(1)

Commission Implementing Regulation (EU) No 1354/2011 (2) provides for the opening of annual Union import tariff quotas for sheep, goats, sheepmeat and goatmeat, including those originating in Iceland.

(2)

Article 4 of Implementing Regulation (EU) No 1354/2011 provides that the tariff quotas opened by that Regulation are to be managed in accordance with Articles 49 to 54 of Commission Implementing Regulation (EU) 2015/2447 (3).

(3)

The European Union and Iceland signed an Agreement in the form of an Exchange of Letters (hereafter ‘the Agreement’) concerning additional trade preferences in agricultural products on 23 March 2017. The signature of the Agreement on behalf of the Union was authorised by Council Decision (EU) 2016/2087 (4) and its conclusion by Council Decision (EU) 2017/1913 (5).

(4)

In accordance with Annex V to the Agreement, the Union amended Regulation (EU) No 1354/2011 by Commission Implementing Regulation (EU) 2018/562 (6). The amendment increased the quantities of the pre-existing duty-free quotas for Iceland for sheepmeat and goatmeat, falling within tariff headings 0204 and 0210, and furthermore opened an annual Union duty-free quota for processed sheepmeat falling within subheading 1602 90.

(5)

The quantities of the sheepmeat and goatmeat quotas managed under Implementing Regulation (EU) No 1354/2011 are expressed in carcass-weight equivalent, whereas the Agreement provides for the quantities to be expressed in tonnes of products. It is therefore appropriate to provide for the management of the Union tariff quotas which are set out in the Agreement in a separate Regulation to be adopted, in order to ensure a smooth quota management pursuant to Regulation (EU) No 952/2013 of the European Parliament and of the Council (7). As a consequence, those tariff quotas should be simultaneously removed from Implementing Regulation (EU) No 1354/2011 based on Regulation (EU) No 1308/2013.

(6)

It is therefore necessary to amend Implementing Regulation (EU) No 1354/2011 accordingly.

(7)

The new Regulation opening the import tariff quotas for sheepmeat and goatmeat and processed sheepmeat originating in Iceland adopted pursuant to Regulation (EU) No 952/2013 will apply from 1 September 2018. Therefore, the corresponding amendments to Implementing Regulation (EU) No 1354/2011 should apply from the same date.

(8)

The measures provided for in this Regulation are in accordance with the opinion of the Committee for the Common Organisation of the Agricultural Markets,

(1)

Commission Delegated Regulation (EU) No 1062/2014 (2) establishes a list of existing active substances to be evaluated for their possible approval for use in biocidal products. That list includes acetamiprid.

(2)

Acetamiprid has been evaluated for use in products of product-type 18, insecticides, acaricides and products to control other arthropods, as described in Annex V to Regulation (EU) No 528/2012.

(3)

Belgium was designated as rapporteur Member State and its evaluating competent authority submitted the assessment report together with its recommendations on 27 July 2015.

(4)

In accordance with Article 7(2) of Delegated Regulation (EU) No 1062/2014, the opinion of the European Chemicals Agency was formulated on 14 December 2017 by the Biocidal Products Committee, having regard to the conclusions of the evaluating competent authority (3).

(5)

According to that opinion, biocidal products of product-type 18 containing acetamiprid may be expected to satisfy the criteria of Article 19(1)(b) of Regulation (EU) No 528/2012, provided that certain specifications and conditions concerning their use are complied with.

(6)

It is therefore appropriate to approve acetamiprid for use in biocidal products of product-type 18, subject to compliance with certain specifications and conditions.

(7)

The opinion of the European Chemicals Agency concludes that acetamiprid meets the criteria for being a very persistent (vP) and toxic (T) substance in accordance with Annex XIII to Regulation (EC) No 1907/2006 of the European Parliament and of the Council (4). Acetamiprid therefore meets the conditions set out in point (d) of Article 10(1) of Regulation (EU) No 528/2012 and should be considered a candidate for substitution.

(8)

Pursuant to Article 10(4) of Regulation (EU) No 528/2012, the approval of an active substance that is considered as a candidate for substitution should be for a period not exceeding seven years.

(9)

Since acetamiprid meets the criteria for being very persistent (vP) in accordance with Annex XIII to Regulation (EC) No 1907/2006, treated articles treated with or incorporating acetamiprid should be appropriately labelled when placed on the market.

(10)

A reasonable period should be allowed to elapse before an active substance is approved, in order to permit interested parties to take the preparatory measures necessary to meet the new requirements.

(11)

The measures provided for in this Regulation are in accordance with the opinion of the Standing Committee on Biocidal Products,

(1)

Commission Delegated Regulation (EU) No 1062/2014 (2) establishes a list of existing active substances to be evaluated for their possible approval for use in biocidal products. That list includes cypermethrin.

(2)

Cypermethrin has been evaluated for use in products of product-type 18, insecticides, acaricides and products to control other arthropods, as described in Annex V to Regulation (EU) No 528/2012.

(3)

Belgium was designated as a rapporteur Member State and its evaluating competent authority submitted the assessment report together with its recommendations on 15 April 2015.

(4)

In accordance with Article 7(2) of Delegated Regulation (EU) No 1062/2014, the opinion of the European Chemicals Agency was formulated on 5 May 2017 by the Biocidal Products Committee, having regard to the conclusions of the evaluating competent authority (3).

(5)

According to that opinion, biocidal products of product-type 18 containing cypermethrin may be expected to satisfy the criteria of Article 19(1)(b) of Regulation (EU) No 528/2012, provided that certain specifications and conditions concerning their use are complied with.

(6)

It is therefore appropriate to approve cypermethrin for use in biocidal products of product-type 18, subject to compliance with certain specifications and conditions.

(7)

Furthermore, a need to further investigate the endocrine disrupting potential of cypermethrin has been identified in a screening study carried out in preparation of the impact assessment conducted by the Commission on various options to set criteria to identify endocrine disruptors (4). An assessment of the potential endocrine disrupting properties of cypermethrin will also be conducted in the context of Regulation (EC) No 1107/2009 of the European Parliament and of the Council (5), and the conclusions thereof are expected before the end of 2018. Depending on the outcome of that assessment, the Commission will consider the need to review the approval of cypermethrin as active substance for use in biocidal products in accordance with Article 15 of Regulation (EU) No 528/2012.

(8)

A reasonable period should be allowed to elapse before an active substance is approved in order to permit interested parties to take the preparatory measures necessary to meet the new requirements.

(9)

The measures provided for in this Regulation are in accordance with the opinion of the Standing Committee on Biocidal Products,

(1)

The evaluating competent authority of the United Kingdom received on 7 July 2015 an application for the approval of the active substance penflufen for use in biocidal products of product-type 8, wood preservatives, as described in Annex V to Regulation (EU) No 528/2012.

(2)

The evaluating competent authority of the United Kingdom submitted the assessment report together with its recommendations on 28 February 2017 in accordance with Article 8(1) of Regulation (EU) No 528/2012.

(3)

The opinion of the European Chemicals Agency was formulated on 14 December 2017 by the Biocidal Products Committee, having regard to the conclusions of the evaluating competent authority (2).

(4)

According to that opinion, biocidal products of product-type 8 containing penflufen may be expected to satisfy the criteria of Article 19(1)(b) of Regulation (EU) No 528/2012, provided that certain specifications and conditions concerning their use are complied with.

(5)

It is therefore appropriate to approve penflufen for use in biocidal products of product-type 8, subject to compliance with certain specifications and conditions.

(6)

Since the opinion of the European Chemical Agency concludes that penflufen meets the criteria for being very persistent (vP) in accordance with Annex XIII to Regulation (EC) No 1907/2006 of the European Parliament and of the Council (3), treated articles treated with or incorporating penflufen should be labelled appropriately when placed on the market.

(7)

A reasonable period should be allowed to elapse before an active substance is approved in order to permit interested parties to take the preparatory measures necessary to meet the new requirements.

(8)

The measures provided for in this Regulation are in accordance with the opinion of the Standing Committee on Biocidal Products,

(1)

Regulation (EU) 2015/2283 provides that only novel foods authorised and included in the Union list may be placed on the market within the Union.

(2)

Pursuant to Article 8 of Regulation (EU) 2015/2283, Commission Implementing Regulation (EU) 2017/2470 (2) was adopted, which establishes a Union list of authorised novel foods.

(3)

Pursuant to Article 12 of Regulation (EU) 2015/2283, the Commission is to submit a draft implementing act authorising the placing on the Union market of a novel food and updating the Union list.

(4)

Natural zeaxanthin is a component of the normal human diet as it is found in many fruits and green vegetables as well as in egg yolk. It is also currently used in food supplements as defined in Directive 2002/46/EC of the European Parliament and of the Council (3).

