Katrien Prins Electricity and Gas Unit DG Energy and Transport European Commission Second Asia Gas Buyers’ Summit Mumbai, 2-3 February 2004 Regulating the Regulating the gas market: the gas market: the EU experience EU experience
Mar 30, 2015
Katrien PrinsElectricity and Gas Unit
DG Energy and TransportEuropean Commission
Second Asia Gas Buyers’ SummitMumbai, 2-3 February 2004
Regulating the gas Regulating the gas market: the EU market: the EU
experienceexperience
StructureStructure
The EU Internal Gas Market
The state of play
The new Directive
The Madrid Forum
Gas Regulation
The EU Internal Gas MarketThe EU Internal Gas Market
European Union is based on free movement of goods, services, capital and people
In nearly all sectors, an internal market was achieved by 1992
The energy sector lagged behind1998 Adoption of the first Gas Directive –
transposition in national legislation – mid 20002003 Adoption of second Gas Directive –
transposition in national legislation – mid 2004
EU25 - Demand and SupplyEU25 - Demand and Supply
339376
556
630
191 197
112 117 155186
381513
0
100
200
300
400
500
600
700in bcm
Demand Production Imports
2000 EU 15 2000 EU 25 2030 EU 15 2030 EU 25
Growth of demand: 67% Growth of imports: 175%
Key provisions of Key provisions of the current Gas Directivethe current Gas Directive
Abolition of exclusive rights - non-discrimination;Non-discriminatory right to build new gas facilities;Unbundling of accounts of integrated companies;Third Party Access to the system, which includes storage;TPA can be negotiated or regulatedGradual market opening – 30% of demand; eligible
customersExceptions.
refusal of access (capacity; PSO; TOP) “emergent” markets and other areas
System of Access
RegTPANegTPA
Hybrid
Derogation
Benchmarking
Unbundling measures in Member States
Benchmarking
Unbundling transmission system operator
Unbundling distribution system operator
Austria Legal Accounts Belgium Legal Legal Denmark Ownership Legal France Accounts Accounts Germany Management Accounts Ireland Management Management Italy Legal Legal Luxbg Management Management Neth Management Legal Spain Legal Legal Sweden Accounts Accounts UK Ownership Ownership
Regulation in the EURegulation in the EU
The second Gas DirectiveThe second Gas Directive
MARKET OPENING
July 2004 : all non-household consumers can freely choose their gas supplier
July 2007 : all consumers are free to choose
The second Gas DirectiveThe second Gas Directive
UNBUNDLING Legal unbundling of Transmission system
operators by July 2004Legal unbundling of Distribution system
operators at the latest by July 2007Functional unbundlingAccounting unbundling
The second Gas Directive The second Gas Directive Third Party AccessThird Party Access
Third party access to transmission and distribution system on the basis ofpublished tariffsapplicable to all eligible customersapplied objectively and without discrimination
between system usersex ante approval of tariffs or methodology
underlying their calculationpublished prior to their entry into force
The second Gas Directive The second Gas Directive Third Party Access to StorageThird Party Access to Storage
Access to storage facilities and linepack necessary for providing efficient access to the system for the supply of customers
in accordance with objective, transparent and non-discriminatory criteria
negotiated TPA:publication of Main Commercial Conditions for the use
of storage facilities, linepack and other ancillary services
regulated TPA:on the basis of published tariffs and/or other terms and
obligations for use of storage and linepack
Access to the network on the basis of regulated terms and conditions – storage can be NTPA
Regulation by regulatory authorities to be designated by Member States
Ex-ante regulation of at least the methodologies with regard to network access conditions, including tariffs and balancing services
At least ex-post regulation with regard to other important aspects
Regulator to decide on complaints in reasonable timeframe (2 months+2)
Regulating network accessRegulating network access
Regulating network accessRegulating network access
Regulator to monitor and - if necessary to ensure non-discrimination - to require TSO/DSO to modify:
rules on congestion management, including allocation of interconnector capacities
unbundling of accounts to exclude cross-subsidies
Regulating network access – Regulating network access – exemption for new infrastructureexemption for new infrastructure
Derogation from non-discriminatory TPA for major new gas infrastructureInterconnectors between Member States, LNG and
storage facilitiesExemptions depends on a series of preconditionsRestrictive approach
Decision by regulatory authority and Commission review
The provision aims to safeguard investments in The provision aims to safeguard investments in very high-risk projects, which would not take very high-risk projects, which would not take
place without such an exemptionplace without such an exemption
Minimum competencies of regulatory authorities in all Member States
Responsible for ensuring non-discrimination, effective competition and the efficient functioning of the market
Core duties relating to network access and balancing
Number of other requirements/options
