Gas

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  • Market Reform
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Market Reform - 3rd Energy Package

The 3rd energy package of proposals, intended to complete the liberalisation of the markets, created a new European Regulators grouping – ACER, and two new Transmission System Operators (TSOs) groups – ENTSO-E (European Network of Transmission System Operators for Electricity) and ENTSOG (European Network of Transmission System Operators for Gas), and was approved in Brussels back in 2009.

The UK regulations, which should have ‘gone live’ back in March 2011, have now come into force. This is a complex set of legislative proposals which, inter alia will require numerous changes to UK networks’ licences. Our members have been actively involved in the UK transposition process.

Following up on the 3rd package, the Commission’s focus has now turned to the operation of the electricity and gas markets, and work is currently underway to develop target market models for both sectors.

ENA recently responded formally to a consultation from European Regulators, Council of European Energy Regulators (CEER), on the concept of a European gas target market model.  We reviewed the options for functioning wholesale markets, and concluded that a market area at a national level is preferable above a trading region or a cross border market. To “merge” markets via trading regions or cross-border areas would present numerous difficulties in the alignment of regulatory and operational arrangements that currently exist in each market. 

ENA considers the first step in enabling functioning wholesale markets should be the implementation of entry/exit zones and virtual trading points within all Member States, as required by the 3rd Package. The National Regulators, in coordination with Agency for the Cooperation of Energy Regulators (ACER), should cooperate to identify zones/market areas that could either merge or form a trading region. A full cost-benefit analysis on how best to proceed will be essential. 

CEER’s aim of implementing the trading regions or market areas by 2013, and presenting the initial conclusions of the pilot projects by 2014, is probably too ambitious, especially considering the necessary Distribution System Operators (DSOs) and Transmission System Operator (TSO) developments that will need to be implemented.  We believe that is vital that distribution system operators are involved in the identification of cross-border market areas and trading regions, since this classification may have a profound impact on the business activities of our networks members.

With regard to investment decisions on cross border capacity projects, system operation is a regulated area, where system operators must make investment decisions on a long-term basis. The relevant regulatory regimes of the Member States need to consider these costs and risks explicitly (and in the longer term). System operators must not be left exposed to the risk of stranded investments.

Looking at the integration of renewable energy, the gas target model must explicitly take account of the important role to be played by the DSOs, and the extent of the challenges they face in this area.