(5)

Commission Implementing Decision 2013/49/EU (4) authorised, in accordance with Regulation (EC) No 258/97 of the European Parliament and of the Council (5), the placing on the market of synthetic zeaxanthin as a novel food ingredient in food supplements at the maximum intake of up to 2 mg per day. The designation of synthetic zeaxanthin authorised by Implementing Decision 2013/49/EU on the labelling of the foodstuffs containing it is ‘synthetic zeaxanthin’.

(6)

On 23 February 2018, the company DSM Nutritional Products Europe (‘the Applicant’) made a request to the Commission to authorise the amendment of the designation and of the specific labelling requirements for synthetic zeaxanthin within the meaning of Article 10(1) of Regulation (EU) 2015/2283. The application requests the deletion of the term ‘synthetic’ from the designation of the novel food as listed in the Union list and from the labelling of foodstuffs containing it.

(7)

The Applicant considers that the change of the designation and the labelling requirements of zeaxanthin is necessary to alleviate any potential negative economic impact that the use of the term ‘synthetic’ on the labelling of food supplements containing synthetic zeaxanthin may cause due to the negative connotation of the term ‘synthetic’. The Applicant also claims that such potential negative economic impact is most probably not experienced by economic operators placing on the market food supplements containing authorised synthetic novel foods which do not carry the term ‘synthetic’ on their labelling.

(8)

There are a number of synthetic substances currently authorised and listed in the Union list of novel foods, of which the counterparts from natural origin exist, and both forms are used in food supplements. However those synthetic substances are not designated as synthetic in the Union list and are not labelled as such. The change in the designation and labelling of synthetic zeaxanthin will ensure consistency with the designation and labelling of those synthetic substances.

(9)

There are no changes in the proposed uses and use levels of zeaxanthin when used as an ingredient in food supplements, the safety considerations that supported the authorisation of synthetic zeaxanthin by Implementing Decision 2013/49/EU remain valid and therefore this change does not pose any safety concerns. Taking into account these legitimate factors, the proposed changes comply with Article 12(1) of Regulation (EU) 2015/2283.

(10)

The implementation of the new labelling requirement in accordance with this Implementing Regulation might involve changes for the business operators who currently place synthetic zeaxanthin on the market. Therefore, it is appropriate to provide for a transitional period.

(11)

Directive 2002/46/EC lays down requirements on food supplements. The change of designation and of specific labelling requirement for zeaxanthin should be authorised without prejudice to that Directive.

(12)

The measures provided for in this Regulation are in accordance with the opinion of the Standing Committee on Plants, Animals, Food and Feed,

(1)

Regulation (EU) 2015/2283 provides that only novel foods authorised and included in the Union list may be placed on the market within the Union.

(2)

Pursuant to Article 8 of Regulation (EU) 2015/2283, Commission Implementing Regulation (EU) 2017/2470 (2) was adopted, which establishes a Union list of authorised novel foods.

(3)

Pursuant to Article 12 of Regulation (EU) 2015/2283, the Commission is to decide on authorisation and on the placing on the Union market of a novel food and on the updating of the Union list.

(4)

On 21 October 2014, the company Desert Labs, Ltd (‘the applicant’) made a request to the competent authority of Ireland to place dried aerial parts of Hoodia parviflora on the Union market as a novel food within the meaning of point (e) of Article 1(2) of Regulation (EC) No 258/97 of the European Parliament and of the Council (3). The application requests for dried aerial parts of Hoodia parviflora to be used in foods including beverages, biscuits, confectionary, savoury snacks, soups and broths, tea, coffee and water. It is also intended for use in food supplements.

(5)

Pursuant to Article 35(1) of Regulation (EU) 2015/2283, any request for placing a novel food on the market within the Union submitted to a Member State in accordance with Article 4 of Regulation (EC) No 258/97 and for which the final decision has not been taken before 1 January 2018 shall be treated as an application submitted under Regulation (EU) 2015/2283.

(6)

While the request for placing dried aerial parts of Hoodia parviflora on the market as a novel food within the Union was submitted to a Member State in accordance with Article 4 of Regulation (EC) No 258/97, the application also meets the requirements laid down in Regulation (EU) 2015/2283.

(7)

On 24 August 2015, the competent authority of Ireland issued its initial assessment report. In that report, it came to the conclusion that dried aerial parts of Hoodia parviflora meets the criteria for novel food set out in Article 3(1) of Regulation (EC) No 258/97.

(8)

On 28 August 2015, the Commission forwarded the initial assessment report to the other Member States. Reasoned objections were raised by some Member States within the 60-day period laid down in the first subparagraph of Article 6(4) of Regulation (EC) No 258/97 with regard to insufficient characterisation of the novel food, limited assessment of allergenicity, insufficient data to exclude the risk for children older than 12 years, insufficient information on the specifications, stability, intake assessment and on toxicological data.

(9)

In view of the objections raised by some Member States, the Commission consulted the European Food Safety Authority (‘the Authority’) on 25 January 2016, asking it to carry out an additional assessment for dried aerial parts of Hoodia parviflora as novel food in accordance with Regulation (EC) No 258/97.

(10)

On 20 September 2017, the Authority adopted ‘Scientific Opinion on the safety of dried aerial parts of Hoodia parviflora as a novel food pursuant to Regulation (EC) No 258/97’ (4). That opinion, although elaborated and adopted by the Authority under Regulation (EC) No 258/97 is in line with the requirements of Article 11 of Regulation (EU) 2015/2283.

(11)

In its opinion, the Authority did not establish the safety of dried aerial parts of Hoodia parviflora in foods at the uses and use levels proposed by the applicant because the intake would exceed the level which is considered as safe (0,134 mg/kg bw). However, the Authority concluded that dried aerial parts of Hoodia parviflora are safe for adults when added to food supplements at a maximum daily dose of 9,4 mg which corresponds to the safe level of intake for an adult with a default body weight of 70 kg.

(12)

That opinion gives sufficient grounds to establish that dried aerial parts of Hoodia parviflora in the proposed uses and use levels when used as an ingredient in food supplements, comply with Article 12(1) of Regulation (EU) 2015/2283.

(13)

On 24 January 2018, the applicant made a request to the Commission for protection of proprietary data for two studies submitted in support of the application namely, reports of the 14-day dose-finding oral toxicity study of dried aerial parts of Hoodia parviflora (5), and of the 90-day oral toxicity study (6), served as basis for the Bench Mark Dose (BMD) analysis and for deriving safe intake levels for human.

(14)

On 18 February 2018, the Authority considered (7) that in elaborating its opinion on dried aerial parts of Hoodia parviflora as a novel food the data from the report of the 90-day oral toxicity study served as basis for the BMD analysis and for deriving safe intake levels for humans. Therefore, it is considered that the conclusions on the safety of dried aerial parts of Hoodia parviflora, could not have been reached without the data from the report of that study.

(15)

Following the receipt of the Authority's opinion, the Commission requested the applicant to further clarify the justification provided with regard to their proprietary claim over the study, and their claim to an exclusive right of reference to that study, as referred to in points (a) and (b) of Article 26(2) of Regulation (EU) 2015/2283.

(16)

The applicant has also declared that, at the time the application was submitted, it held proprietary and exclusive rights of reference to the study under national law and that therefore third parties could not lawfully access or use that study. The Commission assessed all the information provided by the applicant and considered that the applicant has sufficiently substantiated the fulfilment of the requirements laid down in Article 26(2) of Regulation (EU) 2015/2283.

(17)

Accordingly, as provided for under Article 26(2) of Regulation (EU) 2015/2283, the 90-day oral toxicity study contained in the applicant's file should not be used by EFSA for the benefit of a subsequent applicant for a period of five years from the date of entry into force of this Regulation. As a consequence, the placing on the market within the Union of the novel food authorised by this Regulation should be restricted to the applicant for a period of five years.

(18)

However, restricting the authorisation of this novel food and of the reference to the study contained in the applicant's file for the sole use of the applicant does not prevent other applicants from applying for an authorisation to place on the market the same novel food provided that their application is based on legally obtained information supporting the authorisation under this Regulation.

(19)

Directive 2002/46/EC of the European Parliament and of the Council (8) lays down requirements on food supplements. The use of dried aerial parts of Hoodia parviflora should be authorised without prejudice to that Directive.

(20)

The measures provided for in this Regulation are in accordance with the opinion of the Standing Committee on Plants, Animals, Food and Feed,

(1)

On 2 November 2016, the Czech Republic (hereinafter referred to as ‘the Applicant’) submitted to the Commission a request pursuant to Article 35(1) of Directive 2014/25/EU (hereinafter referred to as ‘the Request’).

(2)

The Request concerns the following activities as described in it:

(3)

The Request was accompanied by a letter of the National Competition Authority (‘NCA’) of the Czech Republic dated 30 September 2016 and a supplementary letter from that Authority dated 14 June 2017 (hereinafter referred to as the ‘NCA Opinion’).

