2(16) of Directive 98/30/EC stated that “‘vertically integrated undertaking’ means a natural gas undertaking performing two or more of the tasks of production, transmission, distribution, supply or storage of natural gas”. 195 Article 2(17) of the Directive 98/30/EC said that “‘horizontally integrated undertaking’ means an undertaking performing at least one of the functions of production, transmission, distribution, supply or storage of natural gas, and a non-gas activity”. 196 Article 13 of Directive 98/30/EC. 197 Cameron, 2002, p. 181. Part 2 The European Union’s Energy Acquis 52 “Chinese Wall” principle198. Each transmission, storage, LNG and distribution undertaking was, in the context of sales or purchases of natural gas by the distribution undertaking or related undertakings, required to preserve the confidentiality of commercially sensitive information when such information was obtained in the course of carrying out its business.199 Moreover, transmission and distribution undertakings were required not to abuse commercially sensitive information obtained from third parties in the context of providing or negotiating access to the system.200 Along with the aforementioned measures, legislators aimed at precluding competition violations and preventing potential discrimination. However, it should be said that, in practice, it is not easy to identify whether the commercially sensitive information is abused or discrimination is taking place.201 System operator: Directive 98/30/EC did not envisage an obligation for appointing a transmission system operator in Member States. However, it can be stated that, in practice, the aforementioned situation emerged from the fact that vertically integrated undertakings operated within the ambit of natural gas supply activities by protecting their intrinsic structure.202 Access to networks: According to Directive 98/30/EC, non-discriminatory access to upstream pipeline networks was necessary. Member States were to allow certain gas customers to buy gas from the supplier of their choice and to have it transported through the existing pipeline network at negotiated or regulated rates.203 Directive 98/30/EC introduced two different access regimes: negotiated access204 and regulated access.205 Under the negotiated access, eligible customers could enter into negotiations with natural gas undertakings to determine the precise contractual terms for access to the gas network. Natural gas undertakings were obliged to publish their 198 An artificial barrier restricting the flow of information between different areas within an organization inasmuch as it could lead to conflicts of interest. 199 Cameron, 2002, p. 183. 200 Articles 8 and 11 of Directive 98/30/EC. 201 Cameron, 2002, p. 183. 202 Gräper & Schoser, 2004, p. 61. 203 Brakman et al., 2009, pp. 8–9. 204 Article 15 of Directive 98/30/EC. 205 Article 16 of Directive 98/30/EC. § 4. Energy Acquis on Sectoral Base 53 main commercial conditions for access. Under the regulated access, eligible customers were to have a right of access on the basis of regulated and published tariffs and/or other terms and obligations for use of the network. Eligible customer: Pursuant to Directive 98/30/EC, an “eligible customer” could be defined as a consumer who is eligible to enter into a commercial relationship with the suppliers of choice in the course of supplying natural gas within the national borders of a Member State. It is stated that Member States were to determine the necessary criteria for being eligible customers and subsequently publish it. Furthermore, Member States had to ensure that end consumers who consume approximately 25 million m3 of natural gas annually and gas-fired power generators, irrespective of their annual consumption level, were designated as eligible customers. According to the Directive, distribution undertakings, if not already specified as eligible customers, had the right to enter into commercial relationships with eligible customers regarding gas supply in regions over which they had distribution authority.206 The Commission might request a Member State to modify its specifications concerning eligible customers if they create obstacles to the correct application of the Directive as regards the smooth functioning of the internal market in natural gas.207 Directive 98/30/EC adopted a gradual approach in terms of the opening of markets. In this framework, Member States had to ensure that the definition of eligible customers would result in an opening of the market equal to at least 20% of the total annual gas consumption of the national gas market, increasing to 28% in 2003 and 33% in 2008. Assessment: In 2001, the Commission published the first benchmarking report on the implementation of the internal electricity and gas market. According to the report, as of 2001, almost all Member States had implemented the Gas Directive into their national legislation and brought into force the laws, except France and Germany. The Commission launched infringement procedures against these countries. 206 Article 18 of Directive 98/30/EC. 207 Article 18(9) of Directive 98/30/EC. Part 2 The European Union’s Energy Acquis 54 However, the report also identified a number of competition-related issues208: – Significant obstacles remained for eligible consumers and new entrants into the market. – There was a high concentration in the gas production and import markets which made it difficult for new entrants to buy wholesale gas on reasonable terms. – Third parties did not have flexibility to change their gas sources or their customer base without incurring higher costs due to network access tariffs based on distance and point-to-point capacity reservation. – High network tariffs formed a barrier to competition in themselves by discouraging third-party access and provided revenue for cross subsidy of affiliated businesses in the competitive market. – Network access tariffs and conditions which were not subject to ex ante approval created uncertainty and led to time consuming disputes. – Balancing regimes were non-market-based and were unnecessarily stringent and not reflective of costs incurred. – The level of unbundling was not sufficient and led to obscure discriminatory practices and cross subsidies. According to the Commission, in order to achieve the goal of a fully functioning competitive internal gas market, concrete provisions were needed which would aim at reducing the risks of market dominance and predatory behaviour, ensuring non-discriminatory access to transmission and distribution networks on the basis of tariffs published prior to their entry into force and ensuring that the rights of customers are protected.209 208 European Commission, First benchmarking report on the implementation of the internal electricity and gas market, 2001, p. 4. 209 Recital 30 of Directive 2003/55/EC. § 4. Energy Acquis on Sectoral Base 55 Directive 2003/55/EC Directive 2003/55/EC210 entered into effect on 4 August 2003. It required that Member States implement the Directive in their domestic laws through the key legal arrangements such as law, by-laws and regulations by 1 July 2004.211 The Directive212 aimed at creating a fully operational competitive internal gas market.213 Unbundling: The Directive envisaged three different forms of unbundling: accounting, legal and management. It aimed at preventing distortion of competition, cross-subsidisation and discrimination. The most radical shift in this Directive was the introduction of legal unbundling by requiring that transmission and distribution activities must be carried out by separate undertakings. In other words, the Directive required transmission and distribution system operators which were part of a vertically integrated undertaking to be independent, at least in terms of their respective legal forms, organisation and decision making, from other activities such as production or supply.214 Moreover, vertically integrated natural gas undertakings were required to keep separate accounts for their different activities, e.g., transmission, distribution, LNG and storage, as they would be required to do if the activities in question were carried out by separate undertakings.215 Where appropriate, they were required to keep consolidated accounts for other, non-gas activities. System operator: Directive 2003/55/EC required that a system operator should be designated by Member States or by the owners of the facilities wherein natural gas transmission, storage, distribution and LNG activities were conducted. According to the Directive, system operators (e.g., transmission, storage and/or LNG) were to avoid discriminating between system users, particularly in favour of their related 3. 210 Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 98/30/EC, OJ L 176, 15.7.2003, pp. 57–78. 211 Article 33 of Directive 2003/55/EC. 212 Although the Directive was repealed by Directive 2009/73/EC, the most of main provisions were transposed into the new Directive. 