Internal market for energy (until March 2011)

In response to the call by the Lisbon European Council, this Directive proposes a series of measures to open up the electricity market completely to the benefit of European consumers. The objective of this Directive is to create conditions more conducive to genuine, fair competition and to put in place a true single market. It places an obligation on Member States to take the measures necessary to attain clearly defined objectives such as to protect vulnerable customers, to protect consumers’ fundamental rights and to promote economic and social cohesion.

ACT

Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC.

SUMMARY

This Directive establishes common rules for the generation, transmission and distribution of electricity. It lays down the rules relating to the organisation and functioning of the electricity sector, access to the market, the criteria and procedures applicable to calls for tenders and the granting of authorisations and the operation of systems.

Public service obligations and customer protection

Electricity undertakings must be operated in accordance with commercial principles, with no discrimination between undertakings as regards either rights or obligations. The objective is to achieve a competitive, secure and environmentally sustainable market in electricity.

Member States must:

• impose on undertakings operating in the electricity sector public service obligations which may relate to security, including security of supply, regularity, quality and price of supplies and environmental protection, including energy efficiency and climate protection;
• ensure that all household customers and small enterprises, at least, enjoy the right to be supplied with electricity of a specified quality within their territory at reasonable, easily and clearly comparable and transparent prices;
• take appropriate measures to protect end-users and vulnerable customers, including measures to help them avoid disconnection;
• ensure the implementation of a system of third party access to the transmission and distribution systems for all eligible customers;
• inform the Commission upon implementation of this Directive.

Tendering for new capacity

Member States must ensure the possibility of providing for new capacity or energy efficiency/demand-side management measures through a tendering procedure or any procedure equivalent in terms of transparency and non-discrimination, on the basis of published criteria.

Details of the tendering procedure for generating capacity and energy efficiency/demand-side management measures must be published in the Official Journal of the European Union at least six months prior to the closing date for tenders.

Designation of transmission and distribution system operators

Member States must designate, or require the undertakings owning transmission or distribution systems to designate, one or more transmission or distribution system operators for a period to be determined by Member States having regard to considerations of efficiency and economic balance.

Each transmission system operator is responsible for:

• ensuring the long-term ability of the system to meet reasonable demands for the transmission of electricity;
• contributing to security of supply through adequate transmission capacity and system reliability;
• managing energy flows on the system, taking into account exchanges with other interconnected systems;
• providing the operator of any other system to which its system is interconnected with sufficient information to ensure secure and efficient operation;
• ensuring non-discrimination between system users;
• providing system users with the information they need for efficient access to the system.

The tasks of the distribution system operator are:

• to maintain a secure, reliable and efficient electricity distribution system in its area with due regard for the environment;
• to ensure non-discrimination between system users;
• to provide system users with the information they need for efficient access to the system;
• to give priority to generating installations using renewable energy sources or waste or producing combined heat and power;
• to procure the energy they use to cover energy losses and reserve capacity in their system according to transparent, non-discriminatory and market-based procedures;
• to take energy efficiency/demand-side management and/or distributed generation measures that supplant the need to upgrade or replace capacity.

The minimum criteria which must be applied to safeguard the independence of transmission or distribution system operators are that:

• they may not participate in the integrated electricity undertaking responsible, directly or indirectly, for the day-to-day operation of the generation, transmission or supply of electricity;
• appropriate measures must be taken to ensure that the professional interests of the persons responsible for the management of the distribution system operator are taken into account so that they are capable of acting independently;
• they must have effective decision-making rights, independent from the integrated electricity undertaking, with respect to assets necessary to operate the network;
• they must establish a compliance programme, which sets out the measures taken to exclude discriminatory conduct, and make sure that it is adequately monitored.

Unbundling of accounts

Electricity undertakings must keep separate internal accounts for each of their transmission and distribution activities, as they would be required to do if the activities in question were carried out by separate undertakings, with a view to avoiding discrimination, cross-subsidisation and distortion of competition.

Reporting

The Commission will monitor and review application of this Directive and submit an overall progress report to the European Parliament and the Council before the end of the first year following the entry into force of the Directive and, thereafter, on an annual basis.

RELATED ACTS

Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003 (Text with EEA relevance) [Official Journal L 211 of 14.8.2009].

Communication of 11 March 2009 from the Commission to the Council and the European Parliament – Report on progress in creating the internal gas and electricity market [COM(2009) 115 final – Not published in the Official Journal]. The Report examines the progress in transposing the second package of measures relating to the internal energy market. Considerable efforts have been made in order to introduce genuine competition, especially in the context of regional initiatives. In addition, Member States are endeavouring to comply with the Electricity Regulation and the congestion management guidelines.

There is also an increase in volumes being traded on the power exchange spot market and growing activity of traders on power exchanges. However, electricity prices (for household consumers) in the first half of 2008 differed quite considerably, which is a sign of insufficient market integration.

The internal electricity market is still too fragmented. In order to rectify this situation, action should be taken as a priority on market integration and on the development of infrastructures and cross-border trade. Finally, it is strongly recommended that price regulation which obstructs competition and deters other potential suppliers from entering the market should be abandoned.

Commission Decision 2003/796/EC of 11 November 2003 on establishing the European Regulators Group for Electricity and Gas [Official Journal L 296 of 14.11.2003].

Last updated: 10.11.2010