Bartlomiej Nowak is Assistant
Professor in the Law Department of
Kozminski University in Warsaw
and of counsel to the Domanski
Zakrzewski Palinka law firm. He hold
a Ph.D. from the Law Department of
the European University Institute.
The views expressed in this article are
solely those of the author. He can be
contacted at
bartlomiej.nowak@eui.eu.
Energy Market of the European
Union: Common or Segmented?
The European energy market operates on the premise of
open and competitive markets among its 27 member
states. But the gas and electricity market dynamics and
levels of competitiveness vary enormously across the EU
27. Among the issues are unequal implementation of
electricity and gas directives, a lack of independent energy
regulators, the absence of proper and full unbundling, and
discriminatory third-party access to the infrastructure.
Bartlomiej Nowak
I. General Remarks
The creation of the common
(internal) energy market based on
open and competitive markets
among 27 member states
represents great challenges for the
European Union if it is to have the
kind of a direct impact on
European industry and economic
activity as well as on the welfare
of many European citizens that
have been envisioned. For
decades a unified European
energy market existed solely in
theory. Rather, it remained an
economic sector dependent on
and under the control of different
national governments. It did so
for two reasons. First, because
these nations attached very high
importance to energy matters,
which they perceived as strategic
to their national economies, they
wanted to exercise close control.
Second, the very high cost of the
energy infrastructure kept the
national energy markets
dependent on their respective
national governments. Not
surprisingly, it is only recently
that the segmented European
energy markets are being
combined in the name of an
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internal energy market as a key
part of EU energy policy.
Although Europe is on the right
track, the process of unification is
still far from being complete. One
has to bear in mind that the
creation of a common European
energy market, one that would
take under considerations many
different member states’ policies,
cannot occur all at once but will
occur only over time. After all, it
involves a complicated process of
political negotiations, decisionmaking,
the passage of specific
legislation, and massive market
adaptations. It should be also
clear that the necessary political
involvement will not end with the
decision to liberalize or with the
completion of the legislative work
required to establish a market
framework. Continued political
involvement will be required to
create a competitive European
internal energy market as well as
to monitor and regulate the
exercise of monopoly powers by
independent national regulators.
D oes Europe really need a
common energy market?
Yes. First, an integrated energy
market is essential for enhancing
trade in energy products among
member states. Second, it is also
important for diversifying and
integrating the different domestic
energy markets and therefore for
securing supply across the EU.
Third, the growth of certain
industries in the EU as well as of
the EU economy in general
depends largely on competition,
and an internal energy market is
essential for that to occur.
Although competition can expose
market players to the risk of losing
market share if they are not
sufficiently efficient and
innovative, it is also a force that
benefits customers in the form of
lower prices, lower costs, and
better service. As a result,
competition in the common
energy market should be seen as
an essential apparatus to enhance
Europe’s competitiveness,
especially since energy is an
essential input for European
industry competing on the world
market. Fourth, in this regard only
competitive markets generate the
right investment signals, offer fair
network access for all potential
new comers, and thus provide
effective incentives to both system
operators and generators to invest
billions of euros in infrastructure.
Fifth, a competitive and efficient
energy market is a precondition
for tackling climate change. With a
well-functioning market it is
possible to develop an effective
emission trading mechanism and
renewable energy industry.
T o achieve these objectives
the Community institutions
must foster the observance of the
EU competition law and
harmonize the domestic energy
markets through Directives and
Regulations. For the purpose of
harmonization, the Community
has introduced legislation at three
different times. The first occurred
in the 1990s and included laws to
end legal monopolies in the
electricity and gas sectors.
Unfortunately, the legislative
framework established by the first
electricity and gas Directives1
—
which aimed at allowing large
industrial users to freely choose
their supplier, at granting access to
independent third parties, and at
separating the operations of the
vertically integrated companies—
did not prove as beneficial as
envisaged.2
In response, the
Community adopted a second
legislative package.3
It looked
toward further liberalizing the
energy sector by unbundling
vertically integrated activities of
the electricity and gas
conglomerates and reducing their
horizontal concentration, by
introducing competition in
wholesale generation market and
retail supply, by monitoring
transmission and distribution
networks by mandating regulated
third-party access to the energy
infrastructure, and by introducing
fixed access tariffs, which were to
be established and approved by
national regulators that member
states were also obliged to set up.4
The third wave of energy
legislation came just recently, in
August 2009, and member states
are required to bring into force the
provisions necessary to comply
with the third package of
Although Europe
is on the
right track,
the process of
unification is
still far
from being
complete.