213 Recital 30 of Directive 2003/55/EC. 214 Article 9 of Directive 2003/55/EC. 215 Article 17(3) of Directive 2003/55/EC. Part 2 The European Union’s Energy Acquis 56 undertakings, and not abuse commercially sensitive information or disclose it. These system operators were to function, maintain and develop under economic conditions secure, reliable and efficient transmission, storage and/or LNG facilities, with due regard to the environment.216 Moreover, each system operator were to provide any other system operator with sufficient information to ensure that the transport and storage of natural gas takes place in a manner compatible with the secure and efficient operation of the interconnected system.217 Furthermore, Article 15 of Directive 2003/55/EC allowed for operation of a combined transmission and distribution system operator. According to the Directive, transmission, LNG, storage and distribution activities could be combined under a single system operator as long as it was independent in terms of its legal form, organisation and decision making from other activities not relating to operations mentioned above. Access to networks: Directive 2003/55/EC abandoned the “negotiated third-party access”, and a more rigid “regulated third-party access” was adopted.218 Regarding the regulated third-party access regime, the respective system operator was to publish tariffs, applicable to all eligible customers, including supply undertakings. Member States were required to ensure that these tariffs, or the methodologies underlying their calculation, are approved by a regulatory authority prior to their entry into force.219 Tariffs were to be applied objectively and without discrimination between system users. Access to storage facilities: The Directive realised two types of access regimes for storage facilities: regulated and negotiated third-party access. Member States had a choice as to which access regime to be introduced for storage facilities. However, both of above-mentioned options were to be implemented in accordance with objective, transparent and non-discriminatory criteria.220 216 Article 8 of Directive 2003/55/EC. 217 Ibid. 218 Article 18 of Directive 2003/55/EC. 219 Ibid. 220 Cameron, 2007, p. 185. § 4. Energy Acquis on Sectoral Base 57 Eligible Customers: Directive 2003/55/EC required Member States to ensure that all non-household customers are eligible as 1 July 2004, and as of 1 July 2007 all customers are to be eligible.221 Assessment: Despite all the improvements introduced in the Directive, there were still a number of obstacles to the establishment of a fully competitive internal gas market. In order to address these issues, the Commission conducted an energy sector inquiry222 in the electricity and gas markets in order to identify the main problems and find solutions. In the final report of the energy sector inquiry the Commission found the following shortcomings: – At the wholesale level, the gas market remained national in scope and generally maintained a high level of concentration. – Development of wholesale gas trade followed a slow pace, and the incumbents maintained their dominant position in their respective traditional markets by largely controlling upstream gas imports and/or domestic gas production. – Despite the new unbundling provisions, new entrants often lacked effective access to networks, to storage and to liquefied natural gas terminals. – Available capacity on cross-border import pipelines was limited. – There was a lack of reliable and timely information on the markets. – Competition at the retail level was often limited due to contracts with long or indefinite duration or contracts with tacit renewal clauses and long termination periods. – LNG terminals must be open to third parties (to the extent such access does not eliminate the terminal constructor’s incentives to build the terminal). According to the energy sector inquiry, in order to address the aforementioned market shortcomings and to significantly improve the scope of competition it was essential to apply both competition- and regulatory-based remedies. Additionally, the report stated that, although competition law in the near future would contribute significantly, the imple- 221 Ibid., p. 193. 222 European Commission, Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the European gas and electricity sectors (Final Report) (SEC (2006) 1724), 2006. Part 2 The European Union’s Energy Acquis 58 mentation of competition law rules solely would not be sufficient for opening the gas market to competition and various regulatory measures should be taken for the solution of the problems detected by the energy sector inquiry.223 The inquiry itself stated that competition law enforcement constitutes an effective tool to address some of the above-identified market shortcomings, namely224P market concentration, vertical foreclosure, market integration and market partitioning. As the energy sector inquiry noted main concerns regarding the market structure, such as insufficient unbundling, as well as the regulatory environment, such as regulatory gaps specifically relating to cross border issues, it would have to be tackled in parallel in order to remedy the malfunctioning of the markets.225 Directive 2009/73/EC The energy sector inquiry brought to light a wide range of important areas in which competition did not yet fully function in the EU energy markets. In order to address the ineffectiveness of the pre-existing EU Directive in achieving the goal of creating an internal gas market, the Commission proposed a new Directive.226 Having not obtained the desired results from Directive 2003/55/EC, Directive 2009/73/EC227 was enacted on 13 June 2009 within the scope of the Third Energy Package. It includes the following objectives: – improving the functioning of the internal gas market in the EU, – increasing the regulatory power and independence of national regulation institutions, – providing more effective cooperation between transmission system operators, – taking measures for increasing security of supply, 4. 223 Ibid., p. 12. 224 Piergiovanni, 2009, p. 4; European Commission, Energy Sector Inquiry, 2007, pp. 12–13. 225 Energy Sector Inquiry, para. 52. 226 Johnston & Block, 2012, pp. 23–24. 227 Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC, OJ L 211, 14.8.2009, pp. 94–136. § 4. Energy Acquis on Sectoral Base 59 – establishing the Agency for the Cooperation of Energy Regulators (ACER) to function as a coordination and consultation committee for cross-border transmission, – establishing the European Network of Transmission System Operators for Gas to create a “network code” for cross-border transmission, and – establishing a new distinguishing regime for Member States with three options. Unbundling and system operator: Directive 2009/73/EC introduced three new unbundling mechanisms: ownership unbundling, independent transmission operator, independent distribution operator. The Directive also emphasises that any unbundling system chosen by Member States should be effective in eliminating any conflict of interest between the producers, suppliers and also the system operators in order to create incentives for the necessary investments and to ensure that the new entrants can freely access the market under a transparent and efficient regulatory regime.228 Moreover, it stresses that the system should not create an overly onerous regulatory regime for national regulatory authorities. According to the Directive, each undertaking which owns a transmission system acts as a transmission system operator229; Member States may also choose to designate an independent system operator upon a proposal from the transmission system owner.230 Further, the Directive also requires Member States to designate or request natural gas undertakings which own storage or LNG facilities to designate one or more storage and LNG system operators for a period of time to be determined by Member States, having regard to considerations of efficiency and economic balance.231 Access to networks: In terms of the third-party access regime, the provisions are identical to that in the previous Directive. Member States are required to ensure implementation of a third-party access 228 Recital 9 of Directive 2009/73/EC. 229 Article 9(1) of Directive 2009/73/EC. 230 Article 14 of Directive 2009/73/EC. 231 Article 13 of Directive 2009/73/EC. Part 2 The European Union’s Energy Acquis 60 regime to distribution networks and storage facilities in a non-discriminatory manner.232 According to the Directive, in the case of a major new gas infrastructure the respective national regulatory authority has the competence to exempt this infrastructure from the general rules of third-party access under conditions stated in Article 36, e.g., the investment must increase competition in the gas supply market and enhance security of supply.233 Access to storage: Directive 2009/73/EC introduced a clear roadmap regarding access to storage facilities. According to the Directive, storage system operators must operate independently to facilitate the third-party access to storage systems needed for a technically and economically sufficient gas supply to consumers. Storage undertakings should be separate corporate entities in order to be able to make the necessary decisions for their facilities’ maintenance, operation and development. The Directive also requires Member States to create and publish a nondiscriminatory, clear framework which determines the appropriate regulatory regime applicable to storage facilities in order to increase transparency concerning the storage capacity offered to third parties. Eligible customers: The provisions regarding eligible customers are identical to those in the previous Directive. According to Directive 2009/73/EC, Member States must ensure that the eligible customer is able to switch easily to a new supplier.234 Regulatory authority: Directive 2009/73/EC requires each Member State to designate a single national regulatory authority at national level, ensure its independence and ensure that it exercises its powers impartially and transparently.235 Assessment: The Commission actively supervised the application of Directive 2009/73/EC by Member States. The Commission initiated several infringement procedures against Member States which failed to transpose Directive 2009/73/EC into their national laws. These infringement proceedings incentivised Member States to put in place the national legislation fully transposing the Directive. 