European Parliament backs liberalisation of EU gas market

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European Parliament backs liberalisation of EU gas market

The European Parliament (EP) voted this week in support of the full liberalisation of the European gas markets through “full ownership unbundling” (the separation of gas suppliers from gas transmission networks). This will be of interest to stakeholders in the EU’s gas sectors.

The EP rejected the previously proposed “independent system operator” (‘ISO’) option (which preserved integrated supply and transmission companies, provided that an independent system operator operated the transmission network) but endorsed the “independent transmission operator” (‘ITO’) model (which would allow companies to retain the ownership of pipelines but compel them to abide by rules and a structure designed to ensure the TSO’s operational independence) as the sole alternative option to ownership unbundling, which had been endorsed earlier at a Council meeting held on 6 June.

ITO model enhanced

The EP further enhanced the ITO model with several safeguards, including:

  • an "independent trustee”, meant to protect “the asset value of the transmission system operator”;
  • a “supervisory body” - composed of gas company representatives, third party shareholders, transmission system operator representatives, as well as the Trustee - responsible for decisions “which may have a significant impact on the value of the assets of the shareholders”; (the Trustee, under some circumstances, can veto the body's decisions);
  • a “compliance programme” setting out measures that prevent “discriminatory conduct”;
  • a “compliance officer” responsible for monitoring the implementation of the compliance programme.

The EP voted on two reports, which propose a draft amending directive to Directive 2003/55/EC concerning common rules for the internal market in natural gas and a draft amendment proposal to Regulation (EC) No 1775/2005 on conditions for access to the natural gas transmission networks, respectively.

Internal Market Issues

The report on the draft directive proposes to protect long-term supply contracts in the gas sector and proposes better regulation of international agreements between EU and non-EU countries as potential investors.

In addition to supporting unbundling through full separation of ownership via the ITO model, the report calls for a separation of storage and transmission system operators from supply activities depending on vertically integrated companies, with access to storage being regulated rather than negotiated.

The role of national regulators would be strengthened and harmonised in line with the Commission’s proposals, with national regulators having uniform powers to impose sanctions. Investment into regasification plants, gas storage plants and infrastructure is also proposed.

Amongst other measures, a ‘revision clause’ would provide for the new energy regulators' Agency to report on the effectiveness of the directive in ensuring independence of the transmission system operator (TSO), no later than 5 years after the directive has entered into force.

There are also strict consumer protection measures, which include addressing the needs of vulnerable consumers and making operators more responsible with regard to the quantity and quality of service offered to consumers. These are analogous to the proposed measures dealing with electricity consumers.

Access Issues

The amending regulation proposes greater cooperation between transmission system operators through the creation of a European network of gas TSOs (‘ENTSOG’), which would be responsible for dealing with technical matters relating to network third party access, security and reliability, interoperability rules and operational procedures.

The new energy regulators' Agency would have powers to approve the 10-year investment plan to be drawn up by ENTSOG in respect of network development on a regional, national and EU-wide levels.

Other proposals include:

  • strengthening the functioning of the internal market via integration of the market through regional initiatives between TSOs and regulators;
  • harmonising rules for storage system operators with the existing provisions concerning TSOs to create a common approach for third party access;
  • extending the existing transparency requirements for TSOs to cover commercial gas stocks, forecasts of demand on and availability of capacities and costs for balancing the network and trading capacity.

To access the European Parliament’s press release, please click here.

To access our previous Law-Now on the adoption of third package proposals, please click here.

To read our previous law-now on the Energy Council’s broad agreement on the third package proposals, please click here.

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