(4)

In the letter of 30 September 2016, which the NCA issued in response to the request of the Czech Ministry of Industry and Trade for an opinion concerning the application for exemption of retail sales of electricity and gas in the Czech Republic from the scope of Directive 2014/25/EU, the NCA noted that ‘it did not have sufficient time to perform a sector survey in those areas, which would have allowed it to map the situation on those markets in order to respond to’ the Ministry's request. The NCA finally took the following view in that letter: ‘it can be considered that an exemption on the markets for gas and electricity supplies to end customers in the Czech Republic pursuant to Article 34 should not have a negative effect on economic competition on those markets. This conclusion by the Office (2) is based on the documentation supplied by the Ministry of Industry and Trade. In this regard, the Office reserves the right to re-evaluate its opinion in the event that any structural or other fundamental changes occur on the markets in question, or if any data forming the basis of the information provided to the Office are corrected.’

(5)

The supplementary letter of NCA dated 14 June 2017 was based on ‘other submissions of the Czech Republic […] and the data provided by an independent market operator (OTE) and also by some undertakings operating in the relevant markets including the ČEZ group (ČEZ) and Pražská plynárenská’. The supplementary letter referred in particular to a number of concerns raised by the Commission in respect to the market for retail of electricity to small customers, such as the high market concentration, low switching rates and vertical integration of ČEZ group. The supplementary letter concluded that nothing prevents all markets subject to the Request from being exempted from the application of the Directive.

(6)

The Request was also accompanied by a consultant report (3) (hereinafter referred to as ‘the CRA Report’).

(7)

The Commission submitted to the Applicant requests for additional information on 31 January 2017, 24 March 2017, 27 March 2017, 21 April 2017, 1 June 2017, 28 June 2017 and 21 December 2017 to which the Applicant replied on 16 February 2017, 28 March 2017, 31 March 2017, 3 May 2017, 10 May 2017, 9 June 2017, 1 August 2017 and 12 April 2018. Moreover, at the request of the Applicant, the Commission met the representatives of the Applicant on 31 January 2017, 28 February 2017, 29 March 2017, 30 May 2017 and 9 June 2017. The Applicant provided also supplementary information on 27 January 2017.

(8)

Directive 2014/25/EU applies to the award of contracts for the pursuit of activities related to the retail supply of electricity and gas, unless this activity is exempted pursuant to Article 34 of that Directive.

(9)

Under Directive 2014/25/EU, contracts intended to enable the performance of one of the activities to which the Directive applies are not to be subject to the Directive if, in the Member State in which the activity is carried out, it is directly exposed to competition on markets to which access is not restricted. Direct exposure to competition is assessed on the basis of objective criteria, taking account of the specific characteristics of the sector concerned.

(10)

Access to a market is deemed not to be restricted if the Member State concerned has implemented and applied the relevant Union legislation opening a given sector or a part of it. That legislation is listed in Annex III to Directive 2014/25/EU. As regards the electricity sector, it consists of Directive 2009/72/EC of the European Parliament and of the Council (4). As regards the natural gas sector, it consists of Directive 2009/73/EC of the European Parliament and of the Council (5).

(11)

The Czech Republic has transposed Directives 2009/72/EC and 2009/73/EC in its national law through Act No 458/2000 Coll on conditions of business and state administration in energy markets (hereinafter referred to as ‘the Energy Act’) (6).

(12)

On 7 December 2017, the Commission addressed a letter of formal notice (‘LFN’) to the Minister of Foreign Affairs of the Czech Republic (Ref infringement procedure No 2017/2152) regarding incorrect transposition of Directives 2009/72/EC and 2009/73/EC into the Czech legal order. Given that the presumption of unrestricted access to the market provided for in the first subparagraph of Article 34(3) of Directive 2014/25/EU should not apply for the matters subject to the infringement procedure, the Commission requested by email of 21 December 2017, the Applicant to provide its observations on this matter and explain whether the access to the market is not restricted de facto and de jure, in accordance with the second subparagraph of Article 34(3) of Directive 2014/25/EU.

(13)

The Applicant in its reply of 12 April 2018 explained that access to the market is not restricted de facto and the main arguments were: the low cost of entry, inexistence of other barriers to entry, the large number of licences granted for trading electricity and gas (7) and the large number of retailers currently active on the markets for retail supply of electricity and retail of gas (8). Moreover, the Applicant explained that the way in which the provisions Union law concerned by the LFN were reflected in national law did not result in a de jure restriction to access to the markets of retail of electricity and gas. The Applicant also argued in this context that the specific issues, raised in the infringement procedure, either did not concern access to market or were only potentially related to it.

(14)

As regards the question of whether the access to market is free de facto the Commission agrees with the arguments brought by the Applicant and in particular with the existence of a large number of retailers active at national level on the markets for retail supply of electricity and the market for retail supply of gas, which indicates that access to the market is, de facto, not restricted.

(15)

As regards the question of whether the access to market is not restricted de jure, the Commission has taken good note of the Applicant's explanations regarding the way in which the concerns raised in the LFN were addressed in the national law. The Commission analysed those explanations in the light of requirements of Directive 2014/25/EU, i.e. in order to assess whether the provisions of national law and the concerns related to them and raised in the infringement procedure could result in a de jure restriction of access to market, within the meaning of Article 34 of Directive 2014/25/EU. Having reviewed the arguments of the Applicant, the Commission agrees with the argument underlying all of the Applicant's explanations that the specific issues raised in the infringement procedure do not directly concern access to the market. The Commission also takes into account the argument of Applicant that it is appropriate to consider the Czech legal system as a whole, in particular as regards the obligation to interpret the relevant provisions of national law in a way which is conform to the requirements of EU law. Therefore, while the concerns identified in the infringement procedure still persist, and without prejudice to that infringement procedure, for the purposes of this Decision and the procedure pursuant to Directive 2014/25/EU, the Commission considers that access to the market is not restricted de jure on the territory of the Czech Republic.

(16)

Based on the preceding conclusions the Commission considers that the condition of unrestricted access to market, referred to in Article 34(1) of Directive 2014/25/EU, is fulfilled in the present case.

(17)

Direct exposure to competition should be evaluated on the basis of various indicators, none of which are, per se, decisive. In respect of the markets concerned by this Decision, the market share of the main players on a given market constitutes one criterion which should be taken into account. Given the characteristics of the markets concerned, further criteria should also be taken into account.

(18)

This Decision is without prejudice to the application of the rules on competition and other fields of Union law. In particular, the criteria and the methodology used to assess direct exposure to competition under Article 34 of Directive 2014/25/EU are not necessarily identical to those used to perform an assessment under Article 101 or 102 TFEU or Council Regulation (EC) No 139/2004 (9). This point was upheld by the General Court in a recent judgment (10).

(19)

It should be kept in mind that the aim of this Decision is to establish whether the activities concerned by the Request are exposed to a level of competition, on markets to which access is not restricted within the meaning of Article 34 of Directive 2014/25/EU, which will ensure that, also in the absence of the discipline brought about by the detailed procurement rules set out in Directive 2014/25/EU, procurement for the pursuit of the activities concerned will be carried out in a transparent, non-discriminatory manner based on criteria allowing purchasers to identify the solution which overall is the economically most advantageous one.

(20)

In this context, it is important to mention that, in the markets concerned, not all market players are subject to the public procurement rules. Therefore, the companies which are not subject to those rules, when acting on those markets, would normally have the possibility to exert competitive pressure on the market players which are subject to the public procurement rules (11).

(21)

As the Commission has found in the past (12), the retail supply of electricity encompasses the overall sale of electricity to final customers, that is household and small industrial and commercial customers on the one hand (i.e. customers who are not subject to continual metering and connected to the low voltage grid (13)) and large industrial and commercial customers on the other hand (i.e. customers who are ‘half-hourly metered’ and typically connected to high and medium voltage grids (14)).

(22)

In its decisional practice, the Czech NCA (15) also considered a segmentation of the retail market by different categories of final customers, but ultimately left the definition open.

(23)

The Applicant differentiates between three categories of customers.

(24)

In view of the factors listed in recitals 21 to 23, for the purposes of assessing whether the conditions laid down in Article 34 of Directive 2014/25/EU are fulfilled, and without prejudice to the application of other Union law, the relevant product markets for this Decision, as regards the retail supply of electricity in the Czech Republic, are the following: (a) retail supply of electricity to large customers (continual metering large industrial and commercial consumers including those in the third category mentioned in recital 23(c)); and (b) retail supply of electricity to small customers (non-continual metering households and small commercial customers).

(25)

In respect of retail supply of gas, the Commission differentiates between the supply of natural gas to small customers and the supply of natural gas to large customers, which are subdivided into large industrial customers and power stations (20).

