Eurogas concerned about EC’s third energy directive

Jan. 14, 2008
The wider powers to be granted regulatory authorities under terms of the European Commission’s proposed “Third Energy Package” directive, which was announced Sept. 19, 2007, are causing Eurogas concern.

The wider powers to be granted regulatory authorities under terms of the European Commission’s proposed “Third Energy Package” directive, which was announced Sept. 19, 2007, are causing Eurogas concern. In a 7-page note published Jan. 3, the 30-member gas trade group said the powers lack “a clear accompanying framework” and that the introduction of “powers for the commission to adopt guidelines on a wide range of subjects,” leaves only “negative powers” to the EU council and parliament.

“This means that the democratic procedure is exercised differently from the codecision procedure for approving legislation,” Eurogas charged.

As a major representative of Europe’s gas market players, Eurogas wants a stronger role and greater involvement in applying the right legislation. It outlined its position on proposed regulatory powers and the respective roles of the national regulators: the Agency for the Cooperation of Energy Regulators (ACER), the EC, and the European Network of Transmission System Operators for Gas (ENTSOG).

The new regulatory powers proposed for the EC in the third energy package, Eurogas said, “marks a shift in the traditional pattern of segmentation between the regulated infrastructure business and the competitive, nonregulated supply business,” with regulatory authorities being granted wider powers “in the interest of ensuring a well-functioning and competitive market.”

However, to ensure that the process is transparent and nondiscriminatory, it is essential, insists Eurogas, to establish a “clear policy framework within which the national regulatory authority can implement the additional powers to promote effective competition and ensure the proper functioning of the market.” Better regulation depends on the quality of regulation, which inevitably implies “the participation of the companies involved in the market,” Eurogas insisted.

This framework should, therefore, include consultation with market participants and publication of clear and fully reasoned decisions that take into account the views of market participants, the existing contractual obligations of the parties concerned, and the expected costs and benefits of the decision.

It should also include a memorandum of understanding at the national level setting out the cooperation process between the national regulatory authority and the national competition authority, based on the principle that competition law compliance is mainly the responsibility of the competition authority, while the regulatory authority plays an assisting role.

On the EC’s new powers to adopt guidelines on a wide range of subjects, Eurogas fears that in key areas, binding rules may be adopted “after the legislative process has come to an end” with “inherent limitations of the democratic legitimacy.”

To counter that risk, Eurogas wants market players to take part in drawing up a list defining priorities of subjects where such guidelines may be adopted by the EC, a list drawn up in cooperation with the proposed ACER.

But while Eurogas approves the creation of ACER as a step in the “right direction” to reach policy objectives for the development of regional markets, promotion of market integration, and suppression of trade restrictions among member states, it notes that the degree of its independence from the Commission and national energy regulators “is unclear.” ACER should, for instance, be given more powers to stimulate regional market integration to complement the third energy package’s “more general focus on national markets.”

Likewise, Eurogas doubts whether ENTSOG is best placed to be empowered by the package to establish and adopt technical and market codes. The organization insists that market players should be more involved in this procedure through a “formally defined role” to comment on and participate in the development of any proposed codes.