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Directives5
by Mar. 3, 2011. As a
result, it is difficult to judge how
close member states will come to
achieving these objectives, though
it is possible to argue that the steps
already taken are insufficient to
construct a fully operational
common energy market in the EU.
Forces at play, such as member
states’ sovereignty, protectionism
of national industries,
monopolization of national
markets, different patterns of
energy consumption and thus
different sources of supply;
discriminatory practices
concerning third-party access, lack
of independent domestic
regulators in member states and
unequal transposition of
Directives in general, all pose
obstacles to establishing a
common EU energy market. This
variation, which is both historical
and structural, among the
respective energy sectors of the EU
27 has created the current
variation in openness to
competition and most probably
will continue to hamper the
emergence of a truly coherent
energy market for a number of
years.
N evertheless EU’s third
energy package looks to
ensure that all European citizens
can take advantage of the
numerous benefits provided by a
truly competitive common energy
market. Consumer choice, fairer
prices, cleaner energy, security of
supply, independent regulation,
nondiscriminatory third-party
access, and proper unbundling
are at the centre of the third
energy legislative package.
Additionally, two other
legislative acts provide for
structural changes in the
regulatory framework of the
electricity and gas sectors.
Regulation 1228/2003 of the
European Parliament and Council
as amended by Regulation No.
714/2009,6
which stipulates the
conditions for access to the
network for cross-border
exchanges in electricity
(hereinafter ‘‘Electricity
Regulation’’), and Regulation
1775/2005 of the European
Parliament and Council as
amended by Regulation No. 715/
20097
which lays out the
conditions for access to the natural
gas transmission networks
(hereinafter ‘‘Gas Regulation’’)
envisage setting nondiscriminatory
rules for crossborder
trade of electricity and
gas. Although these regulations
which envisage establishing
harmonized principles and
methodologies for calculating
tariffs and for setting both nondiscriminatory
rules (for access to
transmission systems, capacity
allocation, and congestion
management) and balancing
rules, are equally important in
creating a common energy
market, they are beyond the scope
of this article and will only be
discussed when necessary.
II. Shortcomings of the
Current Energy Market
Framework
Many national electricity and
gas markets in the EU still suffer
from a lack of liquidity and
transparency, conditions that
hinder the efficient allocation of
resources and that block new
entrants. Currently, incumbents
in, for example, Germany, France,
and Poland, are responsible for the
greatest part of electricity and gas
flows, own major portions of the
infrastructure assets, and
generally have more and better
access to information and clients
than new entrants. As a result, in
many countries competition is still
significantly hampered. In fact, the
major difficulties that member
states currently face in creating the
operational European internal
electricity and gas market
involve8
:
 Insufficient independence of
the regulatory authorities, which
shall monitor market behavior of
incumbents;
 Abuse of the dominant position
in the market by the national
champions;
 Insufficient unbundling of
transmission and distribution
system operators such that their
non-discriminatory operations
cannot be guaranteed;
Many national
electricity and
gas markets
in the EU
still suffer
from a lack
of liquidity and
transparency.
December 2010, Vol. 23, Issue 10 1040-6190/$–see front matter # 2010 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2010.10.013 29
 High vertical integration of
energy companies such that vertical
integration of generation,
supply, and infrastructure favors
incumbents (through lack of
equal access to infrastructure and
key market information, for
example);
 Price regulation in some markets
that tends to distort competition
(there is still considerable
concentration caused by vertical
integration, a fact that permits
incumbents to continue to influence
prices and prevent the entry
of new market players);
T here are also problems of a
technical nature, such as the
lack of transmission capacity,
especially cross-border
transmission capacity, which
retards the development of crossborder
trade and creation of
common energy market. Also,
high and still-rising prices for
cross-border capacities, as
established by capacity auctions,
severely restrict trade.9
As a
result, many markets remain
segmented along national
borders. In 2007, for example,
cross-border flows of electricity
stood at around 10.7 percent of
total consumption, which is an
increase of only around 2 percent
compared with 8–9 percent in
2000.10
Lack of electricity and gas
infrastructure not only slows
down the development of the
efficient internal energy market
but also brings the risk of
shortages of supplies across the
EU; such shortages, of course,
would have extremely negative
consequences for the whole
European economy.
