Energy Markets

Market in Energy

The directive on the internal market in electricity establishes common rules for the generation, transmission, and distribution of electricity. It sets rules relating to the organization and functioning of the electricity sector, access to the market, criteria and procedures applicable to calls for tenders, and the granting of authorizations for the operation of systems.

Electricity businesses must be operated in accordance with commercial principles with no discrimination between businesses as regards either rights or obligations. The purpose is to achieve competitive, secure, and economically sustainable markets in electricity.

An updated directive applies to the EU internal market in energy from March 2011. It is aimed at introducing common rules for the generation, transmission, distribution, and supply of electricity. It also provides for universal service obligations, consumer rights, and clarifies competition requirements.

States may impose on undertakings operating in the electricity sector, public service obligations covering security of supply, regularity, quality of service, price, environmental protection, and energy efficiency.

States must ensure customers have the right to choose their electricity supplier and change easily with the operator’s assistance within three weeks. They must also receive consumption data.

Suppliers are obliged to inform final customers about the;

• the contribution of each energy source,
• environmental impact costs,
• rights in the event of a dispute.

States must provide for an independent mechanism such as an ombudsman or consumer body to manage complaints efficiently.

States define the criteria for the construction of generating capacity in their territory, taking account of

• protection of health and safety,
• security and safety of networks,
• contribution towards Commission’s 20-20-20 objectives.

From March 2012, states must unbundle transmission systems and system operators. A business must first be certified before being officially designated as a transmission system operator.

Transmission System Operators

Transmission system operators are responsible for;

• ensuring the long-term ability of the system to meet the demands for electricity.
• ensuring adequate means to meet service obligations.
• contributing to the security of supply.
• managing electricity flows.
• providing to the operator of any other system, information relating to operation development and interoperability of the interconnected system.
• ensuring non-discrimination among system users.
• providing system users with the information they need to access the system.
• collecting congestion rents and payments
• the inter-transmission system operator compensation mechanism.

Distributions System Operators

States must designate distribution system operators or acquire businesses that own or are responsible for them.

The distribution system operator is responsible for;

• ensuring the long-term capacity of the system in terms of distribution of electricity, operation, maintenance, development, and environmental protection.
• ensuring transparency with respect to system users.
• providing system users with information.
• covering energy losses and maintaining reserve capacity.

States and Regulators

States and regulators have the right of access to the accounts of electricity businesses, subject to preserving confidentiality. Electricity businesses must keep separate accounts for transmission and distribution activities.

States must organize a system of third-party access to transmission and distribution systems. Tariffs based on that system must be published.

States must lay down criteria for the granting of authorizations to construct direct lines in their territory on an objective and non-discriminatory basis.

National authorities must be designated. They must be independent and exercise powers impartially. Their main functions are to:

• fix transmission and distribution tariffs.
• cooperate in relation to cross-border issues.
• monitor investment plans of operators.
• ensure access to customer consumption data.

States may take action in the event of a sudden crisis in the market or where the safety of persons is threatened.

Operators’ Obligations

States must impose on undertakings operating in the electricity sector, public service obligations which may relate to

• security of supply,
• regularity,
• quality,
• price of supplies,
• environmental protection including electricity efficiency and climate protection.

They may

• ensure that all household customers and small enterprises enjoy the right to supply of electricity of specific quality within their territory at reasonable, easily, and clearly comparable and transparent prices.
• take appropriate measures to protect end users and vulnerable customers, including measures to avoid disconnection.
• ensure the implementation of a system of third party access to the transmission and distribution network for all eligible customers.

States must ensure the possibility of providing for new capacity or energy efficiency.

Cross-Border Exchange

A  regulation provides for cross-border exchanges of electricity. The regulation lays down rules providing a framework for cross-border exchanges of electricity in order to attempt to remove barriers to competition.

National regulatory authorities must inform the Commission regarding certification of a transmission system operator.

The European Network of Transmission System Operators for electricity is responsible for managing the trading and supply of electricity across borders within the EU.  The Commission must consult the Agency for Cooperation of Energy Regulators in order to establish a list of priorities which are to contribute to developing network codes.

The codes are to be developed using non-binding framework guidelines submitted to the Commission by the agency. The codes include rules and procedures relating to

• network security and reliability;
• data interexchange.
• technical and operating exchanges.
• transparency rules.
• harmonized transmission tariff structures.
• energy efficiency.

The ENTSO for electricity is responsible for adopting;

• Common network operation tools.
• Ten-year network development plan.
• Recommendations relating to the coordination of technical cooperation.
• Annual work program.
• Annual reports.
• Annual summer and winter supply outlooks.

The costs related to the financing of the ENTSO for electricity are borne by the transmission system operator. They shall establish regional cooperation within the ENTSO for electricity and publish a regional investment plan every two years on which investments may be based.

Transmission system operators must receive compensation for costs incurred as a result of hosting cross-border flows of electricity on their network. The compensation must be paid by operators of national transmission systems from which cross-border flows originate. The costs shall be established on the basis of forecasted costs.

Transmission system operators must put in place information exchange mechanisms to ensure the security of networks in the context of congestion management. Network congestion problems must be addressed with non-discriminatory market-based solutions which give economic signals to the market participants and market systems operators. New interconnectors may upon request be exempted for a limited period from the general provisions governing congestion on certain conditions.