232 Article 32–35 of Directive 2009/73/EC. 233 Article 36 of Directive 2009/73/EC. 234 Article 3(3) of Directive 2009/73/EC. 235 Article 39 of Directive 2009/73/EC. § 4. Energy Acquis on Sectoral Base 61 Despite the attempts of the Commission, Directive 2009/73/EC has not been successful in liberalising the natural gas market. Continuous increase in prices, high market concentration, low rates of customers switching suppliers indicates that Directive 2009/73/EC was actually not sufficient to create a liberalised and fully competitive natural gas market.236 Regulations Concerning Natural Gas Regulation 1775/2005 Regulation 1775/2005237 was adopted in 2005; it set out the conditions for access to natural gas transmission networks within the EU. The Regulation aimed at establishing rules on non-discriminatory and fair access conditions to the natural gas transmission networks by also considering the features of national and regional markets and by setting harmonised principles for access to network for cross-border gas exchange. These rules were to ensure that the internal natural gas market functions properly. The Regulation contained harmonised principles for tariffs, or the methodologies underlying their calculation, for access to the network, for capacity allocation and congestion management, rules on TPA services, transparency requirements and principles for balancing rules and imbalance charges and facilitating capacity trading.238 According to the Regulation, the access tariffs were to be transparent239 and to be applied in a non-discriminatory manner. Tariffs, or the methodologies used to calculate them, were to facilitate efficient gas trade and competition while at the same time avoiding cross-subsidies between network users, providing incentives for investment and maintaining or creating interoperability for transmission networks.240 Moreover, the Regulation stated that tariffs for network access should B. 1. 236 Yu, 2010, p. 22. 237 Regulation (EC) No 1775/2005 of the European Parliament and of the Council of 28 September 2005 on conditions for access to the natural gas transmission networks, OJ L 289, 3.11.2005, pp. 1–13. 238 Article 1 of the Regulation 1775/2005. 239 Article 3(1) of the Regulation 1775/2005. 240 Article 3(1) of the Regulation 1775/2005. Part 2 The European Union’s Energy Acquis 62 neither restrict market liquidity nor distort trade across borders of different transmission systems.241 The Regulation required transmission system operators to offer both long and short-term services to all network users without any discrimination.242 In addition, these services were to be provided in a consistent manner without interruption. The transmission system operators were required to make public detailed information concerning – the services they offer, – the relevant conditions applied, – the technical data necessary for network users to gain effective network access243, and – the technical, contracted and available capacities on a numerical basis for all relevant points, including entry and exit points, on a regular and rolling basis and in a user-friendly, standardised manner.244 If the transmission system operator brought an application which required that a piece of information be kept secret, or should not be published, the competent authority would examine the matter and adjudicate upon the application by assessing it having regard to the trade secret concept and competition in the market. Regulation 715/2009 Along with Directive 2009/73/EC, Regulation 715/2009245 entered into effect. The purpose of Regulation 715/2009 included enabling the proper functioning of the internal natural gas market and ensuring the implementation of non-discriminatory rules regarding access conditions to LNG facilities and also to the storage facilities, thereby elimi- 2. 241 Article 3(2) of the Regulation 1775/2005. 242 Article 4(1) of the Regulation 1775/2005. 243 Article 6(1) of the Regulation 1775/2005. 244 Article 6(3) of the Regulation 1775/2005. 245 Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005, OJ L 211, 14.8.2009, pp. 36–54. § 4. Energy Acquis on Sectoral Base 63 nating discrimination with respect to the access conditions upon entrance to such markets where natural gas transmission systems exist. The Regulation envisaged the establishment of the European Network of Transmission System Operators for Gas (ENTSO-G) for ensuring the optimum management of all transmission system networks in the EU. It abolished Regulation 1775/2005 and introduced the following provisions on transparency in the EU’s natural gas markets246: – Transmission system operators should present detailed information about their services to the public. – Transmission system operators and national authorities should publish reasonable and sufficiently detailed information about tariff preparation methodology and structure in order to create transparent, objective and non-discriminatory tariffs and facilitate the effective use of the gas network. – Each system operator must give numerical information for the services about technical, contracted and current capacities related to all relevant points, including standard entry and exit points. – Information about transmission points should be made public and be approved by competent authorities after negotiating with network users. – Transmission system operators should disclose requested information in accordance with the Regulation constantly, clearly and in an easily accessible and non-discriminatory manner. Furthermore, Regulation 715/2009 specifies the details for cross-border capacity allocation and congestion management. According to the Regulation, transmission system operators are responsible for promoting the development of energy exchanges and the coordinated allocation of cross-border capacity through non-discriminatory marketbased solutions.247 It can be stated that the difference between Regulation 1775/2005 and Regulation 715/2009 is that the latter adapts the regulatory regime to the new market conditions and pushes the progress further than the first regime did.248 246 Article 18 of the Regulation 715/2009. 247 Article 12(2) of the Regulation 715/2009. 248 Talus, 2011, p. 90. Part 2 The European Union’s Energy Acquis 64 Electricity Directives concerning Electricity Directive 90/547/EEC Directive 90/547/EEC249, the so-called Electricity Transit Directive, entered into force with the aim of creating an internal electricity market in order to accomplish the objective of establishing the European Common Market.250 The main goal of the Directive was to eliminate obstacles to electricity transmission which were not related to the nature of the technology used and do not result from the nature of the networks themselves. The Directive claimed that such obstacles could be diminished or even eliminated by making the transit of electricity through transmission networks mandatory and introducing an appropriate system for monitoring compliance with this obligation. Moreover, the Directive established a basis for third-party access by defining transit of electricity through transmission grids as requiring the grid of origin or final destination be situated within the Community and the transport operation to involve crossing at least one intra-Community frontier.251 The undertakings responsible for networks monopolise the network on which they operate. Such a situation renders these undertakings relatively more powerful with respect to the undertakings operating in the area of electricity supply as well as import and export. Hence, they can impose their prices and conditions on electricity supply undertakings. Unreasonable conditions and prices determined by undertakings which own transmission networks cause prices to increase, reduce the speed and effectiveness of electricity exchange and inhibit the effective and efficient use of networks. III. A. 1. 249 Council Directive 90/547/EEC of 29 October 1990 on the transit of electricity through transmission grids, OJ L 313, 13.11.1990, pp. 30–33. 250 The European Council has recognised the need for a single internal market in energy and that the achievement of the internal market more specifically in the electricity sector will help the further development of the Community’s energy objectives. 