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How far can Member States go to derogate from Third Package obligations and maintain price controls?

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Rozeta Karova presents at the Vienna Forum on European Energy Law, 2013

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How far can Member States go to derogate from Third Package obligations and maintain price controls?

  1. 1. - Prepared by ECS - 1 How far can Member States go to derogate from Third Package obligations and maintain price controls? Energy Community Secretariat Rozeta Karova, Ph.D. Vienna Forum on European Energy Law 8 March 2013, ECS, Vienna
  2. 2. - Prepared by ECS - 2 Outline of the presentation  What is the problem with price regulation?  End-users’ price regulation under EU law  PSO: meaning v understanding and usage  ECJ on Member States’ intervention in price regulation  Post-Federutility: Member States’ understanding of the judgment  Actions of the EU Commission and of the ECS  Concluding remarks
  3. 3. - Prepared by ECS - 3 What is the problem with regulated end-users prices? If end-users’ prices are regulated at a low (non-cost reflective) level:  Prevent market entry for new suppliers  Limited number of suppliers => limited wholesale and retail market competition => negative impact on customers’ choice & no incentive for customer’s switching  No incentive for investments => endanger viability of companies & energy system as a whole => risk for SoS  Low prices give wrong signals both to investors & population => no incentive for energy efficiency  Applied in a non-targeted way => should be decoupled from social protection
  4. 4. - Prepared by ECS - 4 End-users’ price regulation under EU law  Not addressed explicitly, but could fall under Article 3 Directives 2009/72/EC and 2009/73/EC  Article 3(7) ED and 3(3) GD – vulnerable customers’ protection non-tariff v tariff protection  Article 3(3) – provision of universal service (electricity) the right to be supplied with electricity of a specified quality at easily and clearly comparable, transparent and reasonable prices  Article 3(2) – PSO related to price of supply  State aid  Court of Justice case law: Federutility case (Case C-265/08, 20.04.2010)
  5. 5. - Prepared by ECS - 5 PSO - tool to address liberalisation impact: meaning v understanding and usage  PSO in the EU acquis  Provision of SGEI – from derogation of the Treaty rules to positive obligation of the MS & the Community (Art.14TFEU)  SGEI = economic public service  PSO = sector-specific tool for providing SGEI  Types of PSO • USO for HH and SMEs • PSO related to price of supplies for all customers  Understanding & (ab)use of PSO at national level  SGEI / public service – key concept  Whole sector = public service  Public services = Universal service  Incumbents in charge with providing PSO  No understanding of PS Obligation & lack of notification  PSO shall be an exception NOT a rule Temporary, clearly defined, verifiable, transparent, objective and non- discriminatory measures with clear criteria for calculating the compensation (Article 3(2) ED and GD)
  6. 6. - Prepared by ECS - 6 Court of Justice on end-users’ price regulation Federutility case  The State intervention in determination of price of supply is permitted (para.24) if: Justified in the general economic interest  Compliance with principle of proportionality:  transitory intervention with limited duration and the administration to make a periodic reexamination at close intervals (para.35)  not to go beyond what is necessary to achieve the objective (para.36) & limited to the price component influenced by the specific circumstances, but not to the final end-users’ price (para. 38)  scope of beneficiaries – all customers - including undertakings (irrespective of size) - may benefit (para.41), but not in an identical manner as HH and SMEs (para.43)  Compliance with criteria from Article 3(2):  PSO must be transparent, non-discriminatory, verifiable...
  7. 7. - Prepared by ECS - 7 Post-Federutility: EU Member States  AEEG Decision n. 79/07 and subsequent decisions challenged before T.A.R. => preliminary ruling  T.A.R. decision after ECJ challenged again => Decision of Consiglio di Stato (n. 7645, 28.10.2010):  Price intervention attains an objective GEI - protects final customers from excessive price rises (volatiliity of oil prices at int. market)  National law allows price intervention as long as justified by market conditions  The measure suitable for the goal of protecting final customers against price rises (concentrated wholesale market and undeveloped retail market)  AEEG decision allows reference prices only for undertakings with low consumption  Satisfies conditions of Art. 3(2)
  8. 8. - Prepared by ECS - 8 EU Commission & EnC Secretariat’s actions  EU Commission  several waves of infringement proceedings against EU MS (2006, 2009, 2012)  no case in front of the Court of Justice  Energy Community Secretariat  Analytical paper (presented at PHLG, consulted with Electricity and Social Fora and submitted for public consultation)  joint action needed as more CPs are concerned  limited to what is really needed to attain objectives of EnCT  not only price regulation but also issued closely linked  coupling with measures on social protection  Recommendation  presented at PHLG (June and October 2012)  published on the ECS website  Future steps – dispute settlement
  9. 9. - Prepared by ECS - 9 Concluding remarks  Price regulation NOT prohibited by the acquis BUT can be allowed only:  for protection of vulnerable customers  as a USO – only for HH and SMEs for supply at reasonable prices  as a price of supply PSO for all customers  Under strict conditions:  Shall satisfy the conditions from Article 3(2)  Shall be compliant with requirements from Federutility case (price component only; lack of effective (?!) competition)  Shall be notified to the Commission / ECS NEW  NRA shall monitor level & effectiveness of market opening & competition, including HH prices NEW  NRA shall assess compliance of supply prices with Art.3 on annual basis & NCAs to be informed if needed NEW PSO – a tool for balancing diverging interests; price regulation – obstacle for achieving competitive energy market => shall be an exception NOT a rule => It will hardly be justified for protection of large undertakings
  10. 10. - Prepared by ECS - 10 Thank you for your attention! Rozeta KAROVA Energy Lawyer Energy Community Secretariat Am Hof 4, Level 5 A-1010 Vienna Email: rozeta.karova@energy-community.org website: http://www.energy-community.org/

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