We speak for more than 3,500 companies in power generation, distribution, and supply.

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1 European Commission guidelines on legal, technical and financial arrangements for the application of solidarity in the new Security of Supply gas regulation EURELECTRIC comments October 2017

EURELECTRIC is the voice of the electricity industry in Europe. We speak for more than 3,500 companies in power generation, distribution, and supply.

2 EURELECTRIC is the voice of the electricity industry in Europe. We speak for more than 3,500 companies in power generation, distribution, and supply. We Stand For: Carbon-neutral electricity by 2050 We have committed to making Europe s electricity cleaner. To deliver, we need to make use of all low-carbon technologies: more renewables, but also clean coal and gas, and nuclear. Efficient electric technologies in transport and buildings, combined with the development of smart grids and a major push in energy efficiency play a key role in reducing fossil fuel consumption and making our electricity more sustainable. Competitive electricity for our customers We support well-functioning, distortion-free energy and carbon markets as the best way to produce electricity and reduce emissions cost-efficiently. Integrated EU-wide electricity and gas markets are also crucial to offer our customers the full benefits of liberalisation: they ensure the best use of generation resources, improve security of supply, allow full EU-wide competition, and increase customer choice. Continent-wide electricity through a coherent European approach Europe s energy and climate challenges can only be solved by European or even global policies, not incoherent national measures. Such policies should complement, not contradict each other: coherent and integrated approaches reduce costs. This will encourage effective investment to ensure a sustainable and reliable electricity supply for Europe s businesses and consumers. EURELECTRIC. Electricity for Europe. WG Gas to Power Contact: Blandine MALVAULT, Advisor Wholesale Markets Gas to Power Financial Regulation & Market Integrity bmalvault@eurelectric.org

3 KEY MESSAGES 1. Recourse to the solidarity mechanism by a Member State implies that the gas market s operation in this Member State is suspended. Therefore, a pricing mechanism relying to the maximum possible extent on market data, while protecting market participants and customers from excessive charges/ losses, should be considered. 2. Once the solidarity mechanism is triggered, the gas process should reflect the actual costs incurred by the helping Member State, including network costs. The methodology principles for the determination of gas prices should be the same across the EU. 3. Remuneration mechanisms to the helping Member State for providing solidarity, as well as compensation for curtailing supply to non-protected customers, should be defined on the basis of EU-wide principles. Such principles should ensure that individual Member States policies might not lead to market distortions across the EU. 4. Solidarity provisions for gas should be aligned with those applicable for electricity. Any misalignment might lead to market distortions and/or gas and electricity network operation problems. 5. It is key to have the same principles applicable across the EU for a Member State to resort on emergency measures and/or request for solidarity. Such principles should be clearly defined in a way to carefully balance the danger of an early suspension of the market operation as a result of an early emergency declaration - and the risk of letting an emergency situation develop to a level which might no longer be easy to manage. 6. EURELECTRIC welcomes the principle that the financial responsibility related to compensation should ultimately also be with the Member State concerned. It would indeed prevent undertakings supplying solidarity to bear the credit risk and ensure them being paid in due time. That principle should also apply to interrupted customers eligible to compensation. Moreover, should compensation for curtailed customers being determined in national law, it must be set in a European framework to ensure a minimum harmonisation (on behalf of both the common security of supply standards and the solidarity principle itself), in order to avoid too large discrepancies of compensation regimes between Member States. 7. Furthermore, costs to be paid to stakeholders providing solidarity should also include a risk premium, in addition to all other costs related to the delivery of the gas molecule itself (shipping over costs included), on behalf the service delivered in this tense and emergency situation (i.e. insurance value). 1

4 MORE IN DETAILS (PROPOSED ADDITIONS MARKED IN BOLD & ITALICS) - I. 1. on the solidarity mechanism : a. Markets / hubs prices need to be allowed to move freely even during an emergency. b. DG ENER introduces the concept of "VOLL of curtailed consumer groups. This suggests different VoLLs per type of customer ( cf. curtailed consumer groups ), depending on the value of gas for their business. Distortion effects should be avoided in setting the compensation mechanisms in case of curtailment: setting a too high uniform VoLL may lead to undue / excessive compensation for some end-users (for which the real VoLL may be lower). The value of gas may be different from an end-user (industrial) to another, and also between Member States. The compensation mechanism should avoid disintegration of gas markets throughout Europe, even in tense situations. - II. 1.1 on request for solidarity : a. A template agreed by Member States concluding a bilateral arrangement and attached to this arrangement should be a prerequisite, to ensure minimum standardisation in the way solidarity is triggered. b. Among the information necessary from the requester : Request for an offer / offers including price, volume, deliver points and time of delivery, as well as the profile of the volumes to be delivered. - II. 2.2 on the Gas volumes or the methodology for their setting : The sentence In the helping Member State, such gas volume limits the amount potentially available for solidarity; in the receiving Member State the critical gas fired power plants are prioritized over solidarity protected customers and so the gas volumes necessary for their operation have no impact on the potentially required volumes is unclear. - II. 3. on financial arrangements : a. The EC mentions that Many Member States do not pay compensation to curtailed consumer groups for forced curtailment in the case of a national emergency. The EC should give its opinion on this: is it acceptable? b. Apart from the VoLL-type approach, does the EC have in mind any other alternative? c. The EC also suggests that Member States may also decide to pay such compensation into a centrally managed 'solidarity fund. Such an alternative may be interesting, notably for credit risk management and could more elaborated; it also raises the following question: who brings money to this fund and how? d. A risk premium should be also considered, on behalf of the service delivered in this tense situation (i.e. insurance value). 2

5 - II. 3.1 on the price of gas : a. As a guiding principle, the price of gas should be the market price of the Member State from which the solidarity is provided. b. Should VOLL be implemented, it should be known or communicated to the Competent Authority or National Regulatory Authority in advance and has to be reflected in the curtailment order of the national emergency plans. - II. 3.2 on other categories of costs : a. Regarding the release of gas from strategic storages, the EC should not state that no additional compensation should be attached to their release except the price of gas with transport costs, as risk premiums should be considered. b. Regarding the costs of judicial proceedings, it is a quite tricky issue which raises the following question: how to avoid any perverse situation as described by the EC in this paper? If solidarity costs are not known before delivery, it may hamper the triggering of the solidarity itself, thus do not fit the purpose of the new Regulation. This issue has to be addressed by the Gas Coordination Group, but at a later stage. - II. 3.6 on Roles and responsibilities - who pays who or who arranges payments: a. Financial responsibility of compensation should be borne by Member States or National Regulatory Competent Authorities but not TSOs, nor suppliers. 3

6 EURELECTRIC pursues in all its activities the application of the following sustainable development values: Economic Development Growth, added-value, efficiency Environmental Leadership Commitment, innovation, pro-activeness Social Responsibility Transparency, ethics, accountability

7 Union of the Electricity Industry - EURELECTRIC aisbl Boulevard de l Impératrice, 66 - bte 2 B Brussels Belgium Tel: Fax: VAT: BE EU Transparency Register number:

CONTRIBUTION TO THE REVISION OF THE ENERGY TAX DIRECTIVE

Position Paper 5 November 2009 CONTRIBUTION TO THE REVISION OF THE ENERGY TAX DIRECTIVE During the stakeholder meeting on the revision of the Energy Tax Directive (ETD) of 28 September 2009, the European