251 Mitchell, 1999, p. 772; Article 2 of Directive 90/547/EEC. § 4. Energy Acquis on Sectoral Base 65 The Electricity Transit Directive required Member States to take the measures necessary to facilitate the transit of electricity between highvoltage grids.252 According to it, contracts concerning electricity transit between transmission grids must be negotiated between the grid operators and the undertakings responsible for importing and exporting electricity in Member States.253 It required that the undertakings which were responsible for large networks in Member States and provided transmission into and from their countries should not stipulate unfair conditions to importers or exporters requesting access to transmission networks, that they must not make use of the weak position of the requesting party and that they not ought to reduce electricity exchange effectivity by blocking transmission. For this purpose, the Directive established the general standards for the conditions of transmission. According to the Directive, the conditions set on electricity transit contracts must be non-discriminatory and fair for all parties concerned; they should not endanger security of supply and service quality and should load electricity on current systems as effectively as possible by especially using reserve production capacities.254 If networks operators violated the conditions of transmission, the Directive gave the Commission the authority to implement the procedures provided for by EC law.255 Directive 96/92/EC Directive 96/92/EC256, which provided common rules for establishing an electricity internal market, was adopted by the Council of Ministers on 19 December 1996 and enacted on 19 February 1997. A two-year 2. 252 Article 1 of Directive 90/547/EEC. 253 Article 3 of Directive 90/547/EEC. 254 Article 3 of Directive 90/547/EEC. 255 Article 4 of Directive 90/547/EEC. 256 Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity, OJ L 27, 30.1.1997, pp. 20–29. Part 2 The European Union’s Energy Acquis 66 period257 was determined for Member States to make their national laws compatible with the Directive. The Directive aimed at the gradually and partially opening of Member States’ electricity markets. It established the necessary preconditions for the liberalisation of the electricity sector within the EU and the abandoning of the idea of national sovereignty over electricity.258 It outlined common principles and rules for electricity production, transmission, distribution and supply. Moreover, it liberalised the generation sector and included rules on system operations such as the structure and operation of the electricity market, entrance to the market authorisation and tendering procedures for the construction of new generating capacity259. The gradual creation of the internal electricity market required by Directive 96/92/EC was based on three main pillars260: – Upstream competition: Measures to introduce competition in production and supply and the creation of a non-discriminatory and transparent procedure for granting production licences; – Unbundling: The unbundling of vertically integrated undertakings in terms of the management and accounting of the production, transmission and distribution activities; and – Access to networks: The establishment of third-party access regime to the networks. According to the Directive, Member States were to prevent such abuse of dominant positions and violations of competition which might have had negative results on consumers; for this purpose, they had to create effective control and transparency mechanisms. Within this scope, the 257 Belgium and Ireland were given one extra year to make their legislations compatible with 96/92/EC Directive, while Greece was given two extra years. See: Explanatory Memorandum of Directive 96/92/EU. 258 Jakovac, 2012, p. 317. 259 “Member States were given two options. Under the first, authorisation, developers of new generation basically had to do no more than comply with national planning law for any industrial facility. No specific electricity sector planning procedures to determine need were required. Under the second, tendering, an official authority would determine generating capacity need and allocate the construction of this plant through an open non-discriminatory process.” Thomas, 2006, p. 789. 260 Johnston, 1999, p. 125; Hancher & Vlam, 2004, p. 31. § 4. Energy Acquis on Sectoral Base 67 Directive required that Member States consider the provisions of the TFEU, especially those relating to competition.261 Unbundling: The Directive did not fully prohibit vertical integration. Thus it was possible for vertically integrated electricity undertakings to still own transmission or distribution assets.262 However, the Directive required either Member States or undertakings owning the transmission system to designate a transmission system operator (TSO) to be responsible for operating the transmission lines, carrying out their maintenance and, if necessary, constructing a transmission line in a specific area and connecting this line to other systems.263 According to the Directive, unless the TSO was already independent from generation and distribution activities, the transmission activity should be unbundled at least in terms of its management from other activities of the vertically integrated electricity undertaking.264 In this framework, the undertakings possessing a vertically integrated structure were also required to keep their accounting records concerning production, transmission and distribution separately. Hence, “accounting unbundling” was brought within the realm of the aforementioned activities. Moreover, if such undertakings had activities outside of the electricity market, they were required to keep consolidated accounting records.265 In order for the system operators to fulfil their responsibilities while operating in transmission, production and distribution activities, compliance with the “Chinese Wall” provision (information barriers)266 was required. This clause states that the use of commercially sensitive information by a vertically integrated undertaking which has been obtained in the course of carrying out its transmission and distribution activities is prohibited.267 Moreover, such a prohibition would be especially effective when considering access to the system. Member States were to ensure that there is no flow of information between gen- 261 Article 22 of Directive 96/92/EC. 262 Mäntysaari, 2015, p. 101. 263 Article 7(1) of Directive 96/92/EC. 264 Article 7(6) of Directive 96/92/EC. 265 Article 14(3) of Directive 96/92/EC. 266 Cameron, 2002, pp. 182–183. 267 Articles 9 and 12 of Directive 96/92/EC. Part 2 The European Union’s Energy Acquis 68 eration and distribution activities of vertically integrated electricity undertakings and their single buyer activities. The only exception was if the information was deemed necessary to fulfil the single buyer responsibilities.268 System operator: Member States were required to designate system operators (TSOs and DSOs) being responsible for operating, maintaining and developing the transmission or distribution system in a given area in order to guarantee security of supply.269 The Directive has forbidden system operators to discriminate between system users or classes of system users, particularly in favour of its subsidiaries or shareholders. The Directive also stated that the system operators must be independent from other activities not relating to the transmission system. These provisions aimed at opening the market and avoiding discrimination of possible competitors by vertically integrated undertakings, because if a network company is not effectively separated from its competitive activities (generation and supply), effective competition simply would not emerge.270 Access to networks: Directive 96/92/EC required that the TSOs and DSOs grant non-discriminatory access to networks. It introduced three different methods for providing access to the networks. These methods were negotiated third-party access271, regulated third-party access272 and single buyer273 methods. No matter which system a Member State adopted, the access was to be provided in accordance with objective, transparent and non-discriminatory criteria.274 268 Article 15(2) of Directive 96/92/EC. 269 Articles 7 and 10 of Directive 96/92/EC. 270 Jones, 2016, p. 10. 271 Under the concept of negotiated third-party access, consumers and buyers must be able to negotiate access to the network with the system operator. Article 17(1) of Directive 96/92/EC. 272 Under the concept of regulated third-party access, the prices for access to the network are regulated and not subject to negotiation, and they must be available publicly. Article 17(4) of Directive 96/92/EC. 273 Under the concept of single buyer, Member State was required to appoint a legal person to be the single buyer of power within the territory governed by the relevant system operator. Article 18(1) of Directive 96/92/EC. 274 Mitchell, 1999, p. 778. § 4. Energy Acquis on Sectoral Base 69 Retail competition and eligible customers: Directive 96/92/EC introduced the concept of eligible customers. According to this concept, customers have the legal capacity to contract certain volumes of electricity from any supplier.275 In terms of retail competition, the Directive made an attempt to increase such competition by giving eligible customers (mainly distribution companies and large consumers) a right to choose the supplier. Directive 96/92/EC adopted a gradual approach in order to open the electricity markets to a competition-centric environment. Article 19 foresaw a six-year period encompassing three stages and specified the percentage share of the electricity market which should be opened for competition.276 In all three stages, Member States were expected to open their markets at least to minimum thresholds.277 Opening the electricity markets for competition is proportional to the number of consumers having the chance to choose their suppliers. These thresholds represented a minimum requirement of a market opening of 26% of all final consumers in 1999, 28% of all final consumers in 2000 and 33% of all final consumers in 2003.278 Directive 96/92/EC stated that a supply agreement between a Member State supplier and a consumer existing in another Member State cannot be rejected if the consumer in question has the status of an eligible consumer in both States. Furthermore, if a commercial transaction was to be rejected because the said consumer was an eligible customer solely in one of the two States, the Commission could oblige the refusing party to execute the requested electricity supply at the request of the Member State where the eligible customer was located.279 275 Roggenkamp & Boisseleau, 2005, p. 7. 