Unfortunately, European energy
networks, not to mention the
interconnections among them, are
operating at close to their physical
limits with the risk of temporary
supply interruptions. With only
200 million euros of annual
investments in cross-border grids,
the situation seems to be
particularly grim for the
electricity sector, as more than 60
percent of the European projects
confirmed by the Council and
European Parliament face
significant delays.11
E urope also faces the prospect
of market segmentation by
virtue of the concentrated
influence of a small number of
companies as well as of those
dominant incumbents in some
member states that have no
interest in developing the
networks, since doing so might
aid competitors. To counteract
anticompetitive features of the
energy industry, the member
states must first strengthen their
commitment to instituting the
provisions of the Directives and
Regulations leading to creation of
the common energy market. To
this end they must foster
competition by an aggressive
approach to unbundling. Unless
ownership is separated, the
current unbundling rules will not
remove the incentive for a
company’s cross-subsidization of
itself or for discriminating against
those competitors seeking thirdparty
access (by creating
unnecessary technical barriers,
maintaining artificially small
balancing zones, or not making
unused capacities available).
Here, member states must
prohibit discriminatory practices.
Member states must also find
ways to prevent distortion of
investment incentives, since
current unbundling
developments do not provide for
this. Vertically integrated
network operators simply have
no incentive to develop the
networks in the interests of other
market participants who are not
linked to the vertical integrated
company. To the contrary, they
base their investment decisions
on the needs of their supply and/
or generation affiliates, once again
hampering the efforts of new
entrants to the market. Here, the
most feasible solution for getting
system operators to manage and
develop the networks in the
interest of all market players
would be ownership unbundling.
Ownership unbundling should be
also seen as a powerful
instrument in a battle against
concentrated markets where
concentration tends to be one of
the main obstacles to competition.
Ownership unbundling, although
not mandatory, has been already
Member
states
must also
find ways
to prevent
distortion
of investment
incentives.
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voluntary introduced in several
member states and the evidence
suggests that it is successful in
promoting the efficiency in the
market e.g., in the UK.12
Drawing
on this evidence, the European
Commission in a 2007 press
release13
affirmed that in the next
legislative acts14
its preferred
option of unbundling would be
ownership unbundling.15
H owever, a heated debate
over ownership
unbundling, which constitutes
one of the key amendments
(although not mandatory)
proposed in the European
Commission’s third legislative
energy package, signifies that the
issue is a controversial one. In the
view of the Commission and such
member states as the UK and the
Netherlands, the most radical
option for ownership unbundling
would increase competition and
clear the path for greater energy
sustainability and security of
supply.16
However, the push for
ownership unbundling has
brought strong opposition, not
only from the companies affected,
such as E.ON and RWE or EdF
and GdF, but also from the
governments of Germany and
France.17
Due to the structure of
their industries and the strong
national orientation of the sectors,
the two countries have rejected
ownership unbundling.18
France
expressed its support for national
champions in a September 2007
letter to the European
Commission in which it
emphasized that the aims of
energy policy should be reduction
of the negative impact on the
environment, security of supply,
the decrease of oil and electricity
prices, but not a wide
liberalization as a tool for
reduction of prices on energy
carriers.19
Germany opposes any
ideas that would force private
companies to sell their property,
as that is legislatively forbidden in
Germany and the EU. The main
argument raised in this regard
involves the principle of
subsidiarity in conjunction with
article 345 of the EU Treaty, which
states: ‘‘This Treaty shall in no
way prejudice the rules in
Member States governing the
system of property ownership.’’
Some interpret this article as
prohibiting the Commission from
offering any proposal for
ownership unbundling. In this
regard Hancher argues that
Article 345 of the EU Treaty,
which recognizes the right to
property, casts doubt on the
legality of any proposal for
ownership unbundling from the
Commission with regard to gas
and electricity network
industries.20
Further on, Germany
considers that the division of
assets will destroy the existing
harmonious system of operation
of the German energy sector
which is based on the mutual
arrangements and obligations of
private energy companies.21
In
fact, Michael Glos, Germany’s
Minister of Economics, and
Kristin Legard, France’s Minister
of Finance, derided the
Commission’s initiative as pure
bureaucracy, having declared
their intention to prevent the
obligatory sale of network
assets.22
Additionally the two
countries also argued that
ownership unbundling may not
be compatible with the relevant
constitutional laws and the free
movement of capital across the
EU.
