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TSO Certification: Specific Issues

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Thomas Starlinger (formerly of Fiebinger Polak Leon) presents the opinions of the European Commission on the certification of TSOs at the Vienna Forum on European Energy Law, 2014

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TSO Certification: Specific Issues

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  2. 2. Certification of TSOs Opinions of the European Commission Brief overview Disputed issues Thomas Starlinger
  3. 3. Content  Background  General  Definition of the VIU  Core tasks of a TSO  Outsourcing  Service provision of the VIU to the ITO  Definition of VIU – production assets  ITO  Independence of the board members  Participation in another transmission system  Ownership  ITO  ISO Thomas Starlinger, 14.3.2014 3
  4. 4. Background Third Energy Package 2009  Unbundling of TSOs  OU  ISO  ITO  ITO +  Deadline 03.03.2012  77 opinions issued from November 2011 until December 2013 • Nordeuropäische Erdgasleitung: 3 September 2009 • Scottish Transmission companies: ITO+ Thomas Starlinger, 14.3.2014 4 Nordeuropäischen Erdgas-Leitung (NEL), C(2013) 7019, 18.10.2013, Nr. 74. TSOs in Scotland: C(2012) 3284, 14.5.2012, Nr. 14.
  5. 5. Definition of the VIU Art 2 (20) Directive 2009/73/EC (Art 2 (21) Directive 2009/72/EC identical) a VIU is “a natural gas undertaking or a group of natural gas undertakings where the same person or the same persons are entitled, directly or indirectly, to exercise control, and where the undertaking or group of undertakings perform at least one of the functions of transmission, distribution, LNG or storage, and at least one of the functions of production or supply of natural gas”. “Open Grid Europe GmbH”  Part of the VIU is every associated entity regardless of the scope of their business Thomas Starlinger, 14.3.2014 5 Open Grid Europe GmbH, C(2013) 6444, 30.9.2013, Nr. 71.
  6. 6. Core tasks of a TSO Art 13 (1) (a) Directive 2009/73/EC (Art 12 (1) (a) Directive 2009/72/EC Each TSO shall “operate, maintain and develop under economic conditions secure, reliable and efficient transmission […] facilities to secure an open market, with due regard to the environment, ensure adequate means to meet service obligations” outsourcing? Thomas Starlinger, 14.3.2014 6
  7. 7. Outsourcing? OU  “Vorarlberger Übertragungsnetze GmbH”  no sub-contracting of core tasks  should carry out „administration of the transmission system“ and „control room services“ itself  “Premier Transmission Limited”  “… have sufficient resources to oversee, control and provide instructions to the subcontractor. Only entities which meet the unbundling requirements for gas transmission system operation should be eligible to provide such services.” Thomas Starlinger, 14.3.2014 7 Vorarlberger Übertragungsnetze GmbH, C(2012) 2244, 29.3.2012, Nr. 9. Premier Transmission Limited, C(2013) 4657, 16.7.2013, Nr. 64.
  8. 8. Outsourcing? “Premier Transmission Limited”  “either if the transmission system is operated jointly as part of a wider transmission system or  if a fully resourced transmission system operator makes an independent commercial decision to sub-contract services on efficiency grounds.”  Addition according to the opinion on the “Moyle Interconnector”: “Only other TSOs which meet the unbundling requirements … can provide this joint operation. … However it remains important that each … continues to have the necessary powers and resources both to develop their own system and satisfy themselves that the operation of their system is being carried out in a non-discriminatory way.” Thomas Starlinger, 14.3.2014 8 Premier Transmission Limited, C(2013) 4657, 16.7.2013, Nr. 64. Moyle Interconnector Limited, C(2013) 4398, 8.7.2013, Nr. 63.
  9. 9. Outsourcing? ISO  „responsible“ for third party access, operation, maintenance and development of the pipeline system  “TAG”  supervision and independence of the subcontractor  not in a way that owner is exercising core tasks Thomas Starlinger, 14.3.2014 9 Trans Austria Gasleitung GmbH, C(2013) 649, 4.2.2013, Nr. 43.
  10. 10. Outsourcing? ITO “Only if the ITO has employed a sufficient number of staff members for day-to-day handling of these activities may it, in specific circumstances and by way of exception, conclude contracts with third-party service providers for legal, IT, or accountancy services. The same applies to specific services relating to, for example, the development and repair of the network” (Interpretative Note) Thomas Starlinger, 14.3.2014 10
