Is the regulatory toolset right or is there a need for enhanced regional regulatory oversight?

The Regional Initiatives: Europe’s key to energy market integration European Commission/ERGEG Conference, Brussels, 27 February 2008

Mr Walter BoltzERGEG’s Gas Focus Group (GFG) Chair

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Is the regulatory toolset right or is there a need for enhanced regional regulatory oversight ?

The Regional Initiatives: Europe’s key to energy market integration Conference Brussels, 27 February 2008

Key areas where regional cooperation is required

Formalising voluntary cooperation of regulators

Legal basis for regional cooperation

Optimal design of regulatory toolset

Structure of presentation

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Is the regulatory toolset right or is there a need for enhanced regional regulatory oversight ?

The Regional Initiatives: Europe’s key to energy market integration Conference Brussels, 27 February 2008

Priority topics of common interest

ELECTRICITYELECTRICITY

Congestion management: capacity calculation, allocation, firmness

Transparency

Balancing markets integration

Market entry barriers

Regional cooperation: sensible and required

Electricity Regional InitiativeElectricity Regional Initiative

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Is the regulatory toolset right or is there a need for enhanced regional regulatory oversight ?

The Regional Initiatives: Europe’s key to energy market integration Conference Brussels, 27 February 2008

Gas Regional InitiativeGas Regional Initiative

Priority topics of common interest

GASGAS

Interconnection and capacity

Transparency

Interoperability (including gas balancing)

Development of gas hubs

Regional cooperation: sensible and required

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Is the regulatory toolset right or is there a need for enhanced regional regulatory oversight ?

The Regional Initiatives: Europe’s key to energy market integration Conference Brussels, 27 February 2008

Priority topics of common interest - summary

In all areas solutions need effective cooperation and coordination across borders

Cooperation and coordination by TSOs and Regulators

Broadly similar treatment of common priority topics

Differences due to local market conditions

Enhanced compatibility and eventually full integration of regions are possible at a later stage

Regional cooperation: sensible and required

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Is the regulatory toolset right or is there a need for enhanced regional regulatory oversight ?

The Regional Initiatives: Europe’s key to energy market integration Conference Brussels, 27 February 2008

Areas where better regional cooperation in cross-border issues is needed GAS GAS A model of TSOs acting as one by gradually bringing together their activities

Maximised and coordinated allocation of cross-border capacity

Coordinated investment planning at a regional level

Harmonised balancing rules

Harmonised trading and capacity products

Customer-oriented market transparency

Consultation rules for market codes and decisions of NRAs

Regional cooperation: sensible and required

Where gas infrastructure (use) affects several Member States, cooperation has to be made obligatory

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Is the regulatory toolset right or is there a need for enhanced regional regulatory oversight ?

The Regional Initiatives: Europe’s key to energy market integration Conference Brussels, 27 February 2008

Areas where better regional cooperation in cross-border issues is needed ELECTRICITY ELECTRICITY Coordination, cooperation, information within & between synchronous areas

Coordinated grid planning and construction, coordinated capacity calculation

Enforceable rules and procedures for regional market operators / auction offices, on:

Governance Competition issues Revenues distribution

Efficient decision making and dispute resolution (e.g. resolving ITC problem)

Removing cross-border regulatory gap … reducing market entry barriers

Regional Cooperation: sensible and required

As electricity infrastructure always affects several Member States cooperation must be obligatory

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Is the regulatory toolset right or is there a need for enhanced regional regulatory oversight ?

The Regional Initiatives: Europe’s key to energy market integration Conference Brussels, 27 February 2008

So far regulatory cooperation tends to be voluntary Examples:

MoU in North West Region (GAS) Regulators’ involvement in Pentalateral Agreement in Central West

Region (ELECTRICITY)

Aim: Promoting greater cooperation between NRAs Coordinating national regulatory decisions Facilitating information sharing Mutual consultation of regulatory practices

Drawbacks: As national authorities NRAs can only act within the law No exact rules exist on how NRAs should cooperate in practice An MoU or an Agreement cannot overrule national legislation

Formalizing voluntary cooperation of regulators

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Is the regulatory toolset right or is there a need for enhanced regional regulatory oversight ?

The Regional Initiatives: Europe’s key to energy market integration Conference Brussels, 27 February 2008

Examples: Single Energy Market Committee on the island of Ireland - 3 members (NI, RoI regulators plus 1 other Member)

Cooperation amongst NRAs requires a clear legal basis (in European) legislation

Topics to be addressed: Regulatory coordination Regulation of the Electricity and Gas Markets Sharing of Information Consultation Avoidance of inconsistency of national action Dispute resolution Overriding inconsistent national legislation e.g. market rules

Only a top down approach based on clear EU legislation will work effectively

Legal basis for increased cooperation

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Is the regulatory toolset right or is there a need for enhanced regional regulatory oversight ?

The Regional Initiatives: Europe’s key to energy market integration Conference Brussels, 27 February 2008

Optimal design of a regulatory toolset 3 elements:

Clear legal basis for an obligatory regional cooperation of TSOs and NRAs

Strengthened and harmonized powers & sanction mechanismsat national level

Effective regulatory oversight and dispute resolution top down approachbased on European law

All three elements need towork together for the system

to function

Europe

Region Member State

ACER

Implications

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Is the regulatory toolset right or is there a need for enhanced regional regulatory oversight ?

The Regional Initiatives: Europe’s key to energy market integration Conference Brussels, 27 February 2008

The current regulatory toolset is insufficient

Stronger toolset needed

In particular: addressing the regulatory gap incross-border issues

MoUs and/or Agreements can only partially fill the gap

ACER, if designed rightly, can overcome current problems

Alternative: Intergovernmental Agreements (many!!)

Danger:If the 3rd package is not designed rightly, there will be quickly the need for a 4th package

Outlook

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Is the regulatory toolset right or is there a need for enhanced regional regulatory oversight ?

The Regional Initiatives: Europe’s key to energy market integration Conference Brussels, 27 February 2008

Further information: Mr. Walter BoltzTel: +32 2 788 73 30

+43 1 24724 200Fax: +43 1 24724 99200walter.boltz@ceer.eu

Websites: www.energy-regulators.eu

www.ergeg.org

Thank you for your attention !