276 The proportion of the market opened varied from country to country according to the percentage of power going to large users but was expected to average about 30% by 2003. 277 Member States were required to allow consumers using more than 40 GWh per year to choose their supplier as of when the Directive entered into force. Competition was extended to those annually consuming 20 GWh electricity three years after the entry into force of this Directive and subsequently to consumers using more than 9 GWh per year in 2003. 278 Roggenkamp & Boisseleau, 2005, p. 7. 279 Article 19 of Directive 96/92/EC. Part 2 The European Union’s Energy Acquis 70 Assessment: Directive 96/92/EC was criticised for allowing countries too many ways of avoiding complying with the spirit of the reforms280 and for having left important points unaddressed: – The Directive required only a minimal level of harmonisation.281 – It did not require a wholesale market to be set up. – It did not provide for effective regulation and did not require the establishment of an independent sector regulator. There was not necessarily any impartial supervision to ensure the rules were being followed. – It relied on other treaties for enforcing its objectives instead of including enforcement provisions within the Directive’s own text.282 – Member States were merely required to ensure there was a dispute resolution procedure. – The unbundling requirements could not ensure non-discriminatory access to the network. Moreover, the negotiated third-party access regime provided the incumbent undertakings a way to keep out their competitors. – Competition was significantly limited in Member States which did not go beyond the distinguishing provisions of the Directive and discrimination was present in the markets. – Retail competition remained limited. Only a few thousand consumers were able to choose their suppliers by 2003, even in the largest countries. – The Directive created unequal market opening which has affected consumer choice. The Commission came to the conclusion that, in order to complete the creation of an internal electricity market, provisions on unbundling, non-discriminatory access to the networks, retail competition and eligible customers were to be strengthened. 280 Thomas, 2006, pp. 791–792; Jakovac, 2012, pp. 318–319; European Commission, First benchmarking report on the implementation of the internal electricity and gas market, 2001. 281 Hancher & Vlam, 2004, p. 31. 282 Mitchell, 1999, p. 785. § 4. Energy Acquis on Sectoral Base 71 Directive 2003/54/EC In order to eliminate the shortcomings and also the criticised aspects of Directive 96/92/EC, Directive 2003/54/EC283 was adopted on 26 June 2003. Directive 2003/54/EC did not essentially change the structure established by Directive 96/92/EC; however, it simplified some of the complex provisions284 and introduced further detailed provisions, such as the monitoring of security of supply, the unbundling of distribution system operators, the establishing of a combined operator, the tracking of electricity import and the procedures of control. Directive 2003/54/EC aimed at achieving a genuine internal electricity market in the EU – through the adoption of rules on cross-border tariff setting and congestion management, – through the adoption of measures creating a non-discriminatory access for the transmission of electricity between Member States and – by monitoring issues concerning security of supply. Unbundling: Directive 2003/54/EC introduced rules regarding the legal unbundling285 of undertakings engaged in transmission and distribution activities. According to the Directive, when the transmission or distribution system operator constituted a part of the vertically integrated undertaking, it was to be independent at least in terms of its legal form, organisation and decision-making with respect to the other activities not related to transmission or distribution (i.e., separate legal entity formed within the holding structure). In order to realise legal unbundling, Articles 10 and 15 introduced minimum standards.286 3. 283 Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC, OJ L 176, 15.7.2003, pp. 37–56. 284 Hancher & Vlam, 2004, p. 32. 285 For further information, see: Chapter 7(I) 286 For example, Article 10 of Directive 2003/54/EC envisaged that in order to enable the independence of the transmission system operator, if this operator also operates under a corporate entity executing other electricity market activities, the persons who are in the board of directors of the transmission system undertaking cannot participate in production, distribution and electricity supply activities di- Part 2 The European Union’s Energy Acquis 72 The Directive further required a complete separation of the accounts for different operations within a vertically integrated undertaking.287 Article 17 with the heading “Combined Operator” was also one of the provisions introduced for the first time by Directive 2003/54/EC. Although this article highlighted the necessity of legal unbundling by referring to Articles 10 and 15, it envisaged that activities not related to transmission and distribution can be executed by a single undertaking meeting the conditions of Paragraphs (a)–(d) of Article 17. System operator: The Directive required the designation of transmission and distribution system operators by Member States.288 In order to ensure efficient and non-discriminatory network access, the distribution and transmission systems were to be managed by legally separate entities where vertically integrated undertakings existed. The transmission and distribution system operators were to have effective decision-making rights with respect to assets necessary to maintain, operate and develop networks when the assets in question were owned and operated by vertically integrated undertakings. The independence of transmission and distribution system operators was to be guaranteed especially with regard to generation and supply interests.289 Access to networks: Another point distinguishing Directive 2003/54/EC from the first Electricity Directive is Article 20 which regulated third-party access to the network. Directive 2003/54/EC envisaged the implementation of only one access model: regulated TPA. Negotiated TPA and single buyer systems were abolished because they created more competition issues than they resolved, mainly because of the structural lack of transparency.290 Member States were required to ensure the implementation of a third-party access regime in accordance with objective, transparent and non-discriminatory criteria based on published tariffs, applicable to all eligible customers, and applied.291 rectly or indirectly. A similar provision concerning distribution system operator is included in Article 15. 287 Article 19 of Directive 2003/54/EC. 288 Articles 8 and 13 of Directive 2003/54/EC. 289 Recital 8 of Directive 2003/54/EC. 290 Hauteclocque & Talus, 2011, p. 2. 291 Article 20 of Directive 2003/54/EC. § 4. Energy Acquis on Sectoral Base 73 Retail competition and eligible customers: According to Directive 2003/54/EC, by 1 July 2004 all consumers except for the household users should be considered as eligible customers292 and by 1 July 2007 all consumers should assume the status of eligible customers.293 As stated by Roggenkamp & Boisseleau, Directive 2003/54/EC introduced an important next step regarding the liberalisation process as it disposed of the market opening barriers of the previous Directive and included provisions on full market opening in all Member States.294 Regulatory authority: Another important Article of Directive 2003/54/EC was Article 23 titled “Regulatory Authorities”. Directive 96/92/EC did not include an article concerning regulatory authorities.295 Directive 2003/54/EC recognised the necessity of an ex ante regime in order to accelerate the liberalisation process and required Member States to establish sector-specific regulators.296 According to the Directive, Member States had the obligation to designate one or more competent bodies as having the function of regulatory authorities. These authorities were responsible for ensuring non-discrimination, effective competition and the efficient functioning of the market and were to be wholly independent from the interests of the electricity industry.297 They had to monitor298: – the rules on the management and allocation of interconnection capacity, – the terms, conditions and tariffs for access, – the publication of appropriate information by transmission and distribution system operators concerning interconnectors, grid usage and capacity allocation to interested parties, 292 According to Paragraph 12 of Article 2 (“Definitions”) in Directive 2003/54/EC, eligible customers are the consumers who have the liberty of choosing their suppliers. This definition was not included in Electricity Directive 96/92/EC and the consumers were defined in a general sense in Paragraph 7 of Article 2. 293 Article 21 of Directive 2003/54/EC. 294 Roggenkamp & Boisseleau, 2005, p. 7. 