The idea of ownership
unbundling, however, is not to
take away properties or harm the
affected companies, but to foster
competition in those segments of
the market in which natural
monopolies have arisen.
Ownership unbundling does not
necessitate the nationalization of
the properties in question. To the
contrary, the unbundling that has
been envisaged would rely on
competition law—in particular,
on the analogy to the provisions
concerning mergers and
acquisitions, whereby the transfer
of ownership would go through
only if certain conditions or
remedies are met. Similarly, in
ownership unbundling the
legislation would demand the
selling of transmission or
distribution assets to another
company, which would entail
negotiating a fair-market selling
Due to the
structure of their
industries and the
strong national
orientation of the
sectors, Germany and
France have rejected
ownership unbundling.
December 2010, Vol. 23, Issue 10 1040-6190/$–see front matter # 2010 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2010.10.013 31
and purchasing price. In addition,
in the present globalized business
environment, ownership
unbundling might not entail a
pure separation of transmission
or distribution assets. Instead,
ownership unbundling might
involve more sophisticated
arrangements. For example,
ownership unbundling might
permit a generation/supply
company to have a certain noncontrolling
share (a minority
interest of perhaps up to 15 or 20
percent of shares) in a
transmission or distribution
system operator. Such a minority
shareholder would not have
blocking rights in the operator, it
could not appoint members of the
operator board, and it could not
have any of its own people serve
as a member of the board of the
operator.23
In other words, the
precise way in which unbundling
occurs can be quite varied. The
key is to prevent the conflicts of
interest which are visible in
functional or even legal
unbundling.
N evertheless, countries such
as France and Germany
have resisted this course of action.
Due to the structure of their
energy industries and the strong
protectionist orientation of their
energy sectors, these two
countries advocate the so-called
Scottish model of unbundling that
relies on independent system
operators (ISOs). In the ISO
approach, vertically integrated
companies might retain
ownership of their network
assets, but the network itself
would be managed by an ISO.24
This ISO would have to be legally
and functionally separated from
the vertically integrated company
and empowered to perform all the
functions of a network operator.
The Scottish model could serve as
a compromise between those
calling for large energy groups to
be divided and those in favor of
less radical action. However,
some countries which already
have implemented ownership
unbundling might perceive this
compromise to be unfair. The
reason why is that, in order to
accomplish their ownership
unbundling, the companies in
question were obliged to sell their
assets, an action that decreased
the capitalization of the overall
company. Finally, given the
nature of political negotiations in
Brussels, with their multi-party
compromises, it may also turn out
that the ISO approach will end up
in practice not quite independent
as envisaged.
L astly, one may conclude that
markets in which there is
less than ownership
unbundling—France or Poland—
require more detailed and
complex regulation in order to
prevent discrimination than do
markets where ownership
unbundling has been introduced.
In fact, enhancing the role of
national regulators is another
subject matter in fostering the
creation of the common energy
market. In particular, regulators
must be kept independent not
only from the energy business but
also from governmental
authorities and shall be given
sufficient authority to act. The
studies of the member states
conducted by the Commission25
and the research of the author in
previous publications26
indicate
that in some EU countries
regulatory duties are split
between a specified energy
regulatory authority and the
ministry or other body that
oversees competition. In many
cases, the affected agencies act at
cross-purposes, without
coordination among them, a
circumstance that makes it
difficult for the regulator to
formulate and put into effect
decisions on access tariffs, gas
storage issues, unbundling
provisions, and so on. Interagency
conflict impedes the work
of the regulators and retards the
development of competition in
the energy markets. For these
reasons the Commission, in its
explanatory memorandum on its
third energy package,27
argued
that regulatory authorities need
additional powers to monitor and
intervene in matters pertaining to
(1) all aspects of third-party
access, (2) unbundling, (3)
balancing mechanisms, (4) market
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surveillance of power exchanges,
(5) the extent to which
competition authorities open
markets to effective competition,
(6) cross-border matters, such as
the management of congestion
and interconnection, (7) consumer
protection, including any
end-user price controls, and (8)
transparency obligations.
