Liberalization of Electricity Markets and Public Service Obligations in the Energy Community. Rozeta Karova. Wolters Kluwer Law & Business

Transcription

1 Liberalization of Electricity Markets and Public Service Obligations in the Energy Community Rozeta Karova Wolters Kluwer Law & Business

2 List of Figures List of Tables List of Abbreviations Preface Acknowledgements Introduction xv xvii xix xxi xxiii xxv Parti The Framework 1 Chapter 1 From a Textbook Model to an Incrementally Developing European Model for the Liberalization of Electricity Markets 3 1. The Textbook Model of Electricity Market Liberalization 4 2. Regulation of Electricity Markets before Liberalization: Strong Regulation of a Natural Monopoly Definition of Regulation Rationales for Regulation Network Industries: The Case of Electricity The Concept of a Natural Monopoly Regulation of a (Natural) Monopoly Regulatory Strategies Regulation of the EU Electricity Markets before Liberalization 18

3 3. Liberalization of the Electricity Markets in the EU: Compromise between the Member States The European Policy for Liberalization of Electricity Markets in the EU Defining the Concept of Privatization and Reasons for Privatization Deregulation of the Electricity Industry Indicators for Liberalization Introducing Competition in the Electricity Industry Competition in the Wholesale Generation Market Competition in the Retail Supply Market Change in the Regulatory Strategy: Less Restrictive Regulation of the Remaining Monopolistic Activities The Incrementally Developed European Model of Liberalization The De Facto Liberalization of the European Electricity Markets The European Model of Liberalization of the Electricity Industry The EU Legal Framework Application of the Treaty Rules to the Electricity Sector Sector-Specific Legislation Sector Inquiry and the Third Package for Liberalization Overview and Development of the Key Provisions of the Electricity Directive First Intermediary Remarks 51 Chapter 2 PSO as a Regulatory Tool to Tackle the Impact of Electricity Market Liberalization Sequential Development of the PSO Concept and its Interpretation in Case Law Change in the Policy of State Intervention in Markets The Tensions between Conflicting Values and Regulatory Techniques The Legal Basis for Services in the General Interest and the CJ Case Law Article 37 TFEU and Article 106 TFEU Article 37 TFEU Article 106 TFEU The Energy Monopoly Cases Article 14 TFEU: From the Treaty of Amsterdam to the Lisbon Treaty Article 36 European Charter on Fundamental Rights 67 viu

4 2. SGEI Seen through the Eyes of the Different Actors in the Liberalization Process: The European Commission, the European Courts and the Member States The Commission's Documents: How difficult it is for European Definitions to Develop? Services of General Interest Services of General Economic Interest Non-economic Services of General Interest Public Service Obligation The Link between the Public Service Obligation and Universal Service Public Service Obligations: A Sector-specific Regulatory Tool to Balance Conflicting Values The EU Legislator: Conditions for PSOs Assessment under Article 3 Electricity Directive Publication of PSO and Article 3(2) Electricity Directive Notification of PSO PSO as a Justification for Derogations from the Electricity Directive Financial Compensation or Granting Exclusive Rights The Member States Filling in the Gaps: National Solutions for Implementing PSOs Types of PSOs Price of Electricity Supply: Regulated End-user Energy Prices End-user Energy Price Regulation in the Member States of the EU: An Overview The Commission's View on Regulated Enduser Electricity Prices: Investigations and Infringement Procedures Security of Electricity Supply What Is Security of Electricity Supply? How Can Security of Supply Be Provided? Security of Electricity Supply in the EU Acquis Security of Supply Measures that the Member States Adopt for Ensuring Security of Supply, and the Commission's Position The Court of Justice Corrective Function: How much Flexibility Remains for Member States? CJ's Interpretation of Regulated End-user Prices as a PSO: Questioning the Speed of the UK-Inspired Commission Policy for Liberalization? 105 IX

5 Justification of Regulated End-user Prices as PSO: Lessons from the Member States Regulated Prices for Vulnerable Customers (Article 3(7) and Article 3(8)) - Is it Allowed as Protection? Regulated Prices for All Households and Small Businesses - Justified as a PSO under the Universal Service Provision? Regulated End-user Electricity Prices for Medium- and Large size Businesses - also Justified as a PSO? CJ's Interpretation of Member States' Measures Related to Security of Supply Interaction between the Security of Supply Measures and the Establishment of Competitive Electricity Markets Assessment under Competition Law Assessment under the Electricity Acquis Justification of Measures for Security of Electricity Supply as a PSO: Lessons from Member States Second Intermediary Remarks 119 Chapter 3 The Power of the Commission in Implementing the Incrementally Developed European Model of Electricity Market Liberalization in Third Countries Export of the European Model to Central and Eastern Europe The European Union's Policy towards CEE Regulatory Strategies in CEE Lessons from Exporting the EU Electricity Acquis to the CEE Countries The New EU Policy and Regulatory Strategies for the Liberalization of SEE Electricity Markets The European Union's Energy Policy towards SEE The Athens Process: New Policy and Establishment of the Energy Community The Athens Memoranda Treaty Establishing the Energy Community Regional Initiatives for SEE Benefits from Regional Integration in SEE Regionalization Imposed on the SEE Countries from Outside Open Regionalism and Regional Ownership of Regional Initiatives in SEE The Rationale behind the Athens Process The Rationale of the EU to Launch the Athens Process 143