295 Although they are not regulated under a distinct title in Directive 96/92/EC, provisions on regulatory authorities are included in Article 20(3), (4) and 22. 296 Roggenkamp & Boisseleau, 2005, p. 12. 297 Article 23(1) of Directive 2003/54/EC. 298 Ibid. Part 2 The European Union’s Energy Acquis 74 – the effective unbundling of accounts, and – the level of transparency and competition. Assessment: As mentioned above, the Commission conducted an energy sector inquiry299 in the electricity and gas markets in order to identify the main problems and find solutions. In the final report of the energy sector inquiry, it identified several deficiencies in the process leading to competitive electricity markets. These shortcomings can be summarised as follows: – The level of concentration in the EU electricity market was high, and the undertakings that used to be monopolies before the liberalisation process continued to affect prices in the electricity market. – The liquidity ratio was low in the EU electricity markets. Looking at the reasons for this, the wholesale sector was not so transparent, since the undertakings in these markets operate in both the production and retail sector. Vertical integration of generation and retail within the same group reduced the need to trade on wholesale markets.300 Illiquid wholesale markets also raised significant barriers for new entry into both generation and retail market segments.301 Moreover, unbundling between transmission, distribution and supply activities in the electricity market was not sufficient. – Remaining obstacles regarding the cross-border trade of electricity between Member States prevented the establishment of the EU internal energy market. – Transparency was not fully established, and monopolies that existed before liberalisation in Member States continued to benefit from this situation. Moreover, the lack of transparency in the electricity market was suspected to leading to unfavourable conditions for the new entrants and/or potential new entrants. 299 European Commission, Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the European gas and electricity sectors (Final Report) (SEC (2006) 1724), 2006. 300 Energy Sector Inquiry, 2006, p. 151. 301 European Commission, Energy sector competition inquiry – final report – frequently asked questions and graphics, 2007. § 4. Energy Acquis on Sectoral Base 75 – Since the EU electricity market was not sufficiently transparent, the industry and consumers did not trust price formation mechanisms in wholesale markets. – Since retail-sales agreements were long-term for the industrial users and local distribution firms, competition was generally limited at the level of retail sales. Directive 2003/54/EC was enacted in order to eliminate shortcomings of Directive 96/92/EC in the areas on access to networks, unbundling and retail competition. However, it was not effective of breaking up vertically integrated incumbents and introducing competition in wholesale electricity markets. These deficiencies led the Commission to propose a new Directive. Directive 2009/72/EC Taking into consideration that Directive 2003/54/EC was insufficient for the full liberalisation of the electricity market in the EU, Directive 2009/72/EC302 was adopted on 13 June 2009. It aims at liberalising the European electricity market, thereby stimulating competitiveness and also protecting the consumers. It establishes common rules for electricity generation, transmission, distribution and supply. It also encompasses provisions on the organisation and operation of the electricity sector as well as on opening the market. Unbundling and system operator: One of the most important novelties of the Directive is its provisions concerning unbundling mechanisms. Directive 2009/72/EC introduces three new unbundling mechanisms: ownership unbundling, independent transmission operator (ITO) and independent system operator (ISO).303 According to the Article 9(1), each undertaking which owns a transmission system acts as a transmission system operator.304 However, Member States may decide not to apply Article 9(1) and designate an independent system operator. 4. 302 Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC, OJ L 211/55, 14.8.2009. 303 For further information, see: Chapter 7(I) 304 Article 9 of Directive 2009/72/EC. Part 2 The European Union’s Energy Acquis 76 Access to networks: One of the main goals of Directive 2009/72/EC is to ensure non-discriminatory network access.305 Member States must implement a system of third-party access to the transmission and distribution networks.306 Retail and wholesale competition and eligible customers: While Directive 2003/54/EC gave all customers the right to choose their suppliers, Directive 2009/72/EC gave large non-household customers a right to enter into contracts simultaneously with several suppliers to secure their electricity requirements. Such customers are thus protected against exclusivity clauses.307 The Directive required Member States to ensure all customers to be regarded as “eligible customers” who may freely choose their own suppliers as of 1 July 2007308 regardless of whether the supplier is a local one or is established in another Member State of the EU.309 Member States must ensure that their administrative procedures do not discriminate against supply undertakings already registered in another Member State.310 Regulatory authority: Directive 2009/72/EC ensures very effective regulatory supervision of independent national energy regulators.311 It stipulates that each Member State must appoint a single regulatory authority at the national level. Member States are responsible for ensuring the independence of these regulatory authorities as well as the objective and transparent use of their competences.312 One of the main goals of Directive 2009/72/EC is the development of a fully functioning internal electricity market through a network connected across the Community. Therefore, regulatory authorities should focus on regulatory issues of cross-border interconnections and regional markets in close cooperation with the Agency for the Cooper- 305 Recital 4 of Directive 2009/72/EC. 306 Article 32(1) of Directive 2009/72/EC. 307 Recital 20 and Article 41(3) of Directive 2009/72/EC; Mäntysaari, 2015, p. 106. 308 Article 33(1) of Directive 2009/72/EC. 309 Article 3(4) of Directive 2009/72/EC. 310 Ibid. 311 Jakovac, 2012, p. 328. 312 Article 4(4) of Directive 2009/72/EC. § 4. Energy Acquis on Sectoral Base 77 ation of Energy Regulators313 (ACER).314 According to the Directive 2009/72/EC, regulatory authorities and transmission system operators should cooperate with the ACER to ensure the compatibility of regulatory frameworks between the regions with the aim of creating a competitive internal market in electricity. One of the tasks of the ACER is to make appropriate recommendations if binding rules on such cooperation are required.315 Assessment: The Commission has been actively supervising the application of Directive 2009/72/EC by Member States. It has initiated several infringement procedures against Member States which failed to transpose Directive 2009/72/EC into their national laws. These infringement procedures urged Member States to put in place the national legislation fully transposing the Directive. In 2017, the Commission sent formal notices to Hungary, Estonia and the Netherlands requesting them to ensure the correct implementation and application of the Electricity Directive (Directive 2009/72/EC). The Commission conducted an ex post evaluation on the effectiveness of Directive 2009/72/EC. Overall and within the scope of the two evaluations carried out, the evaluations’ findings support the view that the objectives of Directive 2009/72/EC, namely to promote competition and remove obstacles to cross-border competition in electricity markets, have been met.316 Member States actively enforce the legislation and this resulted in significant positive outcomes for the electricity market, e.g. markets which are in general less concentrated and 313 The ACER has been established by Regulation 713/2009. Regulation (EC) No 713/2009 of the European Parliament and of the Council of 13 July 2009 establishing an Agency for the Cooperation of Energy Regulators, OJ L 211, 14.8.2009, pp. 1–14. The ACER’s main tasks are: complement and coordinate the work of national regulatory authorities; participate in the creation of European network rules; take, under certain conditions, binding individual decisions on terms and conditions for access and operational security for cross border infrastructure; give advice on various energy-related issues to the European institutions; and monitor and report developments at the energy markets. 