T o move toward a common,
operationally functional
electricity and gas market,
member states also need to make
sure that their regulators address
the ongoing problems of
inconsistencies between national
systems with regard to tariff
structures, capacity allocation
rules, trading timetables, and
security of supply measures, all of
which have led to fragmented
domestic markets. In order to
ensure that the decisions of the
national regulators are conducive
to the development of the
common energy market rather
than impeding it, the Commission
has proposed strengthening the
coordination of regulators at the
EU level. Drawing on the ERGEG
and Commission proposal, the
Community has issued
Regulation No. 713/2009 of the
European Parliament and of the
Council of July 13, 2009,
establishing an Agency for the
Cooperation of Energy Regulators
(ACER).28
This Agency shell
complement the national
regulatory authorities at the
European level by providing (1) a
framework for cooperation
among the national regulators, (2)
regulatory oversight of
cooperation among transmission
system operators, (3) decisionmaking
powers so that individual
regulators could take appropriate
action in handling cross-border
issues (such as facilitating crossborder
energy trade), and (4)
adopting a general advisory role.
Along these same lines the
European Parliament, in a report
prepared by the ITRE
Committee,29
proposed a
significant increase of powers for
the national regulators and rules
of transparency, disclosure, and
accountability. The major
weakness of the Community
model of ACER is the limited
authority of the Agency to have its
decisions be legally binding for
the energy parties involved.
Neither the Treaty on European
Union nor the Treaty of Lisbon
provides such autonomous
powers and essential legal basis
for the ACER to take legally
binding decisions. Therefore,
simply establishing ACER
without making necessary
changes in the Treaty will not
produce the required effect.
Currently, such autonomous
powers given to the Commission
by the Treaty exist only with
respect to the rules of
competition. Yet the repeated
questions about the trend towards
the European Commission
becoming a kind of EU energy
regulator are not a novel thing.30
Most commentators, however,
agree that the new marketoriented
regulation that emerged
in 2003 for network industries
already require the active roles of
independent regulatory
authorities in the member states
(subject of practical
implementation). For this reason
it is unlikely that member states
would accept the establishment of
the EU regulator with
Commission adopting a role
analogous to that of the Federal
Energy Regulatory Commission
(FERC) in the U.S., which
regulates interstate energy
transmission. For instance,
Germany’s chancellor, Angela
Merkel, at one of the EU summits
bypassed the issue of granting
energy regulatory powers to the
Commission and instead focused
on the need to diversify energy
sources by opening up the energy
grids and fostering much closer
relations with countries from
North Africa and the Middle
East.31
What the member states have
so far accepted is a significant
transfer of powers from their
national governments to their
respective national regulatory
authorities, a transfer that has
entailed institutional changes in
their domestic legal order. In this
regard, it is important to keep in
mind that the energy sector is a
December 2010, Vol. 23, Issue 10 1040-6190/$–see front matter # 2010 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2010.10.013 33
strategic economic sector that is
very important to national
policymakers. These people have
only reluctantly and in piecemeal
fashion ceded some of the
national sovereignty in energy
matters, what involved in some
cases constitutional changes. The
upshot is that the process of
establishing a common energy
market with coordinated
regulation means that the
Commission must cooperate
closely with the regulatory
authorities of the member states
in order to actualize the legal
framework of the liberalized gas
and electricity markets.
T he domestic regulatory
authorities also need to be
independent, legally and
functionally separate from any
other public or private entity;
moreover, their employees as well
as decision-makers need to act
independently of the interests of
any particular market player, any
government body, or any other
public or private entity. For this
reason, the national regulatory
authorities need to have legal,
personnel, and budgetary
autonomy as well as appropriate
human and financial resources to
act autonomously.
The third legislative package is
about to strengthen national
regulatory agencies, giving them
independence of the legal person
and budgetary autonomy.
Further, the package will specify
the competencies of national
regulators in how they should
exercise monitoring of
implementation of Directives on
energy liberalization, analyze the
investment plans of transmission
network operators, observe for
the transparency of the market
and competition, and protect
consumers. All these measures
aim to equip regulators with legal,
functional, and financial
independence.
F inally, in response to the
increasing demand for
energy, additional infrastructure
must be built to strengthen the
existing networks and ensure the
development of cross-border
markets, in what would likely
improve the security of supply,
guarantee a high level of public
service, maximize the benefits
expected by consumers, and lay a
tangible foundation for a common
energy policy. In the energy
sector, most investments are
likely to come from private capital
and financial institutions. The
important thing is to create a
favorable climate for that
investment. Therefore, if the
actions of the natural monopolies
(infrastructure) on the energy
market are to be regulated in
order to enable investment, the
competitive sectors of the market
(generation and supply) should
not be subject to price controls,
which might discourage new
investments. Price regulation in
general may be used to avoid
market opening, to discriminate
among suppliers, or distort
competition. Therefore, the role of
the state is to establish the
political and legal frameworks
needed for the network to be
developed, in particular by
promoting major gas supply
infrastructure projects such as
liquefied natural gas both in the
European Union and also it.
