Making the regulators stronger

If, as seems likely, the national governments that have not introduced ownership unbundling refuse to go down that route, the European Commission is insisting on strengthened powers for national regulators and more effective cross-border co-operation and regulation.

While the Commission is stopping short of merging existing national regulators into a new pan-European body, it has no doubt that there should be a stronger central regulatory body. It believes that some regulators tend to focus on short-term national concerns rather than pro-actively trying to develop integrated markets.

In a paper sent to energy ministers for discussion at their meeting in June, the Commission called for the role of Ergeg, the European Regulators Group for Electricity and Gas, to be formalised, instead of being simply an advisory body as at present. It suggests that the new body should be able to draft "binding decisions" for regulators and market players such as network operators, power exchanges or generators on technical issues such as standards and cross-border issues.

The Commission wants this body to have decision-making powers on the implementation of general rules in specific cases, including the ability to adopt decisions which would be legally binding for third parties. It should also be able to make recommendations to the Commission on what legislation is needed for general rules. The Commission insists that it would not replace national regulators but the national regulation would be "strengthened" by the mechanism.

The main job of this strengthened body would be to oversee the work of transmission system operators (TSOs) which are co-operating as well as reviewing market and technical codes and investment planning, both at regional and EU level. The Commission believes that this mechan-ism would be able to focus on the most critical issues for market access and creating a truly competi-tive internal market.

Ergeg itself has proposed a European System of Energy Regulation (ESER) which would deal with cross-border issues such as market oversight, monitoring and information-sharing, investigations and enforcement. There should also be a mechanism to ensure that TSOs develop and operate their networks as part of a single EU grid. Ergeg also recommends that the powers of national regu-lators should be levelled up and harmonised, and their political and commercial independence should be guaranteed.

Eurelectric, the European electricity industry association has backed this approach. Speaking at Eurelectric’s annual conference in Antwerp on 11 June, Rafael Miranda, the organisation’s president, said: "If the suggested Ergeg-plus model for regulator-co-operation is to deliver a more European approach capable of overcoming current difficulties with cross-border issues, the Commission must be given a role to oversee the process and take appropriate action."

The extent to which EU governments sign up to a strengthened central body when the Commission presents its legislative proposals in September will depend on how far-reaching are the plans put forward by Andris Piebalgs, the energy commissioner.

There is little appetite for a new single European regulator to replace current national bodies, although there is support for a mechanism to strengthen the powers of regulators on cross-border issues, if it enables them to deal more effectively with issues such as grid connection, wholesale market transparency, balancing settlement rules, data exchange by TSOs and security of supply. EU governments insist that additional powers for a centralised regulatory body should be proportionate to the issues being addressed and that extra costs at central level should be offset by savings at national level.

If, as seems likely, the national governments that have not introduced ownership unbundling refuse to go down that route, the European Commission is insisting on strengthened powers for national regulators and more effective cross-border co-operation and regulation.