314 Recital 59 of Directive 2009/72/EC. 315 Article 6 of Directive 2009/72/EC. 316 Evaluation Report, 16:0412:FIN (accessed: 1 June 2019). Part 2 The European Union’s Energy Acquis 78 more integrated than in 2009.317 Concerning consumers, the set of provisions on consumer rights introduced by Directive 2009/72/EC have clearly had a positive impact on the position of the consumer in energy markets.318 The strengthened unbundling requirements increased the competitiveness of energy markets and helped to reduce market foreclosure. The new provisions aiming at expanding cross-border electricity cooperation and trade through removing barriers to cross-border trade and enhancing cooperation between transmission system operators and regulators contributed to the increased liquidity of electricity markets and the development of cross-border trade, resulting in more competitive wholesale markets.319 However, the impact of the norms set out in Directive 2009/72/EC remains limited in a number of fields, both at the wholesale and the retail level. The Commission’s ex post evaluation demonstrates there is room for improvement on the market design framework.320 According to the evaluation, the level of competition in retail markets could be significantly improved. Electricity prices still vary widely from one Member State to another due to relatively high transportation cost (transmission losses) and transmission bottlenecks between countries.321 Electricity prices have risen steadily for households as a result of significant increases in network charges, surcharge for renewable energy, taxes and levies, and increases in natural gas prices. As a part of the 2016 Clean Energy Package, the Commission proposed a new Directive on common rules for the internal market in electricity on 30 November 2016.322 The proposed Directive would require Member States to take measures necessary to ensure a more competitive, customer-centred, flexible and non-discriminatory EU electricity market 317 Explanatory Memorandum, Proposal for a Regulation of the European Parliament and of the Council on the Internal Market for Electricity, p. 11. 318 Ibid, p. 12. 319 Evaluation Report, 16:0412:FIN (accessed: 1 June 2019). 320 Explanatory Memorandum, Proposal for a Regulation of the European Parliament and of the Council on the Internal Market for Electricity, p. 11. 321 OECD, 2011, p. 48. 322 Proposal for a Directive of the European Parliament and of the Council on common rules for the internal market in electricity, COM/2016/0864 final. § 4. Energy Acquis on Sectoral Base 79 with market-based supply prices. According to the proposed Directive, Member States have to ensure that there are no undue barriers for market entry or market exit of electricity generators or electricity suppliers.323 The proposed Directive also focuses on strengthening existing costumer rights and introducing new ones. According to it, customers should be able to freely choose their supplier or aggregator324 and to switch their supplier without any fee, except in cases where a fixed-term contract that offers demonstrable advantages to the customer is terminated prematurely.325 The proposed Directive will recast326 Directive 2009/72/EC. Regulations concerning Electricity Regulation 1228/2003 Regulation 1228/2003327 was adopted in 2003. It contained the norms governing the cross-border electricity trade, which were established in order to increase competition in the internal electricity market. The Regulation aimed at encouraging cross-border electricity exchange, establishing a compensation mechanism for the cross-border electricity flow and determining the cross-border transmission prices and the corresponding principles with respect to the allocation of the current interconnection capacity between the national transmission systems. According to the Regulation, the transmission system operators were to establish information exchange and coordination mechanisms in order to ensure the network security within the context of constraint management. Furthermore, the Regulation required that the market participants who wish to use the allocated capacity should inform the B. 1. 323 Erbach, 2019, p. 5. 324 Aggregator means a market participant that combines multiple customer loads or generated electricity for sale, for purchase or auction in any organised energy market. 325 Ibid., p. 6. 326 “Recasting” means bringing a legislative act and all the amendments made to it together in a single new act. The new legislative act passes through the full legislative process and repeals all the acts being recast. 327 Regulation (EC) No 1228/2003 of the European Parliament and of the Council of 26 June 2003 on conditions for access to the network for cross-border exchanges in electricity, OJ L 176, 15.7.2003, pp. 1–10. Part 2 The European Union’s Energy Acquis 80 transmission system operator in advance within a certain period of time. The provisions concerning the pricing of cross-border electricity exchanges, the allocation of sufficient interconnection capacity and the facilitation of the access to the system were laid out in the Regulation. The Regulation envisaged the implementation of general rules specifying issues such as pricing, making transparent the prices of access to the networks, capacity allocation and the adoption of the related methodologies. It thus aimed at harmonising different pricing systems which would otherwise harm competition. It required that the regulatory authorities in Member States implement properly the general rules specified above in Article 6 and, as and when necessary, collaborate with each other or with the Commission.328 Regulation 714/2009 Regulation 714/2009329 abolished Regulation 1228/2003 and aims at increasing the competition in the internal market by specifying the fair rules regarding the cross-border electricity market and by establishing a transparent wholesale market operating with a high-level security of supply. As an addendum, the Regulation also includes several provisions on harmonisation mechanisms with respect to the cross-border markets in the electricity sector and envisages the establishment of a European Network of Transmission System Operators for Electricity (ENTSOE). Such an establishment enables all transmission system operators to collaborate at the level of the EU. It can be observed that this network is designed for contributing to the functioning of the internal electricity market in an integrated way and for encouraging cross-border trade. 2. 328 Article 9 of the Regulation 1228/2003. 329 Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003, OJ L 211, 14.8.2009, pp. 15–35. § 4. Energy Acquis on Sectoral Base 81 There are two important goals of the regulation330: – setting fair rules for cross-border electricity trade, thus enhancing competition within the internal market in electricity, taking into account the particular characteristics of national and regional markets, and – facilitating the emergence of a well-functioning and transparent wholesale market with a high level of security of electricity supply. The new Clean Energy Package includes recasting the Electricity Market Regulation331 which sets out stricter and harmonised rules concerning capacity mechanisms: – It introduces principles for the development of a European resource adequacy assessment to arrive at a common European methodology to determine the need for a capacity remuneration mechanism (CRM). – It clarifies the circumstances for the introduction of CRM. – It clarifies market-compatible design principles for CRM. The new Regulation will specify basic principles with regard to tarification and capacity allocation. Furthermore, it will reconcile the EU objectives of security of supply and emission reduction. The new Regulation will also include provisions on enhanced regional coordination which will improve market functioning and thereby competitiveness of the electricity markets.332 330 Article 1 of Regulation 714/2009. 331 Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), COM/2016/0861 final/2. 332 European Commission, Commission welcomes political agreement on conclusion of the Clean Energy for All Europeans package, 2018. Part 2 The European Union’s Energy Acquis 82 Renewable Energy Directive 2001/77/EC Directive 2001/77/EC333 aimed at increasing the generation of electricity from renewable energy sources. Through the Directive, the use of the renewable energy resources, the protection of the environment and sustainable development were encouraged. New employment opportunities ought to have been created within the EU, social cohesion would be reinforced, a major contribution to the energy supply security would be made and the objectives of the Kyoto Protocol would be achieved in an unprecedented, rapid fashion. The Directive established a target for the EU regarding electricity generated from renewable sources. According to this target, EU15334 had to increase the share of electricity generated by renewable energy to 22% in 2010 (compared with 14% in 2000).335 In accordance with this objective, each Member State had to provide the specific reference values as well as the national values. Hence, it ought to have been possible to fulfil both the obligations pertaining to the Kyoto Protocol and the main objectives of the EU. In the course of realising the said aims and objectives, Member States were required to implement regulations. The Directive introduced a “guarantee of origin” system. The guarantee of origin is a certificate stating that electricity is generated from renewable energy resources. Member States had to ensure that their electric energy would be generated from renewable energy resources. The Directive also required Member States to evaluate their existing legislative and regulatory framework with regard to authorisation procedures. It aimed at reducing the regulatory and non-regulatory barriers related to the increase in electricity generation from renewable IV. A. 333 Directive 2001/77/EC of the European Parliament and of the Council of 27 September 2001 on the promotion of electricity produced from renewable energy sources in the internal electricity market, OJ L 283, 27.10.2001, pp. 33–40. 334 Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, United Kingdom. 