The document discusses the status and consequences of unbundling in energy markets following liberalization. It covers: 1) The requirements for legal and functional unbundling of distribution and transmission system operators, including establishing independent corporate identities. 2) Examples of cases where operators in Austria have been certified as independent transmission or distribution system operators. 3) The penalties energy regulators can impose on operators that fail to properly legally unbundle or comply with unbundling rules, such as fines up to 10% of annual turnover.

1. Unbundling: Status and Consequences
Bernhard Painz,
Head of Gas Department, E-Control

2. 2
Agenda
• Liberalization of Energy Markets / Unbundling
• Distribution System Operator (DSO)
• New Corporate Identity
• Transmission System Operator (TSO)
• Cases
• Consequences
• Penalties / Offences
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3. Liberalization of Energy Markets
Unbundling
3

4. (Un-)Bundling?
4 4

5. Unbundling!
Before Liberalization:
• All from one source
• One undertaking
• Vertically Integrated
Undertaking (VIU)
After Liberalization in 2001:
• Supplier = selectable
• TSO/DSO
– Monopolist
– Independent Prod./Supply
5
Grid (transmission and
distribution system operator
TSO/DSO)
Production
Supply
VIU
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6. Unbundling for DSO
6

7. 7
Unbundling: DSO (Art 26)
• Legal Unbundling
 Independent legal body
• Functional Unbundling
– Effective decision making rights
– Independent
– Necessary human, technical, physical, financial resources
(3rd Package!)
– Separate corporate identity (3rd Package!)
– Fully independent compliance officer
• Unbundling of Accounts
– Separate accounts
– No cross-subsidies
20140314, Vienna Vienna Forum on Energy Law

8. New Corporate Identity
(DSO and ITO)
8

9. New Corporate Identity
• Art 17, 26 Directive 2009/72/EC, 2009/73/EC
„shall not […] create confusion“
• Criteria: Trade Mark Law
- Company name
- Company Logo
- Color of the brand
- Etc.
No possibility of confusion !!!!
Average customer !!!!
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10. Cases
• ITO / TSO:
• DSO:
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11. Unbundling for TSO

12. 12
Unbundling: TSO (Art 9)
• From 3. 3. 2012
• 4 Options:
– Ownership Unbundling
– ISO: Independent System Operator
– ITO: Independent Transmission Operator
– ITO+: more effective independence of the TSO than ITO
3. 9. 2009
Standard Model

13. 13
Ownership Unbundling
– TSO is owner of the transmission system
– VIU is not owner under company law of the
TSO (only minority shares – but without any
„rights“)
– Independence of the TSO
– No decisive influence
– No rights (e.g. power to exercise voting
rights)
– Exemptions
– Member State / Public Body
• „Truly separated“
• No commercially sensitive
information
– New Infrastructure
• Tariff Regulation
• Third Party Access
• Ownership Unbundling
• Temporary / limited
VIU
TSO
System Owner & System Operator
Vienna Forum on Energy Law

14. 14
Independent System Operator (ISO)
– System Owner is not the System
Operator
• System Owner shall not be
responsible for granting TPA,
investment planning
• System Owner shall cooperate with
ISO
• Legal Unbundling of System Owner
– Designation of an ISO
• necessary human, technical, physical,
financial resources responsible for
granting TPA, collecting access
charges, operating, maintaining
• Outsourcing possible
• but not to VIU or System Owner
VIU
TSO
System Owner
ISO
System Operator
20140314, Vienna
Vienna Forum on Energy Law

15. 15
Independent Transmission Operator
(ITO)
• ITO is the System Owner
– necessary resources and personnel
– own „corporate identity“
– No rendering of services (and leasing of
personnel) from VIU
– Core business (Operation, Maintenance,
Development, etc.)
• No sharing of IT-systems, premises
Compliance Officer & Programme
• Independence of the Management
– Cooling-on, -off, no business relationship,
no shares
• Independence of the Supervisory Body
• No influence to day to day activities and 10-
years-investmentplan
• 50 % -1 member shall be „independent“
VIU
ITO
System Owner+
System Operator
NRA
20140314, Vienna Vienna Forum on Energy Law