III. Conclusions
Six years after the obligation to
transpose the second set of
electricity and gas directives on
July 1, 2004, the nature and
number of infringement cases32
across the European Union clearly
reveals the insufficiencies of the
current EC energy legal
framework leading to the creation
of a common energy market. So,
too, does the disappointing pace
at which the European electricity
and gas markets have been
opened to competition and
harmonized across national
borders. What are the main
obstacles to healthy competition
in both gas and electricity
markets? They include highly
concentrated markets, the
protectionist policies of domestic
governments, varying degrees of
reliance on imports, the vertical
integration of supply, generation,
transmission and distribution,
infrastructure obstacles to equal
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third-party access, and
insufficient investment in
infrastructure. They also include
domestic markets that are
dominated by national
champions, which seek further
consolidation rather than market
opening, as with EdF and GdF in
France and RWE and E.ON in
Germany. These corporations are
domestic monopolies that are also
among the largest vertically
integrated gas and electricity
companies in the EU. Further
consolidation on their part would
not promote but interfere with
competition in the domestic and
common European market. In this
regard the merger of Gaz de
France and Belgium’s Suez may
well create a global player able to
compete across all European
markets and expand overseas;
however, it is also likely to reduce
competition in the companies’
respective home markets.
T o overcome the dominance
of national interests, the EU
not only needs to complete the
establishment of the internal
energy market, it also requires a
common energy policy and a
system of energy solidarity,
especially in the case of supply
problems. The present practice of
individual member states making
important energy-related
decisions without consulting or
assessing their impact on other
member states hampers the
coordination of the energy policy
and the setting of common
objectives for the internal energy
market.Another important issue is
the varying endowment of
member states with natural
resources. Some of the countries
are producers, such as the UK and
Netherlands, while the majority
are energy-importing countries.
As a result there is a great variation
in the level of import dependence
among EU countries, which, apart
from the disparity between Russia
andmemberstates,createsarather
difficult obstacle to energy market
integration. Other significant
issues impeding the common
approach in energy market
integration are differences in the
energy mixes of the member states
of the EU and differences in the
structure of national energy
sectors. This predetermines
different national energy priorities
and sets the pattern for respective
energy policies such as
protectionism. The protectionist
trends are the most visible in
France and Poland. The former
fears that, in an open market, it
could lose its national champions,
while the second fears that its
energy sector will end up under
The protectionist trends are the most visible in France and Poland.
December 2010, Vol. 23, Issue 10 1040-6190/$–see front matter # 2010 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2010.10.013 35
Russian control, putting its energy
security at risk.
The Lisbon Treaty among other
things should bring provisions to
the primary law, which refers to
the principle of energy solidarity
anticipated by Poland as well as
other new member states.
However, in order to enable
energy solidarity, the EU will not
only have to develop rules for
strategic stocks and crisis
management mechanisms for
fossil fuels, but it also will have to
support the construction of a
storage and network
infrastructure. Perhaps in
combination with a real internal
energy market, such
developments will enable
member states to have
comparable energy mixes and
import dependencies and
therefore similar interests in the
field of external energy policy.&
Endnotes:
1. Directive 96/92/EC of the
European Parliament and of the
Council of Dec. 19, 1996, concerning
common rules for the internal market
in electricity (O.J. 1997, L 027) and
Directive 98/30/EC of the European
Parliament and of the Council of June
22, 1998, concerning common rules for
the internal market in natural gas (O.J.
1998, L 204/1).
2. See G. Shuttleworth, Opening
European Electricity and Gas Markets, in
C. Robinson, Ed., UTILITY REGULATION
AND COMPETITION POLICY (Edward
Elgar, 2002), at 130-142. Additionally,
see European Commission (2004), DG
TREN Draft Working Paper, Third
Benchmarking Report on the
Implementation of the Internal Electricity
and Gas Market, Mar. 1, 2004, ‘‘Little
progress is being made to improve the
market structure of the electricity
industry’’ (at 5) and, for gas, ‘‘the level
of concentration at national level
remains a problem’’ (at 7).