Regulatory authoritiesRegulatory authorities
All Member States to appoint regulatorPreferred model is independent regulator –
limited Ministry involvementLocal regulators are possibleMulti-MS regulators : regional regulator also
an optionRegulators must have sufficient resources and
rights to information: technical and financial
Regulatory authoritiesRegulatory authorities
Ex-ante approval of: overall network tariff methodology balancing methodology
Ex-post intervention possible for: individual network tariffs individual balancing charges mechanisms to deal with interconnectors and national congestion time taken for connections and repairs publication of appropriate information the effective unbundling of accounts the access conditions to storage, linepack and to other ancillary
services
Regulatory authoritiesRegulatory authorities
15 liberalised market do not constitute and internal market
Lack of rules concerning cross-border trade of gas
Addressed in Regulatory Forum of Madrid, assembling Regulators (CEER), Member States, Commission, gas industry (GTE and Eurogas), consumers, traders
Creating an internal marketCreating an internal market
Tariff methodology : need for tarification regimes to converge, to avoid tariff pancaking and ensure cost reflectivity;
Strong support for an “entry-exit” tariff structure (would best facilitate the development of competition)
Importance of ensuring non-discrimination with regard to access to information on system use including available capacities of the system
ensure publication of available capacities Principles adopted as overall guidelines with regard to
capacity allocation and congestion management
Madrid Regulatory ForumMadrid Regulatory ForumTarification, transparency, congestionTarification, transparency, congestion
Overall objective:to ensure TPA to the networks which would meet the
requirements of a well functioning competitive market for natural gas in line with the principles of non-discrimination and transparency
Guidelines aim atclarifying the roles and responsibilities of the main parties in
gas transportationensuring the principle of non-discriminationfacilitating cross-border trade and customer choice through
competition in the internal marketavoiding distortions in trade
Madrid Regulatory ForumMadrid Regulatory ForumGuidelines for good practiceGuidelines for good practice
Offer unbundled TPA services for access to the different parts of the system including all necessary ancillary facilities operated by TSOs including storage when technically necessary for efficient TPA;
Offer the same range of services on the same conditions according to the principle of non-discrimination to any eligible third party within the EU as to marketing affiliates;
Publish the main conditions for all services;Publish available capacities on a regular and user-friendly
basis;Co-operate with other TSO’s on interoperability
Madrid Regulatory ForumMadrid Regulatory ForumGuidelines for good practiceGuidelines for good practice
Offer both firm and short-term services (flexible in time) and interruptible in certain circumstances;
Design services to facilitate trading and liquidity in the European market;
Standardise request and response procedures according to best practice, co-ordinate maintenance to minimise disruption;
Implement non-discriminatory and transparent capacity allocation mechanisms and congestion management procedures subject to review by relevant authorities;
Ensure sufficient functionally independence of SOs from supply business to avoid conflicts of interest.
Madrid Regulatory ForumMadrid Regulatory ForumGuidelines for good practiceGuidelines for good practice
Tariff structure and derivationTSOs should publish reasonably and sufficiently detailed
information on tariff derivation and tariff structure;As far as differences would hamper cross-border trade,
TSOs should pursue convergence of charging principles and tariff structures.
Secondary capacity trading:Allow TPA capacity rights to be freely tradable in a
secondary market;Endeavour to discourage capacity hoarding and facilitate
reutilisation of un-used capacity.
Madrid Regulatory ForumMadrid Regulatory ForumGuidelines for good practiceGuidelines for good practice
Tarification modelsTarification models
Progress made on tariffs: EU15 - 32001 Benchmarking
5 DR, 4 postalised, 3 e/e
2002 Benchmarking4 DR, 4 postalised, 4 e/e
2003 Information 1 DR, 4 postalised, 7 e/e
By 20040-1 DR, 3 postalised, 8-9 e/e
Guidelines Guidelines Regulation Regulation
The Madrid Forum and the Guidelines of Good Practice have one major drawback: they are voluntary
Compliance is mixed
Commission decided to propose in December 2003 a Gas Regulation to change these voluntary arrangements in legally binding instruments
Directive on security of gas supplyDirective on security of gas supply
Why?The new market environment necessitates having
security of supply arrangements compatible with the requirements and needs of a competitive market
What?Member States are required to define security of supply
policies clarifying the general roles and responsibilities of different market players in terms of security of supply
Minimum requirements in the form of output standards
Crisis mechanism (extraordinary supply situation)