16. Cases

17. Cases in Austria
• Ownership Unbundling:
– Vorarlberger Übertragungsnetz GmbH (V ZER 02/11)
– Nabucco Gas Pipeline International GmbH (V ZER G 04/12)
• ITO:
– Austrian Power Grid GmbH (V ZER 02/11)
– Gas Connect Austria GmbH (V ZER G 01/12)
– Baumgarten-Oberkappel GasleitungsgesmbH (V ZER G 02/12)
• New Procedure: V ZER G 01/14
•  ITO; Completion Q2 / 2014
• ISO:
– Trans Austria Gasleitung GmbH (V ZER G 03/12)
• New Procedure: V ZER G 04/13
•  ITO; Completion Q2 / 2014
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18. Principles
• Assets owned by TSO (e.g. APG, GCA, VÜN, BOG)
– But: „pipe-in-pipe“ (e.g. GRTGaz/MEGAL)
“ownership of the transmission system assets is shared between two TSOs, where these
TSOs have joint control over the transmission assets and where they have rights of use
and disposal over a part of the transmission system that are equivalent to those of an
owner (Eigentümergleiche Verfügungsbefugnis), and which allow them to operate
their part and develop it independently and without being hindered, the certification of
such TSOs should in principle not be withheld as regards compliance with Article
9(1)(a) of the Directive“
• Core activities within TSO (e.g. APG, GCA, BOG)
– But: outsourcing possible at OU, ISO (e.g.
Vorarlberger Übertragungsnetz GmbH as OU)
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19. Principles
• Prohibition of services provided to the ITO by other parts of
the VIU
– But: telecommunication services (e.g. APG)
“derogation could only be envisaged in exceptional circumstances. Such derogation
should be construed narrowly and should not go beyond what is strictly necessary to
protect overriding interests, such as the security and the reliability of the transmission
system. Only in exceptional cases, where the services concerned are strictly necessary
to protect overriding interests as referred to above, and where no other service
provider except for the VIU could provide these services to the ITO, could a derogation
possibly be considered justified. Such derogation should also in principle be of a
transitional nature, limited in time.”
• ITO remains part of the VIU (e.g. GCA, APG)
– But: in respect of outsourcing of tasks (e.g. BOG)
“certified ITO should not be considered as ordinary "other part" of the VIU”
“it diminishes the possibilities for a conflict of interest“
“Still, assessment will be needed” 19

20. Consequences

21. Consequences
• simultaneous participation in a TSO and in generation,
production and/or supply activities
– THE COMMISSION'S PRACTICE IN ASSESSING THE PRESENCE OF A
CONFLICT OF INTEREST INCLUDING IN CASE OF FINANCIAL INVESTORS
http://ec.europa.eu/energy/gas_electricity/interpretative_notes/doc/implementation_notes/swd_2013_0177_en.pdf
In-depth analysis
Case-by-case
• Cases:
– Swedegas (Sweden): Waste disposal company generating
electricity in neighbor country
– National Grid (UK): under control of National Grid USA
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22. Consequences
– 50 Hertz Transmission (Germany): IFM Global
Infrastructure Fund several participations in
generation/supply
– Società Gasdotti (Italy): Eiser Global Infrastructure
Fund participation in generation
– TAG (Austria): Cassa Depositi e Prestiti participation
in ENI („Separate Account Regime“ – power of
guidance of Ministry)
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23. Penalties / Offences

24. Penalties
Art 37 (4) (d) Directive 2009/73/EC;
Art 41 (4) (d) Directive 2009/73/EC
• Effective
• Proportionate
• Dissuasive
– Administrative Penalties
• No Application for Certification – EUR 150.000,--
• Repellent decision – EUR 150.000,--
• Fail to comply with Unbundling Rules – EUR 50.000,--
to EUR 75.000,--
– Discrimination and finable Offences
• 10 % of the annual turnover
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25. 25
Bernhard Painz
 + 43 1 24 7 24 801
 bernhard.painz@e-control.at
 www.e-control.at
Contact
20140314, Vienna Vienna Forum on Energy Law

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