3. Directive 2003/54/EC of the
European Parliament and of the
Council of June 26, 2003, concerning
common rules for the internal market
in electricity (O.J. 2003, L 176/37) and
Directive 2003/55/EC of the European
Parliament and of the Council of June
26, 2003, concerning common rules for
the internal market in natural gas (O.J.
2003, L 176/57).
4. B. Nowak, Electricity and Gas Market
Liberalization in the EU as a Part of the
Internal Energy Market Strategy: Chosen
Aspects, J. INTERDISCIPLINARY ECON. 17(4),
2006, at 465-480. For more see also P.
Cameron, Internal Market in Energy:
Harnessing the New Regulatory Regime,
EUROPEAN LAW REV., Vol. 30, 2005, at
631-33.
5. Directive 2009/72/EC of the
European Parliament and of the
Council of July 13, 2009, concerning
common rules for the internal market
in electricity and repealing directive
2003/54/EC (O.J. 2009, L 211/55) and
Directive 2009/73/EC of the European
Parliament and of the Council of July
13, 2009, concerning common rules for
the internal market in natural gas and
repealing Directive 2003/55/EC (O.J.
2009, L 211/94).
6. Regulation No 1228/2003 of the
European Parliament and Council of
June 26, 2003, on conditions for access
to the network for cross-border
exchanges in electricity (O.J. 2003, L
176/1). Regulation 1228/2003 has
been amended by Regulation No 714/
2009 of the European Parliament and
of the Council of July 13, 2009, on
conditions for access to the network
for cross-border exchanges in
electricity (O.J. 2009, 211/15).
7. Regulation No 1775/2005 of the
European Parliament and Council of
Sept. 28, 2005, on conditions for access
to the natural gas transmission
networks (O.J. 2005, L 289). Regulation
No 1775/2005 has been amended by
Regulation No 715/2009 of the
European Parliament and of the
Council of July 13, 2009, on conditions
for access to the natural gas
transmission networks (O.J. 2009, L
211/36).
8. For more on this see B. NOWAK,
WEWNE˛TRZNY RYNEK ENERGII W UNII
EUROPEJSKIEJ (INTERNAL ENERGY MARKET
IN THE EUROPEAN UNION) (CH Beck,
2009) at 90-92 and 178-180.
9. For more, see W. Webster, Recent
Developments in EU Energy Markets, in
U. Hammer and M. Roggenkamp,
Eds., EUROPEAN ENERGY LAW REPORT III
(Intersentia, 2006) at 3-5.
10. See Report on Progress in Creating
the Internal Gas and Electricity Market,
SEC (2005) 1448 at 5.
11. Press Release, European
Electricity and Gas Networks:
European Commission Calls for
Urgent Improvements, Brussels, Jan.
10, 2007 (MEMO/07/11).
12. M. Pollitt , The Arguments for and
against Ownership Unbundling of Energy
Transmission Networks, CWPE 0737,
2007.
13. IP/07/1361 (Sept. 19, 2007),
Energizing Europe: A Real Market with
Secure Supply.
14. Directive 2009/72/EC of the
European Parliament and of the
Council of July 13, 2009, concerning
common rules for the internal market
in electricity repealing directive 2003/
54/EC (O.J. 2009, L 211/55) and
Directive 2009/73/EC of the European
Parliament and of the Council of July
13, 2009, concerning common rules for
the internal market in natural gas,
36 1040-6190/$–see front matter # 2010 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2010.10.013 The Electricity Journal
repealing directive 2003/55/EC (O.J.
2009, L 211/94).
15. See for instance recital 11 of the
Directive 2009/72/EC.
16. B. Nowak, supra note 8, at 236-238.
17. In fact the Commission’s
proposal of ownership unbundling
has been criticized by eight
countries: France, Germany, Austria,
Bulgaria, Latvia, Luxembourg,
Slovakia, and Greece. For more on
this see S. Goldberg, Recent
Developments in the European Union
Energy Sector, in EUROPEAN ENERGY
REVIEW published by Herbert Smith
LLP in association with Gleiss Lutz &
Stibbe, 2008.
18. For more on this see A.
Hauteclocque and V. Rious,
Reconsidering the Regulation of Merchant
Transmission Investment inthe Lightofthe
Third Energy Package: The Role of
Dominant Generators, EUI Working
Papers RSCAS 2009/59, Florence,
at 4-6.
19. Ministere de l’Ecologie, du
Developpement et de l’Amenagement
Durables de la France Marche
interieur de l’electricite et du gaz, Sept.