(26)

In its Decision M.4238 — E.ON/PP (21) concerning the Czech gas retail market, the Commission left the definition open, as the transaction concerned did not lead to competition concerns under any alternative definition.

(27)

In its decisional practice (22), the Czech NCA also considered a segmentation of the gas retail market by the different categories of final customers, but ultimately left the definition open.

(28)

The Applicant also differentiates between large and small gas supply customers. Large gas supply customers (23) are commercial customers with (i) automated continual metering with remote (A) or monthly (B) reading that have annual consumption of at least 4,2 GWh; or with (ii) non-interval metering with monthly reading that have annual consumption of between 0,63 and 4,2 GWh. They normally receive individualised offers from suppliers. Small customers are commercial and household customers with non-interval metering with other than monthly reading that have annual consumption of less than 0,63 GWh. They generally receive standardised offers. Each category accounts for around half of the total gas consumption.

(29)

In view of the factors listed in recitals 25 to 28, for the purposes of assessing whether the conditions laid down in Article 34 of Directive 2014/25/EU are fulfilled, and without prejudice to the application of other Union law, the relevant product markets are the following: (a) retail supply of natural gas to large customers; (b) retail supply of natural gas to small customers.

(30)

The Commission has previously found (24) that the retail supply of electricity to large customers was national in scope, whereas narrower, regional markets could be considered for the retail supply of electricity to small customers. In its Decision M.4238 — E.ON/PP (25) concerning the Czech retail market, the market investigation confirmed that the market was at least national in case of electricity retail market. However, the exact scope of the geographic market was left open. The Czech NCA found that the retail supply of electricity to small customers is national in scope (26).

(31)

According to the Applicant, there are currently around 65 active suppliers with more than 100 delivery points that can supply large and small commercial customers and households on a national basis. This would point to a national scope of the retail supply markets.

(32)

In the Czech Republic there are three distribution areas, according to the ownership of the distribution companies (27). Due to the high market shares of the three regional distributors in their own respective distribution areas, the Czech Republic is characterised by a strong regional element. ČEZ group, through its subsidiary ČEZ Distribuce, is the largest distributor with five of the eight electricity distribution networks accounting for around […] of all the electricity consumed in the Czech Republic; in comparison, […] of electricity consumption stems from E.ON's distribution area and only […] stems from PRE's distribution area while the rest stems from the local LDZ (28). In total, around […] % of all delivery points are located in the area of ČEZ Distribuce. Not all of them are served by ČEZ Prodej (the retail supply arm of ČEZ group); however ČEZ Prodej supplies the large majority ([…] %) of the small commercial customers and households in its own distribution area (29).

(33)

At national level, ČEZ Prodej serves […] million household delivery points, which corresponds to around […] % market share in terms of delivery points.

(34)

Another element that would point to non-homogeneous competition conditions across the three distribution areas would be the fact that PRE charges around […] % more for the energy component of the standard tariff in its own area. The Applicant justifies this price difference by the presence of PRE's low-cost subsidiary (Yello Energy) outside its own area but claims that ČEZ Prodej and E.ON charge identical prices for the energy component of the tariff across the three areas (30).

(35)

For the purposes of assessing whether the conditions laid down in Article 34 of Directive 2014/25/EU are fulfilled and without prejudice to the application of other Union law; and based on the fact that there are a large number of retailers operating at national level, the geographic scope of the retail supply of electricity to final customers in the Czech Republic can be considered national for both large and small customers. This does not exclude however that strong regional elements may also be present.

(36)

The Commission has previously defined the markets for retail supply of gas, including those for small customers, as national in scope (31).

(37)

In its Decision M.4238 — E.ON/PP (32) concerning the Czech retail market, the Commission left the definition open, as the transaction concerned did not lead to competition concerns under any alternative definition.

(38)

From a geographical perspective, the Czech NCA has, in its previous practice (33), considered the relevant product markets in the sector of retail supply of gas as national in scope.

(39)

According to the latest information, there are currently a large number of active suppliers (34) in the Czech gas retail market. According to the Applicant these suppliers can supply large and small customers on a national basis.

(40)

As for electricity, gas distribution in the Czech Republic is split into three distribution areas, according to the ownership of the distribution companies (35). With regard to retail supply of gas to households, the Commission notes a similar pattern as for electricity with regard to the incumbent gas distributors' market shares per distribution area. In 2015, these market shares were around […] % for RWE, […] % for PP and […] % for E.ON (36). However, the market shares of these companies are more diluted at national level with regard to the supply of gas to large customers (37).

(41)

The energy component of the gas price is not regulated and is set by the local distribution companies across the three distribution areas. The Applicant's analysis shows that both PP's and RWE's pricing of the energy component of the total gas price is the same across the three distribution areas, while E.ON has identical prices in PP and RWE areas, and slightly lower (less than […] %) in its own area (38). In the light of this, the Applicant argues that the market for gas retail is national in scope.

(42)

For the purposes of assessing whether the conditions laid down in Article 34 of Directive 2014/25/EU are fulfilled and without prejudice to the application of other Union law; and based on the fact that there are a large number of retailers operating at national level, the geographic market for the retail supply of natural gas to final customers in the Czech Republic can be considered national for both large and small customers. This does not exclude however that, like for electricity supply, regional elements may also be present.

(43)

The Commission has adopted other decisions (39) concerning the applicability of exemptions from procurement rules to the retail supply of electricity and gas. In those Decisions, the Commission based its assessment on the following criteria in particular: number of market participants in general, combined market share of the biggest players, switching rate of final consumers, liquidity of the wholesale markets and price regulation.

(44)

It should be first pointed out that, in order for a supplier to be a credible long-term player exerting effective competitive pressure at retail level in the Czech Republic, it is necessary to have access to competitive electricity sources, either via own generation capacity or through access to liquid wholesale markets for all the necessary wholesale products in the Czech Republic or abroad through imports. Otherwise, retailers are dependent on their vertically-integrated competitors for their electricity sourcing which means that they are under the permanent threat of a margin squeeze, which in turn significantly limits the competitive constraint they can exert on vertically-integrated suppliers such as ČEZ.

(45)

In assessing whether the retail supply of electricity is directly exposed to competition, it is therefore also necessary to consider the conditions of competition in the upstream market for generation and wholesale supply of electricity and the position of the operators therein (40).

(46)

In June 2017, 65 active suppliers were supplying more than 100 delivery points across the three distribution areas of ČEZ group, E.ON and PRE. ČEZ Prodej is the largest supplier for both large and small customers, followed by E.ON and PRE. Other competitors have much smaller market shares for the supply of final customers.

(47)

In previous decisions (41), the Commission considered that, concerning the electricity retail supply market, the combined market share of the largest three undertakings is one of the relevant indicators to assess the market concentration and assess the general competition situation. Given that not all market players are subject to public procurement rules, the analysis focuses mainly on the market position and competitive constraints on the individual market players subject to public procurement rules that is, essentially, ČEZ Prodej and PP. However, whenever relevant to understand the market context in which ČEZ Prodej and PP are operating, other market operators are included in the analysis (see also recital 20).Other measures of concentration may also be considered relevant.

(48)

ČEZ Prodej supplies […] of large customers, namely, in volume, around […] TWh out of […] TWh (42). Its market shares for large customers have been rather stable during the period 2012-2015 at […] % (43), however they dropped to […] % in 2016 (44). The Commission notes that this drop happened during the same year when ČEZ group experienced several shortfalls at a number of its nuclear reactors affecting around […] of its nuclear capacity, which confirms that access to competitive electricity sources is a key factor to compete in the retail markets. Furthermore, it cannot be excluded that ČEZ Prodej's […] % market share would be larger in one or more regions if it was calculated on the basis of a regional, instead of national, geographic market for large customers. However, local market share figures for large customers connected to the network of ČEZ Prodej were not provided, although requested.

(49)

During the period 2014-2016, the market shares for large customers were rather stable also in the case of E.ON with around […] % and in the case of PRE with around […] %.

(50)

At national level, the combined market share of the three main market players (ČEZ Prodej, E.ON and PRE) for large customers is around 60 % (45) (HHI (46) calculated for this market is 1 847 (47)). With regard to the other suppliers for large customers, Bohemia Energy, CENTROPOL, RWE, Veolia Komodity, Lumius, EP Energy Trading, Slovenské elektrárne and Amper Market are all below […] %.

(51)

At national level, ČEZ Prodej supplies […] % of small customers (48) in terms of volume deliveries; however, larger volumes were consumed in ČEZ group's distribution area, namely, […] TWh out of […] TWh were consumed by small customers (49). ČEZ Prodej's market shares for such customers have been rather stable during the period 2012-2015 at […] % (50). The Commission notes however that, according to the NCA opinion, the market shares of ČEZ Prodej have decreased over the last 6 years (51).