335 With the participation of ten new members to the Union in 2004, this objective was decreased to 21%. § 4. Energy Acquis on Sectoral Base 83 energy sources and at ensuring that the rules are objective, transparent and non-discriminatory.336 According to the Directive, Member States were expected to take the necessary measures to ensure that transmission and distribution system operators in their territory guarantee the transmission and distribution of electricity produced from renewable energy sources.337 Moreover, Member States were responsible for prioritising the access of the energy produced from these resources to the network. Member States had to implement the regulations required by this Directive by 27 October 2003. They had to inform the Commission regularly about their activities, and the Commission was to present an assessment report on the Directive to the EU Parliament and the Council every five years. However, since no binding objective was set, only some Member States achieved the objective and the others remained far behind it. After the adoption of Directive 2001/77/EC, because the objectives regarding renewable energy use had not been met by Member States, the EU decided to change its approach to renewable energy policy. The Commission filed 61 infringement proceedings against Member States for not implementing the necessary laws within the scope of Directive 2001/77/EC.338 Directive 2003/30/EC Directive 2003/30/EC339 aimed, in essence, at ensuring that obligations concerning climate change would be fulfilled, protecting the environment and providing energy supply security by decreasing the use of gasoline and diesel oil in transportation and encouraging biofuels340 and other renewable fuels341. In this context, as it was the case in Di- B. 336 Article 6 of Directive 2001/77/EC. 337 Article 7 of Directive 2001/77/EC. 338 Ahner, 2011, p. 95. 339 Directive 2003/30/EC of the European Parliament and of the Council of 8 May 2003 on the promotion of the use of biofuels or other renewable fuels for transport, OJ L 123, 17.5.2003, pp. 42–46. 340 Liquid or gas fuels such as biogas, bio methanol, bioethanol and biodiesel produced from biomass. 341 This refers to fuels obtained from renewable energy resources except for biofuels and used in transportation. Part 2 The European Union’s Energy Acquis 84 rective 2001/77/EC, some reference values were determined, and Member States were expected to establish national objectives concerning the use of biofuel and other renewable fuels. The reference values for these objectives were determined to be 2% for 2005 (the share within the totality of the fuels such as gasoline and diesel by 31 December 2005) and 5.75% for 2010 (the share within the totality of the fuels such as gasoline and diesel by 31 December 2010). Member States had to submit to the Commission reports before 1st June every year. These reports included the measures taken for the development of biofuel and other renewable fuels used in transportation. They should also contain the information pertaining to sales amount and market shares in related periods. Finally, the assessment report to be published by the EU Commission based on these reports had to be submitted to the EU Council and Parliament every two years, the first of which was published before 31 December 2006. The report was to be prepared with reference to the progress made in the use of biofuels and other renewable fuels in Member States.342 Directive 2009/28/EC With the introduction of 20–20–20 objectives343, Directive 2003/30/EC was also revised. Directive 2009/28/EC344, the so-called Renewable Energy Directive, was enacted on 25 June 2009. It establishes a general framework for encouraging the generation of energy obtained from renewable energy resources. It enforces compulsory national renewable energy targets and promotes cooperation amongst Member States to help them meet their renewable energy targets, such as statistical transfers of renewable energy amounts between Member States345 and cooperation on joint projects relating to the production C. 342 Article 4(2) of Directive 2003/30/EC. 343 The 2020 package is a set of binding laws to ensure that the EU meets its climate and energy targets for the year 2020. The package sets three key targets: 20% cut in greenhouse gas emissions (from 1990 levels), 20% of EU energy from renewables and 20% improvement in energy efficiency. ies/strategies/2020_en (accessed: 1 June 2019). 344 This Directive encourages the use of the energy obtained from renewable energy resources and replaces 2001/77/EC and 2003/30/EC Directives. 345 Article 6 of Directive 2009/28/EC. § 4. Energy Acquis on Sectoral Base 85 of electricity, heating or cooling from renewable energy sources346. Moreover, it sets out rules on administrative procedures and access to the network. According to the Renewable Energy Directive, each Member State will determine an objective showing the share of renewable energy in the gross final energy consumption by 2020. This objective should be compatible with the 20–20–20 common objective of the Community for 2020. Moreover, the share of renewable energy resources in the transportation sector should be at least 10% within the final energy consumption of the sector. The Directive is part of the energy and climate change legislation providing a legal framework for Community objectives concerning greenhouse gas emissions. The difference between the Renewable Energy Directive and Directive 2001/77/EC is the former’s introduction of binding objectives for Member States. As per the binding provisions, infringement procedures may be filed against a Member State, if it fails to fulfil the objectives specified for it. The Renewable Energy Directive contemplates the implementation of four stages by Member States in order to achieve the 2020 objectives. The first stage envisages that the share of energy generated by using renewable energy resources should increase to 20% by the 2011– 2012 period; in the following stages this has to be 30% by the 2013– 2014 period, 45% by the 2015–2016 period and, finally, 65% by 2017– 2018.347 These rates are determined to be an indicative trajectory. In other words, as distinct from 2020 objectives, these objectives are not binding. One of the important regulations of the Renewable Energy Directive concerns national renewable energy actions plans.348 According to this regulation, each Member State should create and implement its own national renewable energy action plan. In this plan, information about the objectives on the share of energy generated from renewable resources used in transportation, electricity and heating/cooling should be included. Another important change brought by the Renewable Energy Directive involves cooperation mechanisms. The Directive develops three 346 Article 7 of Directive 2009/28/EC. 347 Ahner, 2011, p. 99. 348 Article 4 of 2009/28/EC. Part 2 The European Union’s Energy Acquis 86 cooperation mechanisms: statistical transfers between Member States349, joint projects between Member States350 and joint projects between Member States and third countries.351 One of the reasons for establishing cooperation mechanisms between Member States is to understand whether renewable energy is cheap and where the potential for the deployment of renewable energy is highest.352 Hence, the purpose is to enable Member States to achieve their national objectives at lower costs.353 The rule for submitting reports on renewable energy resources every two years by Member States is set out in Directive 2009/28/EC. Thus far, the Commission prepared a report in 2015 covering the whole EU and based on these reports.354 According to this report, all Member States are progressing towards meeting the objectives concerning renewable energy resources, but some Member States should take additional measures. The Commission launched consultation studies for introducing a new Renewable Energy Directive. The new package is expected to reinforce the 2030 objectives355 of the EU defined in October 2014.356 349 Article 6 of 2009/28/EC. 350 Articles 7 and 8 of 2009/28/EC. 351 Articles 9 and 10 of 2009/28/EC. 352 Ahner, 2011, p. 100. 353 Johnston & Block, 2012, p. 310. 354 Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – Renewable Energy Progress Report, Brussels, 15.6.2015, COM (2015) 293 final. 355 European Council, Council Conclusions 23 and 24 October 2014. 356 European Commission, Renewable Energy Package, 2015. § 4. Energy Acquis on Sectoral Base 87

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Since the beginning of the 1990s, Europe has been struggling to establish a competitive as well as a fully integrated internal energy market. Until the early 1990s, the European energy markets consisted of national monopolies possessing vertically integrated structures. They were also still nationally segregated. Since, the EU has made the decision to open European energy markets to competition and subsequently establish an internal energy market.

The European energy markets are currently controlled by a dual structure consisting of two different regulatory frameworks: competition law and sector-specific regulations. The primary goal of these legal instruments is the establishment of an internal energy market.

This book aims at analysing the development of the European energy markets and policies from the perspective of competition law as well as sector-specific regulations and, hence, identifying the problems regarding the introduction of competition into the energy markets.