Regulators raise some questions on the Commission’s Energy Market Report
Brussels, 13 October 2014
• How will consumers remain central in the Internal Energy Market? • Won’t a blanket 15% interconnector target send perverse incentives? • How best to finish the unfinished business of implementing the existing energy framework?
Today (13 October) the European Commission adopted its Report on Progress towards completing the Internal Energy Market (IEM). The Council of European Energy Regulators’ (CEER1) welcomes the Commission’s IEM Report, which reinforces the regulators’ own analysis of the IEM2 and aligns with the concrete actions in our Bridge to 2025 proposals. However, we question the proposed 15% interconnector target for all Member States, and encourage the Commission to specifically address the concerns of energy consumers in its future work.
How will consumers remain central in the Internal Energy Market? Consumers’ interaction with energy markets is at retail and distribution level, an area where CEER makes a massive contribution. Agreeing with the Commission that retail and wholesale markets need to be better linked to allow the benefits to become visible also on retail level, CEER advocates for the widely endorsed CEER 2020 Customer Vision4 to be at the heart of future energy markets. Lord Mogg outlined how it ties with concrete actions for retail markets in the Bridge paper:
“We encourage the Commission in its forthcoming Retail Communication to build upon the CEER Customer Vision principles and also our concrete proposals for retail markets outlined in the Bridge to 2025. These include setting the key features of retail market design, establishing a Roadmap aimed at competitive retail markets by 20253, developing toolboxes of good practices to empower consumers to participate actively in energy markets.“
Won’t a blanket 15% interconnector target send perverse incentives? We question the Commission’s proposal to raise the current interconnector target to 15% in each Member State. We fully recognise the importance of increasing interconnection capacity for energy security and market integration. We question whether a single target is the best means to achieve this or indeed if it is in the interest of European energy consumers. Instead, decisions on expanding networks should be evidence-based and follow a cost-benefit analysis to ensure they are in the interests of consumers5.
How best to finish the unfinished business of implementing the existing energy framework? Underpinning both the Commission’s report and the regulators’ analysis is the urgent need to implement the entire 3rd Package framework:
President of CEER, Lord Mogg stated: “Regulators and the European Commission are singing from the same hymn sheet. Complete implementation of legislation as well as agreement on and implementation of network codes, deeper integration based on regional integration, more institutionalised cooperation between network operators’ bodies, improved regulatory oversight, the need for properly resourced regulators and embedding a consumer-centric approach in energy policy are common recommendations in the our recently published Bridge to 2025 paper and the Commission’s report."
For regulators’ own IEM analysis (which includes a clear customer-focus), the new CEER-ACER Market Monitoring Report will be presented at an event in Brussels on 22 October. The Bridge to 2025 proposals will be presented to the European Parliament’s ITRE Committee on 5 November.
Ends (see Notes for Editors)
Notes for Editors:
The Council of European Energy Regulatory (CEER) is the voice of Europe’s national energy regulators. Its members and observers, from 33 European countries, are the independent statutory bodies responsible for energy regulation at national level. Visit www.ceer.eu and the dedicated customer section of the CEER website.
Regulators analyse annually of the progress towards the implementation of the Third Energy Legislative Package and the completion of the Internal Energy Market. The latest ACER-CEER Annual Report on the results of Monitoring the Internal Electricity and Natural Gas Markets will be presented at a joint CEER-ACER Market Monitoring Report event in Brussels on 23 October 2014.
Regulators’ Bridge to 2025 proposals, published 22 September, present a set of concrete actions for collective action by regulators, the EU institutions, Members States and stakeholders to fully implement EU legislation, including the network codes as well as the Gas and Electricity Target Models, to help establish and maintain liquid, competitive and integrated wholesale energy markets.
The Bridge to 2025 provides a vision for the next decade, and is intended as a guide to policy makers and the energy sector alike. Cross-cutting proposals address the full range of energy policy - from electricity and gas, to retail and consumer to distribution networks and the overall governance for European level energy cooperation. Some key proposals include: • to implement fully the Third Package framework; • to establish a roadmap aimed at competitive and innovative retail markets by 2025; • to give consumers further rights and tools to empower them to participate actively in energy markets (principally through the development of CEER-BEUC 2020 Consumer Vision) • to promote flexible response, and its provision by generators and consumers on a non-discriminatory basis; • to ensure that the market for new service providers is not foreclosed by incumbents; • to develop the Gas Target Model to help manage the uncertainty about future gas demand; • to promote security of supply through a greater consistency of assessment and policy mechanisms; • to protect and empower consumers to participate actively in energy markets (principally through the development of the CEER 2020 Customer Vision); including establishing stakeholder panels of energy actors and consumer representative bodies; and • to review and, where needed, improve the arrangements for regulatory oversight of the European Networks of Transmission System Operators (ENTSOs) and of other bodies (e.g. nominated electricity market operators – NEMOs).
CEER took an initiative in 2012 to build (with stakeholders) a 2020 vision that puts energy customers first. BEUC, the European Consumer Body, also backed our initiative from the start. The result was the CEER-BEUC 2020 Vision for Energy Customers presented to the November 2012 London Forum. The CEER-BEUC 2020 Vision appears as an Annex to the 2012 London Forum Conclusions. The Vision is grounded on four ‘RASP’ principles (Reliability, Affordability, Simplicity and Protection & Empowerment). In addition to the European Commission, 17 EU level energy associations have declared their support for the Vision (AIB, ANEC, CECODHAS, CEDEC, Cooperatives Europe, EDSO for Smart Grids, ENTSO-E, ENTSOG, ESMIG, EURELECTRIC, EuroCoop, Eurogas, GEODE, IGU, NEON, SEDC and UEAPME). CEER is working with stakeholder to embed the principles into their daily work. In the Bridge to 2025 CEER committed to developing the principles of the Vision by: bringing forward proposals to enable vulnerable customers to secure the same benefits from the market as non-vulnerable customers ; issuing common standards for the content, format and exchange of customers’ data, further developing CEER’s benchmarking work to identify best practices for minimums guaranteed service standards by Distribution System Operators and suppliers; and reviewing the potential impact on consumers of the development of new services (such as those relating to Demand Side Response).
The Commission reiterates today in their “Progress towards completing the Internal Energy Market”, COM (2014) 634, report, its May 2014 proposal to increase the current interconnection target from 10% to 15% by 2030. Regulators do not see evidence of why a blanket 15% target of each Member State’s installed is optimal or feasible. It could lead to adverse incentives. In addition, using generation capacity is particularly inappropriate due to the growth of intermittent generation.
Instead, CEER advocates that investment decisions need to be evidence-based following an assessment of costs and benefits. Such evidence-based analysis has gone into identifying congested areas in the grid in the Ten-Year Network Development Plan (TYNDP), and the regional and national network development plans. This includes identifying whether interconnectors between Member States or internal reinforcements are better placed to cope with future scenarios. In line with the Energy Infrastructure Package, there are robust processes in place to assess the costs and benefits of projects to ensure they are in the interests of consumers. Furthermore, Member States and NRAs are making sure that appropriate incentives are in place to encourage the development of projects with significant benefits to the EU-wide grid. These appropriate incentives are far more likely to drive effective interconnector development that a single numerical target applying to each Member State. For more, see CEER’s position paper on the European Commission's Communication: European Energy Security Strategy.
Council of European Energy Regulators (CEER) Cours Saint-Michel 30a, box F 1040 Brussels www.ceer.eu