(52)

At local level, the incumbents' market shares for small customers are high: in 2014-2015, ČEZ Prodej and E.ON had […] % market share in their respective distribution areas, while PRE had […] % market share in the Prague area. The presence of the three main suppliers in each other's respective areas was insignificant ([…] %) (52). This confirms that strong regional elements are present.

(53)

During the period 2014-2016, the market shares for small customers were rather stable also in the case of E.ON with around […] % and in the case of PRE with around […] %. At national level, the combined market share of the three main market players (ČEZ Prodej, E.ON and PRE) for small customers is around 74 % (53) (the HHI calculated for this market is 2 664) (54). The closest competitor for that category of small customers is Bohemia Energy with […] %.

(54)

The number of customers switching is also considered a relevant indicator of effective competition. Two types of customer switching could be defined: external switching, which refers to the switching of supplier, and internal switching, which is defined as the switching of tariff or contract with the existing supplier. In a previous decision (55), the Commission analysed mainly the external switching.

(55)

The Applicant claims that external switching rates are relatively high among large consumers. However, the external switching rate among large customers decreased from around 30 % in 2010 to 16 % in 2015; the average external switching rate during those six years was 22 % (56). By way of comparison, on average the external switching rates are higher in the Czech Republic than in Germany (around 11 %) (57) and lower than in Italy (around 32 %) (58). According to the Applicant, no costs are incurred for switching electricity supplier; customers directly connected to the high voltage network organise their electricity supply through tenders or they directly purchase electricity on the exchanges, which may explain their tendency to switch suppliers more often than small customers (see recitals 56 to 59) (59).

(56)

The Applicant claims that external switching rates are not high for small customers, due to alleged high customer satisfaction levels and/or due to contract renegotiations with the same supplier. The external switching rate of small customers was approximately 4,6 % in 2015 (i.e. the same as in 2010); the average external switching rate during these six years was 5 % (60). According to the Applicant, external switching of the electricity supplier is fairly easy also for small customers. According to a customer survey carried out by the Applicant, small customers across the three distribution areas would switch electricity supplier ‘in response to price increases of 5-10 %’ (61).

(57)

The NCA Opinion indicated that according to the customer survey ordered by ČEZ Prodej, customers are very sensitive to prices and willing to switch (62). Moreover, the NCA Opinion indicated that ‘suppliers started to make pro-competitive retention offers to their customers with significant discounts’ and consequently, based on internal data of ČEZ Prodej, ‘a substantial part of the customers of ČEZ Prodej that would otherwise switch to another supplier chose switching to a more advantageous price of ČEZ Prodej’ (63). Also, the NCA Opinion concluded that by combining external switching rate with the internal switching rate of ČEZ Prodej, the combined level of switching rates for households was of […] %.

(58)

The Commission notes however that, according to the latest available public information (64), internal switching rates for households appear to be rather low in the Czech Republic. In particular, the three-year average of internal switching rates of electricity for household customers' accounts for 2 % only, while the five-year average of external switching of electricity for household customers is 6 % (65).

(59)

Moreover, the Commission notes that the Czech National Regulator (ERO) points out, in relation to the retail market for electricity, certain unclear contractual conditions in fixed-term contracts with automatic extension, which may make it more difficult for customers to identify the dates and conditions on which contracts can be terminated (66). The same point regarding contracts with fixed term and automatic extension was reiterated in the latest available ERO National Report of 2016 (67).

(60)

The liquidity of the wholesale market is a relevant indicator for competition, as sufficient volumes on both the supply and the demand side for the relevant wholesale products (e.g. baseload, peak load, hourly blocs for different timeframes) provide sourcing and hedging opportunities to suppliers that do not dispose of own generation, enabling them to enter the retail markets and to compete with vertically integrated suppliers with own generation capacity.

(61)

At the generation level, ČEZ group produced […] % of the electricity generated in the Czech Republic in 2016 (68). The second largest generator (Elektrárna Počerady a.s.) had a […] % market share and the following three largest generators (Sokolovská Uhelná a.s., Elektrárna Dětmarovice a.s. and Severní Energetická a.s. (69)) were all below […] % each (70). The following six producers were below 3 % and the remaining category (representing around 17 % of the electricity generated) consisted in a multitude of small solar/wind power plants and agricultural undertakings. E.ON, PRE and the other smaller retailers (e.g. Bohemia Energy, CENTROPOL) do not own generation assets in the Czech Republic.

(62)

ČEZ group remains therefore the largest electricity generator of the Czech Republic. Its market share at generation level reflects its privileged access to the cheapest sources of generation in the Czech Republic (nuclear, lignite, coal).

(63)

As regards nuclear generation, it should be noted that in 2016-2017, ČEZ group experienced several shortfalls at a number of its nuclear reactors […].

(64)

Under the Czech long-term energy strategy plan of the Czech Republic (71), nuclear generation should account for around half of the country's total electricity consumption by 2050 (up from around one third at present). The Czech authorities plan to phase out four units at Dukovany from 2035 onwards and at the same time they plan to build new reactors at the two existing nuclear sites (Dukovany and Temelin) with an option either for the State to acquire ČEZ group's nuclear division or for ČEZ group to finance the new plants. In this scenario, with the full re-start of its reactors and forecast increase of power generation for next year (72), ČEZ group's share of the generation market will likely increase to previous levels.

(65)

At the wholesale level, electricity is either sold internally within vertically integrated undertakings carrying out both generation and retail supply activities (such as ČEZ group entities) or traded through various channels: under purely bilateral (over-the-counter or ‘OTC’) or brokered contracts; at the futures markets organised by Power Exchange Central Europe, a.s. (‘PXE’) or the Czech Moravian Commodity Exchange Kladno (‘CMCEK’) (73); and at spot markets organised by the Czech electricity and gas market operator, the company OTE a.s. Electricity traders can use any combination of bilateral contracts and energy exchange products, including OTE's platforms and foreign exchanges (74), for buying and selling (75).

(66)

Wholesale prices at the PXE exchange traditionally follow the prices on the EEX exchange. In this regard, the Applicant claims that ČEZ Prodej (76) has no competitive advantage compared with other retailers on the market procuring their electricity on the PXE exchange, because […] (77). However, it should be noted that this price level is based on a purely contractual arrangement between two companies belonging to the same group, and can therefore be changed at any time and has no impact on the total profit of ČEZ group.

(67)

The volumes traded on the wholesale markets (spot and forward, brokered and exchanges) in the Czech Republic in 2016 ([…] TWh) were around […] the amount of annual electricity consumption (78). In particular, OTC volumes traded on broker platforms such as Trayport amounted to […] TWh (out of a total traded volume of […] TWh) in 2016, increasing slightly since 2008 ([…] TWh) (79). In comparison, the size of the German wholesale market was ten times bigger than the total volumes of electricity withdrawals (80). In the Czech Republic, low futures trading volumes (81) were registered in the largest power exchange (PXE (82)), while very small volumes (2-3 TWh) were traded in domestic trading venues such as the CMCEK (83). The volumes traded in the day-ahead and intra-day markets (OTE-Spot), which are also required for retailers to be able to rely on wholesale markets, increased since 2008 but the volumes involved remain small (84). Finally, the lack of data about direct (OTC) bilateral sales does not allow the Commission to assess whether they are sufficient for new entrants to compete in the market (85).

(68)

With regard to imports, the Applicant has argued that there is ‘ample interconnector capacity on the Czech/German border’ (86). However, the Czech TSO has reported (87) several critical situations in the Czech transmission system due to unplanned transit flows (or ‘loop flows’) amounting to several GW. In particular, according to the Czech TSO, loop flows are a major problem in grid stability (88) and a limiting factor for commercial trade on the Czech borders, in particular on the Czech-German border. Figures submitted by the Applicant (89) shows that the import capacity commercially available at the border with Germany has substantially decreased in the period 2014-2016 (90).

(69)

Moreover, the scope for imports from neighbouring countries could be reduced due to the traditionally low wholesale prices in the Czech Republic. This has been the case during the period 2012-2016 when the average day-ahead price differential across the Czech borders was negative, namely – 3,9 EUR/MWh with Poland; – 0,4 EUR/MWh with Austria; – 0,6 EUR/MWh with Slovakia, and only with Germany was it slightly positive (0,4 EUR/MWh) (91).

(70)

Notwithstanding the above, the Applicant has argued that in 2016, around 8,6 TWh of import capacity was allocated to market participants, while 7,9 TWh, representing ‘roughly 13 % of total electricity consumption’, were imported in response to the sudden outages of ČEZ group's nuclear power plants (92). This exceptional circumstance may explain the volumes of capacity imported and allocated to market participants in 2016. Indeed, ČEZ group has calculated that, in the absence of those shortfalls, it would have produced additional […] TWh of electricity. However, the situation is recovering and some of the reactors have restarted while others are planned to restart soon. As a result it can be expected that imports will gradually decrease in the future as the ramping up of nuclear generation with low marginal cost will push down electricity prices in the Czech Republic.