6 The Rationale of the SEE countries Benefits from Regional Integration and Establishing a REM The EU Membership Perspective Concluding Remarks on the Rationale behind the Athens Process Regulatory Strategies in the SEE Regulation of the Electricity Industry in Former Yugoslavia Regulatory Strategies for the Liberalization of Electricity Markets in the SEE: Using the Same Tools as in the Old Member States Third Intermediary Remarks 163 Part II Analysis of Electricity Market Liberalization in SEE 165 Chapter 4 Implementation of the Incrementally Developed European Model of Electricity Market Liberalization in Third Countries What is so specific about the SEE Electricity Markets? The Problems and Developments of the SEE Countries in the Years of Transition Difference between the Needs and Expectations of the Developing and Developed Countries Differences between the SEE and CEE Countries Establishing a REM Preconditions for Establishing a REM Benefits from the Creation of a REM and Obstacles for Effective Integration Development of the European ERI Definition of the SEE REM Implementing the European Model - Phase 1: National Reforms as Preconditions for SEE REM Legislative Reforms Institutional Reforms Independence and Competences of the NRAs International Cooperation and Regional Institutional Activities Economic and Structural Reforms: Restructuring and Privatization Wholesale Electricity Markets in the Contracting Parties Generation Markets TSOs Unbundling TPA and Adoption of Technical Rules 211 XI

7 3.5. Retail Electricity Markets in the Contracting Parties DSO Unbundling from the Supply and Generation Activities Definition of Traders and Suppliers Licensing and Numbers of Traders and Suppliers Market Opening and Eligibility Threshold Implementing the New European Policy for SEE - Phase 2: Market Design and Cross-Border Issues National Market Designs Standard Market Design for SEE REM Cross-Border Issues Inter-TSO Compensation Mechanism (ITC Mechanism) Access Charges Capacity Allocation and Congestion Management: The SEE CAO The ERI Approach towards Common Congestion Management The Common Congestion Management in the Eight REM: The SEE CAO Transparency Requirements Outlining the Progress and Identifying the Obstacles in the Liberalization Reforms in the Contracting Parties Progress in the Reforms at National and Cross-Border Levels Obstacles to Trade in the SEE REM Fourth Intermediary Remarks 267 Chapter 5 Rethinking Liberalization through an Analysis of PSO: Is PSO a Useful Tool to Tackle the Impact of Electricity Market Liberalization in the Contracting Parties? Understanding the PSO in the Contracting Parties Assessment of PSOs in the Contracting Parties under Article 3 Electricity Directive Defining the PSOs in the Contracting Parties - Are They Clearly Described, Transparent, Non-discriminatory and Verifiable? Price of Supply PSO Measures in the Contracting Parties End-user Energy Price Regulation in the Contracting Parties Legislative Analysis of Tariff Methodologies Customer Categories in the Contracting Parties Regulated Prices, Tariff Evolution and Cross-subsidies in the Contracting Parties Breakdown of Electricity Revenues Relationship Between Tariff Levels and Consumption Patterns 302 xn

8 Reversibility and Road Maps for Abolishing Regulated Prices: Tariff Reforms Some Summary Remarks on Regulated End-user Electricity Prices Interaction Between the Regulated End-user Electricity Prices and Opening the Retail Electricity Markets to Competition: How much Discretion Remains for the Contracting Parties after Learning the Member States' Lessons? Alternatives to the Regulated End-user Electricity Prices Energy Poverty and the Affordability Issue Protection of Vulnerable Customers in the Member States: An Overview Protection of Vulnerable Customers in the Contracting Parties Definition of Vulnerable Customers Measures for Protection of Vulnerable Customers Concluding Remarks on the Definition and Measures for Protection of Vulnerable Consumers in the Contracting Parties Customer Protection in the Contracting Parties PSO Measures Related to Security of Supply in the Contracting Parties Security of Supply in the Energy Legislation of the Contracting Parties Analysis of the Security of Supply Measures in the Contracting Parties The Interaction Between the Security of Supply PSOs and Opening of the Wholesale Electricity Markets to Competition: Drawing on the Lessons from the Member States Fifth Intermediary Remarks 346 Conclusion Conceptual Remarks Recommendations in Relation to Understanding and Defining the PSOs Proposal for Notification of PSOs The Role of the Different Actors in the Liberalization Process Recommendation for more Efficient Use of the PSO Tool Policy Lessons for the Contracting Parties Related to Price of Supply PSO and Proposal for Alternative Measures for Customer Protection Proposals for Identification of Vulnerable Customers Proposals for Measures for Protection of Vulnerable Customers Other than Price Regulation Policy Lessons for the Contracting Parties in Relation to the Security of Supply PSO Measures 366 Xlll

9 3.3. Regulated Price of Electricity Supply and SoS Measures as PSOs: Interaction Policy Lessons for the EU and the Path Forward for the Contracting Parties 370 Appendices 375 Annex I: Market Participants in the Electricity Markets of the Contracting Parties 375 Annex II: Energy Consumption and Supply, and Installed Capacity to Meet Electricity Demand in the Contracting Parties 382 Bibliography 389 Table of Statutes 403 Table of Cases 413 Energy Community Documents 415 Index 423 xiv