19, 2007, at http://www.equipement.
gouv.fr/article.php3?id_article=2464.
20. L. Hancher, The New EC
Constitution and the European Energy
Market, in M.M. Roggenkamp and U.
Hammer, Eds., EUROPEAN ENERGY LAW
REPORT II (Intersentia, 2005) at 4.
21. Michael Glos, Completion of the
Single European Market for Electricity
and Gas: Striking the Balance between
Competition and Energy Security, Berlin,
Mar. 29, 2007, at http://www.bmwi.
de/English/Navigation/Press/
speeches-and-statements,did=195184.
html.
22. EU unveils plan to dismantle big
energy firms, Sept. 20, 2007, at http://
www.euractiv.com/en/energy/eu-
enveils-plan-dismantle-big-energy-
firms/article-166890?Ref=RSS.
23. For more on ownership
unbundling see B. Nowak, Equal
Access to the Energy Infrastructure as a
Precondition to Promote Competition on
the Energy Market, ENERGY POLICY, Vol.
38, No. 7, 2010, at 3691-3700.
24. For more on ISO see A.
Hauteclocque and V. Rious,
Reconsidering the Regulation of
Merchant Transmission Investment in
the Light of the Third Energy Package:
The Role of Dominant Generators, EUI
Working Papers RSCAS 2009/59,
Florence, at 4.
25. See Commissions Staff Working
Document. Implementation Report –
SEC (2006) at 1709. Accompanying
document to the Communication from
the Commission to the Council and the
European Parliament – Prospects for
the internal gas and electricity market
– COM (2006) at 841. See also
Commission’s Staff Working
Document SEC (2008) at 460.
Accompanying document to the
Report on Progress in Creating the
Internal Gas and Electricity Market
COM (2008) at 192.
26. B. Nowak, supra note 8, at 227-234.
27. Explanatory Memorandum (Sept.
19, 2007) on proposal for a Directives of
the European Parliament and of the
Council amending Directive 2003/54/
EC and Directive 2003/55/EC; on the
proposal for a Regulations of the
European Parliament and of the
Council amending Regulation No
1228/2003 and Regulation No 1775/
2005 and of the proposal for a
Regulation establishing an Agency for
the Cooperation of Energy Regulators,
at 8, at http://ec.europa.eu/energy/
electricity/package_2007/doc/2007_
09_19_explanatory_memorandum_
en.pdf.
28. Regulation No 713/2009 of
the European Parliament and of
the Council of July 13, 2009,
establishing an Agency for the
Cooperation of Energy Regulators
(O.J. 2009, L 211/1).
29. ERGEG (2007) 3rd
Legislative
Package Input. Paper 5: Powers and
Independence of National Regulators. An
ERGEG Public Document, Ref: C07SER-13-06-5-PD,
Brussels.
30. J. Matlary, Energy Policy in the
European Union, THE EUROPEAN UNION
SERIES (Macmillan Press, 1997) at 45.
See also P. Buigues, O. Guersent and J.
Pons, Alternative Models for Future
Regulation, in C. Henry, M. Matheu
and A. Jeunemaitre, Eds., REGULATION
OF NETWORK UTILITIES: THE EUROPEAN
EXPERIENCE (Oxford Univ. Press, 2001)
at. 281.
31. J. Dempsey and D. Bilefsky, EU
Unity on Power Is Elusive, INT’L. HERALD
TRIBUNE, Mar. 23, 2006, at http://
www.iht.com/articles/2006/03/22/
business/energy.php.
32. Through Jan. 2008 the
Commission launched 34
infringement procedures against 20
member states for violation and nontransposition
of the existing Electricity
and Gas Directives. All four compared
countries have received Letters of
Formal Notice from the Commission.
Poland and France have been charged
with absence of, or insufficient, legal
unbundling distribution system
operators; absence of the notification of
public service obligations; and
preferential access for certain contracts
in the electricity market. France
additionally has been alleged to
maintain regulated prices which block
the arrival of new suppliers and to not
have published commercial conditions
for access to storage. Germany and the
UK have received Letters of Formal
Notice regarding the E-Directive for
maintaining preferential access for
certain historical contracts in the
electricity markets and Germany
additionally for absence of the
notification of public service
obligations. For more on this see also
Memo/06/152 on infringement
procedures opened in the gas and
electricity market sector, by member
state.
December 2010, Vol. 23, Issue 10 1040-6190/$–see front matter # 2010 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2010.10.013 37