(71)

The price of electricity supply to end customers, has two main components (93): the first one, accounting for 45 % of the total final price, includes fixed costs for electricity distribution, auxiliary services, system charges, etc.; the second one, accounting for 37 % of the total final price, is the electricity component, which includes the retail supply margin (94). This second component is not regulated (95).

(72)

With regard to prices of electricity to end consumers, for both large and small customers, the price level including taxes is smaller than the EU-28 average, and also smaller than the EU-28 average if taxes are excluded (96). The Applicant observes that these prices were consistently lower than the corresponding prices in Germany over the period 2007-2015.

(73)

In particular, with regard to large industrial customers (97), the Applicant observes that the Czech energy component decreased by more than 40 % between the second half of 2012 and the second half of 2015, when it was 24 % lower (0,0300-0,0400 EUR per kWh) than the German energy component (0,0400-0,0500 EUR per kWh). With regard to households (98), the Applicant observes that, after the second half of 2009, the Czech energy component was constantly declining and in the second half of 2015 it was almost 0,0400 EUR per kWh, which means that it was 49 % lower than the German energy component (0,0700-0,0800 EUR per kWh) (99).

(74)

The Applicant concludes from these figures, based on Eurostat data, that ‘the degree of competition is larger in the Czech market than in the German market that is directly exposed to competition according to the Commission's recent German Retail Exemption Decision’ (100). However, this is not corroborated by evidence, in particular with regard to the price comparison between the Czech and German markets. Under certain conditions (e.g. marginal cost levels and elasticities of demand), economic theory suggests that highly concentrated markets could have lower prices than less concentrated markets (101). More importantly, the price comparison depended on the choice of unit. In fact, German prices were above Czech ones in absolute terms in the last years but they were lower in terms of purchasing power standard (PPS); in that respect Czech prices were higher in 2015 (102).

(75)

Moreover, with regard in particular to household prices, the Agency for Cooperation of Energy Regulators (ACER) has observed, on the basis of information received from the national regulators, that ‘there may be irregularities in the data for household electricity prices. These results should therefore be interpreted with caution’ (103).

(76)

Latest figures from the ERO indicate that in 2016, 98 active traders supplying gas to customers operated in the Czech Republic (104). The total cost (105) of entry into the market for retail supply of gas is low, and does not seem to constitute a barrier to entry.

(77)

In previous decisions (106), the Commission considered that, concerning the gas retail supply market, the combined market share of the largest three undertakings is one of the relevant indicators to assess the market concentration and assess the general competition situation. Given that not all market players are subject to public procurement rules, the analysis focuses mainly on the market position and competitive constraints on the individual market players subject to public procurement rules that is, essentially, ČEZ Prodej and PP. However, whenever relevant to understand the market context in which ČEZ Prodej and PP are operating, other market operators are included in the analysis (see also recital 20).Other measures of concentration may also be considered relevant.

(78)

According to the most recent figures (107), the largest suppliers of gas in terms of quantity supplied to customers are RWE (now, Innogy Energie, s.r.o.) with almost […] % market share, followed by PP and E.ON with […] % market share. Also ČEZ Prodej is active in this market with a market share of […] % (108).

(79)

According to the 2016 figures supplied by the Applicant, RWE is the largest supplier to large customers with a market share of […] %, followed by ČEZ Prodej with a market share of […] % and E.ON with a market share of […] %. The Commission notes that only PP and ČEZ Prodej are considered contracting entities in the sense of Article 4 of Directive 2014/25/EU, and hence are subject to procurement rules.

(80)

The combined market share of the three largest retailers to large customers on the Czech gas market is 51 %. The HHI calculated for this market is 1 341 (109).

(81)

According to the 2016 figures supplied by the Applicant, the three largest suppliers to small customers are RWE, with a market share of […] %, followed by PP with a market share of […] %, and E.ON with a market share of […] % (110). Also ČEZ Prodej (fourth largest supplier) is active in this market with a market share of […] %. The Commission notes that only PP and ČEZ Prodej are considered contracting entities in the sense of Article 4 of Directive 2014/25/EU, and hence are subject to procurement rules.

(82)

The combined market share of the three largest retailers to small customers on the Czech gas market is 69 % (111). The HHI calculated for this market is 2 024 (112).

(83)

ERO's national report for 2016 contains information regarding supplier switching data separately for four categories of customers (113): ‘high demand’, ‘medium size demand’, ‘low demand’ and ‘households’.

(84)

The first two categories (‘high demand’ and ‘medium size demand’) can be broadly assigned to the category of ‘large customers’ as defined for the purposes of this Decision. In 2016, customer switching for high demand customers was 38 % and for medium size demand was 29 %. The levels of switching for those two categories were also high over the last five years.

(85)

The last two categories (‘low demand’ and ‘households’) can be broadly assigned to the category of ‘small commercial customers and households’ as defined for the purpose of this Decision.

(86)

In 2016, customer switching for ‘low demand’ was at 14 %, while for ‘households’ it was at 6,6 %. The levels of switching for ‘low demand’ customers were above 10 % during the period 2011-2016. The levels of switching for ‘households’ have been decreasing since 2011 (around when the switching rate was 13 % (114)), however in 2016 the switching rate increased.

(87)

Entities trading at the wholesale gas market can buy gas under long-term contracts, at commodity exchanges, or from other traders. Long-term contracts with Russian and Norwegian gas producers probably still have the most significant influence on the formation of wholesale prices. Long-term contracts are usually entered into for very long terms of up to 30 years. Earlier, certain changes to the gas price formulae were made in these contracts, but long-term contracts themselves have not been abandoned (116). According to Eurostat figures, in total 36 entities imported gas into the Czech Republic in 2016 (117).

(88)

According to the ERO, the holder of the exclusive licence for the activities of the market operator in the Czech Republic, OTE, a.s., has been organising a spot gas market since 2010. An amendment to the Gas Market Rules has abolished the day-ahead gas market organised by the market operator. On the other hand, a platform has been established for the intra-day gas market. According to ERO, this market has maintained its high attraction for gas market participants in 2016 (118).

(89)

The largest share of the wholesale market takes place outside of the exchange platforms and in the form of bilateral over-the-counter (‘OTC’) trading. OTC trading offers the advantage that it can be carried out flexibly, namely in particular without having to have recourse to a limited set of contracts. A significant role in OTC trading is played by brokerage via broker platforms. OTC trading saw substantial increases as of 2012. In 2016, natural gas trading transactions brokered on broker platforms with the Czech Republic as a supply area totalled 88 TWh (93 TWh including the volumes traded on exchange platforms). The volume of futures contracts rose from 0,7 TWh in 2014 to 3 TWh in 2015.

(90)

In 2016, annual gas consumption in the Czech Republic totalled around 88 TWh. Consumption rose by 8,5 % compared to 2015. The ratio of the wholesale trading volume with the consumption is > 1 (119).

(91)

In view of the factors examined in recitals 87-90, in this case, the Commission considers that the liquidity of the Czech wholesale market is sufficient to allow the retailers to have access under competitive conditions to the wholesale gas either through wholesale markets or through imports. The liquidity of the Czech wholesale market does not prevent the retail supply of gas from being subject to direct exposure to competition.

(92)

The price of gas supply to end customers, without taxes, has two main components (120). The first one, accounting for 22 % of the price, contains regulated parts (transmission, distribution, etc.). The second one, which accounts for 78 % of the price, represents the price of the commodity itself which includes the retail supply margin. The second component is not regulated (121).

(93)

For large customers, the price level including taxes is smaller than the EU-28 average, and also smaller than the EU-28 average if taxes are excluded (122).

(94)

For small customers, the price level including taxes is smaller than the EU-28 average, and also smaller than the EU-28 average if taxes are excluded (122).

(95)

Competition on the Czech retail electricity markets is structurally limited by the fact that retailers (other than ČEZ Prodej) do not have sufficient own generation capacity nor access to significantly liquid wholesale markets either in the Czech Republic or abroad through imports. As a result these retailers are not in a position to compete on an equal footing with ČEZ Prodej which is vertically integrated with the largest local distribution company and the largest electricity generator.

(96)

The combined market shares of the three largest retail supply companies for large customers is rather high (60 %) with the largest market player (ČEZ Prodej) holding a […] % market share. The second and third largest market players, namely E.ON and PRE, which hold market shares of […] % and […] %, respectively, are not subject to Union procurement rules. Despite their non-negligible market shares, they can only exercise limited competitive pressure on ČEZ Prodej. Access to wholesale electricity is not sufficient: ČEZ group is by far the largest electricity generator in the Czech Republic and electricity interconnection capacities are limited and therefore the liquidity of the wholesale electricity market is dependent on the behaviour of ČEZ group. This situation limits their possibility to procure electricity both in baseload and the other products needed under competitive conditions, which in turn structurally limits their ability to compete with ČEZ Prodej. For the same reasons, smaller competitors have a limited ability to compete with the three largest suppliers.