  11. 11. Outsourcing? ITO  “BOG“  “… must have all the necessary resources to ensure that it can adequately fulfill its tasks as an ITO independently. In the present case, the Commission observes that key functions are not exercised by BOG. De facto, the operation of WAG is split over BOG and GCA.”  “Thyssengas“  “The Commission furthermore agrees that the aforementioned services are to be carried out by the TSO itself as the assessment and decisions regarding investments and infrastructure projects constitute a core task of a TSO and should be taken without being potentially influenced by undertakings with supply or production interests”. Thomas Starlinger, 14.3.2014 11 Baumgarten-Oberkappel Gasleitungsges. m. b. H, C(2013) 963, 15.2.2013, Nr. 47. Thyssengas GmbH, C(2013) 570, 30.1.2013, Nr. 42
  12. 12. Service provision of the VIU to the ITO Art 17 (1) (c) Directives 2009/72(73)/EC  General prohibtion “exceptional circumstances“  Such derogation should be  construed narrowly,  not go beyond what is strictly necessary to protect overriding interests,  no other service provider,  transitional nature and  transactions occur at arm’s length. Thomas Starlinger, 14.3.2014 12
  13. 13. Service provision of the VIU to the ITO Open Grid Europe GmbH • Assessment depends on the relation of the task to the TSO activities • “In principle however, tasks that are not closely related to the transmission activity raise less of a concern, because in such cases the risk of compromising the independent network operation is small.” Thomas Starlinger, 14.3.2014 13 Open Grid Europe GmbH, C(2013) 6444, 30.9.2013, Nr. 71.
  14. 14. Definition of VIU – production assets Geographic scope  E.g. participations located in the US (Swedegas (OU), 50 Hertz (OU), National Grid (OU)) Significance  Swedegas: waste treatment company – limited quantities of electricity as a by-product, pre- established prices (similar 50 Hertz)  Red Eléctrica (OU): regulated framework, small size (0.1375%) Thomas Starlinger, 14.3.2014 14 Swedegas AB, C(2012) 3009, 30.4.2012, Nr. 13. 50 Hertz Transmission GmbH, C(2012) 6260, 6.9.2012, Nr. 21. National Grid Companies, C(2012) 2735, 19.4.2012, Nr. 10. Red Eléctrica de España, S.A.U., C(2012) 3526, 24.5.2012, Nr. 15.
  15. 15. Potential for discrimination? Participation in storage facilities, activities in exchanges • Energinet.dk (OU): “ownership and operation of a gas storage facility falls outside of the scope of relevant activities listed in Article 9(1)b(ii) juncto Article 9(3)” • Operation of power and gas exchanges cannot be qualified as “supply” Thomas Starlinger, 14.3.2014 15 Energinet.dk, C(2012) 88, 9.1.2012, Nr. 6
  16. 16. ITO - Independence of the Management/Supervisory Board Art 19 (3) Directive 2009/72(73)/EC – cooling on 3 years  Austrian Gas Act 2011, German EnWG: only applicable to appointments after March 3, 2012  Commission: not in line with the Directive, independence has to be ensured German EnWG interests in VIU can be kept by the management until March 31, 2016  Commission: not in line with Directive, financial interests should at least be given in the hands of a trustee Thomas Starlinger, 14.3.2014 16
  17. 17. Participation of an ITO in another transmission system? Objective of unbundling?  Effective and efficient separation of networks from activities in production and supply “BOG”  in corporate law terms, the ITO remains part of the VIU, therefore the ITO-model can be chosen  with regard to the prohibition of the rendering of services the shareholder GCA as effectively unbundled ITO should not be considered as ordinary “other part” of the VIU; the possibility of a conflict of interest is minimized Thomas Starlinger, 14.3.2014 17 Baumgarten-Oberkappel Gasleitungsges. m. b. H, C(2013) 963, 15.2.2013, Nr. 47.
  18. 18. ITO - Ownership of network „Bruchteilseigentum“ • Co-ownership is possible, if co-owner has the same degree of independence as the TSO which co-owns. • Bundesnetzagentur: TSO has to be able to act both legally and de facto in a manner comparable to that of an owner. Pipe-in-Pipe concept (jordgas, GRTgas) • Pipeline is virtually splitted into several pipelines • Joint control and rights of use and disposal equivalent to those of an owner • Independent operation and development jordgas Transport GmbH, C(2012) 6255, 6.9.2012 , Nr. 27. Open Grid Europe GmbH, C(2013) 6444, 30.9.2013, Nr. 71 GRTgaz Deutschland GmbH, C(2012) 6257, 6.9.2012, Nr. 26 Thyssengas GmbH, C(2013) 570, 30.1.2013, Nr. 42 Gasunie Deutschland Transport Services GmbH, C (2012) 9102, 3.12.2012, Nr. 37 Thomas Starlinger, 14.3.2014 18
  19. 19. ISO - Partial ownership of the transmission system „Transelectrica“ and „Transgaz“ • Transmission system partially owned by the state and by the TSO • „not the typical background for which the ISO model was established“ • Conclusion that ISO-model is not appropriate for such a situation • Preference of the OU-model Thomas Starlinger, 14.3.2014 19 Companiei Naţionale de Transport al Energiei Electrice “Transelectrica” S.A. , C(2013) 6891, 14.10.2013, Nr. 73. Societatea Națională de Transport Gaze Naturale Transgaz S.A., C(2013) 8485, 25.11.2013, Nr. 76.
  20. 20. Thomas Starlinger A-1060 Wien, Am Getreidemarkt 1 Telefon: +43 1 582 580 Telefax: +43 1 582 582 E-Mail: t.starlinger@fplp.at

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