(97)

The market position of ČEZ Prodej, E.ON and PRE is strengthened by the strong regional elements characteristics of this market and non-homogeneous competition conditions across the three distribution areas make it difficult for competitors to challenge those operator's market positions within their own respective distribution areas. Finally, the degree of customer switching although higher than for small customers has declined in recent years.

(98)

In view of the factors examined above the condition of direct exposure to competition laid down in Article 34(1) of Directive 2014/25/EU should be considered not to be met in respect of the retail supply of electricity to large customers on the territory of the Czech Republic.

(99)

The combined market share of the three largest retail supply companies for small customers is high (74 %), with the largest market player (ČEZ Prodej) holding a […] % market share. The second and third largest market players, namely E.ON and PRE, which are the second and third largest market players holding market shares of […] % and […] % (123), respectively, are not subject to Union procurement rules. Despite their non-negligible market shares, they can only exercise limited competitive pressure on ČEZ Prodej. Access to wholesale electricity is not sufficient: ČEZ group is by far the largest electricity generator in the Czech Republic and electricity interconnection capacities are limited and therefore the liquidity of the wholesale electricity market is dependent on the behaviour of ČEZ group. This situation limits their possibility to procure electricity both in baseload and the other products needed under competitive conditions, which in turn structurally limits their ability to compete with ČEZ Prodej. For the same reasons, smaller competitors have a limited ability to compete with the three largest suppliers.

(100)

The market position of ČEZ Prodej, E.ON and PRE is strengthened by the strong regional characteristics of this market and non-homogeneous competition conditions across the three distribution areas, which make it difficult for competitors to challenge those operators' market position within their own respective distribution area. Finally, the degree of customer switching is rather low and, for the reasons noted above, low retail prices are not an indicator of direct exposure to competition.

(101)

In view of the factors examined above, the condition of direct exposure to competition laid down in Article 34(1) of Directive 2014/25/EU should be considered not to be met in respect of the retail supply of electricity to small customers on the territory of the Czech Republic.

(102)

In respect of the retail supply of gas to large customers in the Czech Republic, the situation can be summarised as follows: there is a high number of suppliers active at national level; the combined market shares of the three largest retail supply companies is not very high (51 %); the first and third market players are not subject to Union procurement rules; the degree of switching appears satisfactory, there is no end-user price control and the wholesale market liquidity does not seem to constitute an obstacle to the retail supply of gas being subject to direct exposure to competition.

(103)

In view of the factors examined above, the condition of direct exposure to competition laid down in Article 34(1) of Directive 2014/25/EU should be considered to be met in respect of retail supply of gas to large customers on the territory of the Czech Republic.

(104)

In respect of the retail supply of gas to small customers in the Czech Republic, the situation can be summarised as follows: there is a high number of suppliers active at national level; the combined market shares of the three largest retail supply companies is rather high (69 %), however the first and the third market players are not subject to procurement rules; the degree of switching appears satisfactory; there is no end-user price control and the wholesale market liquidity does not seem to constitute an obstacle to the retail supply of gas being subject to direct exposure to competition.

(105)

In view of the factors examined above, the condition of direct exposure to competition laid down in Article 34(1) of Directive 2014/25/EU should be considered to be met in respect of retail supply of gas to small customers on the territory of the Czech Republic.

(106)

This Decision is based on the legal and factual situation as of November 2016 to April 2018 as it appears from the information submitted by the Applicant, and the ERO National Reports. It may be revised, should the conditions for the applicability of Article 34 of Directive 2014/25/EU be no longer met, following significant changes in the legal or factual situation.

(107)

Since the services related to the retail supply of electricity (124) should continue to be subject to Directive 2014/25/EU, it is recalled that procurement contracts covering several activities should be treated in accordance with Article 6 of that Directive. This means that, where a contracting entity is engaged in ‘mixed’ procurement, that is procurement used to support the performance of both activities exempted from the application of Directive 2014/25/EU and activities not exempted therefrom, regard must be had to the activities for which the contract is principally intended. In the event of such mixed procurement, where the purpose is principally to support activities which are not exempted, the provisions of Directive 2014/25/EU are to be applied. Where it is objectively impossible to determine for which activity the contract is principally intended, the contract is to be awarded in accordance with the rules laid down in Article 6(3) of Directive 2014/25/EU.

(108)

The measures provided for in this Decision are in accordance with the opinion of the Advisory Committee for Public Contracts,

(1)

Commission Implementing Decision 2012/795/EU (2) laid down the obligations for the Member States to report on the implementation of Directive 2010/75/EU for the period 2013-2016. That Decision has exhausted its temporal effects and should be repealed.

(2)

The type, format and frequency of information relating to the years from 2017 which are to be made available by the Member States should be established.

(3)

In accordance with Article 72(1) of Directive 2010/75/EU, Member States are to report information on the implementation of that Directive, on representative data on emissions and other forms of pollution, on emission limit values, and on the application of best available techniques in accordance with Articles 14 and 15 of that Directive, in particular on the granting of exemptions in accordance with its Article 15(4).

(4)

Member States are, in addition, required to include information under Articles 51(4), 55(2) and 59(1), (2) and (3) of Directive 2010/75/EU in the reports submitted under Article 72 of that Directive.

(5)

In accordance with Article 72(1) of Directive 2010/75/EU, Member States are to make the information available in an electronic format using a reporting tool provided by the Commission for this purpose.

(6)

Directive 2010/75/EU requires each installation covered by its Chapter II to have an individual permit in order to operate. Permit conditions must be based on the environmental performance achievable by that installation taking into account its technical characteristics, external factors including local conditions, and its use of best available techniques. Permits set conditions, in particular, on emission limit values, emission monitoring and compliance assessment specific to each individual installation. Permit conditions are to be periodically re-considered, and where necessary updated, particularly where new conclusions on best available techniques (‘BAT conclusions’) have been published for the main activity of an installation, in accordance with Article 21(3) of Directive 2010/75/EU. The most efficient way to report on the implementation of Directive 2010/75/EU is to provide the relevant information for each individual installation, and thus to extend the approaches taken in Modules 2 and 3 of Implementing Decision 2012/795/EU to all sectors.

(7)

Large combustion plants and waste (co-)incineration plants are covered by specific provisions in Chapters III and IV of Directive 2010/75/EU. For those plants, Member States should, in addition, provide information on the implementation of temporary derogations and emission control safeguards as specified in Articles 32 to 35 and 46(2) of Directive 2010/75/EU. For waste incineration and waste co-incineration plants with a capacity of less than 2 tonnes per hour, Article 55(3) of that Directive requires Member States to make publicly available a list of installations. Information on the publication of that list should be provided to the Commission in order for it to monitor the implementation of the Directive on those smaller plants.

(8)

In accordance with Article 72(1) of Directive 2010/75/EU, the Member States must also report representative data on emissions and other forms of pollution. In order to reduce unnecessary administrative burdens, Member States should provide information on where emission monitoring data are made available under Article 24(3)(b) of Directive 2010/75/EU and also a link to the emission data reported under Regulation (EC) No 166/2006 of the European Parliament and of the Council (3). Under that Regulation, Member States are required to report annual data on, inter alia, off-site transfers of waste and releases to air, water and land of pollutants in accordance with its Annex II, which covers all pollutants listed in Annex II to Directive 2010/75/EU. At the same time, all ‘installations’ covered by Directive 2010/75/EU relate to or coincide with a ‘facility’ covered by that Regulation. The data reported under Regulation (EC) No 166/2006 thus provide ‘representative data on emissions and other forms of pollution’ in the sense of Article 72(1) of Directive 2010/75/EU.

(9)

The link to the reporting of emissions under Regulation (EC) No 166/2006 should be created by the use of existing spatial data which are managed by the Member States in accordance with Article 4(1) of Directive 2007/2/EC of the European Parliament and of the Council (4) and point 8 of Annex III to that Directive. The data model established in Commission Regulation (EU) No 1089/2010 (5) enables Member States and the Commission to link ‘installations’, large combustion plants and waste (co-) incineration plants with ‘facilities’ within the meaning of Article 2(4) of Regulation (EC) No 166/2006. Reporting spatial data on installations, large combustion plants and waste (co-) incineration plants instead of providing detailed reports on emissions from installations is, in this context, thus just another ‘type’ of reporting within the meaning of Article 72(2) to Directive 2010/75/EU. This includes the adaptation of the INSPIRE model to the specific reporting requirements of Article 72(1) of Directive 2010/75/EU, thereby rendering compulsory certain elements of spatial information that are voidable under Regulation (EU) No 1089/2010.

(10)

For installations and activities using organic solvents which are not covered by Chapter II of Directive 2010/75/EU, and therefore not necessarily subject to an installation specific permit, Member States should report information on the total number of installations and on the number of installations which apply a reduction scheme under Article 59(1)(b) of that Directive, or a derogation under paragraph 2 or 3 of its Article 59. This will inform the Commission whether, and to what extent, the implementation of Directive 2010/75/EU could be affected.

(11)

The measures provided for in this Decision are in accordance with the opinion of the committee established by Article 75(1) of Directive 2010/75/EU,

(1)

Avian influenza is an infectious viral disease in birds, including poultry. Infections with avian influenza viruses in domestic poultry cause two main forms of that disease that are distinguished by the virulence of the virus. The low pathogenic form generally only causes mild symptoms, while the highly pathogenic form results in very high mortality rates in most poultry species. That disease may have a severe impact on the health of domestic and wild birds and the profitability of poultry farming.

(2)

Directive 2005/94/EC sets out the minimum control measures to be applied in the event of an outbreak of that disease in poultry or other captive birds and also provides for certain preventive measures relating to the surveillance and the early detection of avian influenza.

(3)

Wild birds, in particular migratory water birds, are known to be the natural host for avian influenza viruses of low pathogenicity which they carry, usually without showing signs of that disease, during their seasonal migratory movements. However, since 2005, highly pathogenic avian influenza (HPAI) viruses of the H5 subtype have shown to be able to infect migratory birds which can then spread these viruses over long distances between continents.

(4)

The presence of avian influenza viruses and in particular HPAI viruses in wild birds poses a continual threat for the direct and indirect introduction of these viruses into holdings where poultry or other captive birds are kept, in particular during the seasonal movements of migratory birds, with the risk of subsequent virus spread from an infected holding to other holdings liable to cause significant economic losses.

(5)

The European Food Safety Authority (EFSA) adopted on 14 September 2017 a comprehensive scientific opinion on avian influenza (2), confirming that the strict implementation of biosecurity measures plays a key role in preventing the spread of HPAI viruses from wild birds to poultry and other captive birds (the 2017 EFSA opinion).

(6)

The 2017 EFSA opinion lists the most relevant biosecurity measures to be applied continuously in different poultry husbandry systems including small size farms. It also states that certain general biosecurity principles universally apply to poultry holdings, while unique features for each holding need to be considered for optimised protection based on expert advice.

(7)

The 2017 EFSA opinion assessed and identified risks for HPAI virus introduction into poultry holdings, such as the keeping together of domestic ducks and geese with other poultry species, and the risks related to certain activities, such as the release of poultry for restocking supplies of game birds, and it proposed measures to mitigate these risks.

(8)

The 2017 EFSA opinion concluded that the passive surveillance of wild birds is the most effective means for the early detection of the presence of HPAI viruses in wild birds, where the HPAI virus infections are associated with mortality and it recommended the sampling and laboratory testing of wild bird target species. Subsequently, EFSA published a list of wild bird target species in its scientific report on avian influenza approved on 18 December 2017 (3).

(9)

In a scientific report on avian influenza approved on 22 March 2018 (4), EFSA stated that there have not been any reported cases of human infection due to A(H5N8) or the newly emerged A(H5N5) and A(H5N6) viruses representing a reassortment of A(H5) clade 2.3.4.4 viruses with local European viruses donating the N5 or N6 gene. The A(H5N8), A(H5N5) and A(H5N6) viruses are considered to be predominantly adapted to avian species.

(10)

The 2017 EFSA opinion also concluded that in certain epidemiological situations, it may be appropriate that Member States temporarily intensify certain preventive measures around the place where the HPAI virus infection was confirmed in a wild bird or in its faeces, in particular in order to assess, if transmission to poultry holdings has occurred and if biosecurity measures are effectively applied to prevent virus introduction.

(11)

In order to target the bird populations that are most at risk of avian influenza infection and to ensure the effectiveness of the measures laid down in this Decision, certain preventive measures should therefore be targeted at holdings keeping poultry.

(12)

Commission Implementing Decision (EU) 2017/263 (5) provided for risk mitigating and reinforced biosecurity measures to reduce the risk of the transmission of HPAI viruses from wild birds to poultry by preventing direct and indirect contacts between these populations, and it required the Member States to identify the areas of their territory that are at particular risk for the introduction of HPAI viruses into holdings where poultry or other captive birds are kept (‘high risk areas’), taking into account, amongst other things, the epidemiological situation and specific risk factors. That Implementing Decision applied until 30 June 2018.

(13)

The measures laid down in Implementing Decision (EU) 2017/263 should therefore be reviewed taking into account the current epidemiological situation in poultry, other captive birds and in wild birds in the Union and in risk-relevant third countries, the 2017 EFSA opinion and subsequent scientific reports on avian influenza and the Member States' experience gained in the implementation of the measures laid down in that Implementing Decision.

(14)

Accordingly, in view of the ongoing threat of HPAI virus transmission by infected wild birds, and the risk of outbreaks in holdings where poultry or other captive birds are kept, updated measures, taking into account the results of the review of Implementing Decision (EU) 2017/263, should therefore be laid down in this Decision.

(15)

The experience gained in the implementation of the measures laid down in Implementing Decision (EU) 2017/263 shows that certain derogations from risk mitigation and reinforced biosecurity measures are necessary in order for individual Member States to be able to adapt these measures to the changing epidemiological situation.

(16)

The measures provided for in this Decision are in accordance with the opinion of the Standing Committee on Plants, Animals, Food and Feed,

(1)

Commission Implementing Decision 2013/92/EU (2) provides for plant health checks and measures to be taken on wood packaging material actually in use in the transport of specified commodities originating in China. Articles 1 to 4 of that Decision expire on 31 July 2018.

(2)

Plant health checks conducted by Member States on the basis of that Decision, as well as Article 13a of Directive 2000/29/EC, have shown that wood packaging material used in the transport of certain commodities originating from Belarus and China (‘the specified commodities’) was non-compliant with Union requirements concerning marking of wood packaging material as set out in point 2 of Section I of Part A of Annex IV to Directive 2000/29/EC, and in some cases also infested by harmful organisms listed in Part A of Annex I to that Directive.

(3)

In order to ensure a better preparation of the authorities carrying out the respective plant health checks, airport authorities, harbour authorities, other authorities responsible for the control of movement of goods or any professional operator involved in the importation of specified commodities accompanied by wood packaging material, should give, as soon as they are aware of the imminent arrival of that wood packaging material, advance notice thereof to the customs office of the point of entry and to the responsible official body of the point of entry.

(4)

The wood packaging material of consignments of the specified commodities should be subject to the plant health checks on a regular basis. Member States should define the rate of the wood packaging material of the specified commodities subject to plant health checks. That rate should be no lower than 1 % of the imported wood packaging material of the specified commodities, to ensure that a representative sample is checked.

(5)

That wood packaging material, as well as the specified commodities, should be subject to the Union rules concerning customs supervision until those plant health checks are completed, in order to ensure that their free movement within the Union territory does not introduce any phytosanitary risks.

(6)

Plant health checks should take place at the point of entry into the Union or at the place of destination approved for that purpose by the responsible official body, in order to ensure that those checks are carried out in the most appropriate facilities.

(7)

Where the plant health checks are carried out in the place of destination, and they show that point 2 of Section I of Part A of Annex IV to Directive 2000/29/EC is not complied with, or that the wood packaging material has been found infested by harmful organisms listed in Part A of Annex I to that Directive, the Member State concerned should properly handle the respective wood packaging material and immediately destroy it, to ensure the phytosanitary protection of the Union territory.

(8)

Member States should notify to the Commission the number and the results of the plant health checks carried out in accordance with this Decision by means of a specific electronic reporting template.

(9)

Experience of the plant health checks carried out so far shows that, in order to provide further detail on the interceptions recorded on wood packaging material to the national plant protection organisations of those third countries, it is necessary that Member States report any information necessary to identify the sources of unreliable or incorrect marking.

(10)

This Decision should apply as from 1 October 2018, in order to allow the responsible official bodies and the professional operators the appropriate time to adapt to the new provisions.

(11)

In order to ensure that no legal vacuum occurs by that date, Articles 1 to 4 of Implementing Decision 2013/92/EU which expire on 31 July 2018 should apply until 30 September 2018.

(12)

For the purpose of legal clarity, Implementing Decision 2013/92/EU should be repealed as of 1 October 2018, which is the date of application of this Decision.

(13)

This Decision should apply until 30 June 2020, in order to allow for the adoption of the necessary measures as appropriate by that time.

(14)

The measures provided for in this Decision are in accordance with the opinion of the Standing Committee on Plants, Animals, Food and Feed,