COMPETITION IN ELECTRICITY MARKET ACCORDING TO THE REGULATION OF DIRECTIVE 2003/54/ EC


                                            JUDIT BŐHM


                               Faculty of Law, University of Miskolc


                                         TAMÁS PRUGBERGER


Key words: Energy supply - Electricity market – Competition - Public service


The main element of European energy policy is the creation of internal gas and electricity markets.
From 1^st of July 2007 all consumers can choose their electricity and gas services free. It sounds
very simple, but it is not so simple legislative task for member states. Common market for gas and
electricity promotes the use of renewable energy sources, increases the safety of gas and
electricity supply and competitiveness of the European Community. The directive of 2003/54/EC
determines the main elements of competition in electricity markets and the legal tasks of member
states and undertakings. In my presentation I’m going to examine in three main subjects
(discrimination, public service obligations, and conditions of activities) effects of European
directive on competition in electricity market.


Energy market is a special element of European economy. Electricity power has advantages and
disadvantages. Electricity is mostly produced in the Community, it is not depends on import and it
can be generated using different technologies and raw material. But electricity can’t be stored, so
supply has to follow consumers’ demand. We don’t use electricity in its original forms, the use
always needs transformation of electricity to light, heat etc. and at last electricity services are
fixed to network, so all actors of the market must access to the network-system. The most important
speciality of electricity supply is that it is a public service, because everyone wants continuous
and safe supply, so member states mainly restricted competition in this sector. Liberalization of
electricity market doesn’t mean free competition, because electricity supply is still public
service, and it still has specialities, so some restriction must be remained. General competition
rules in themselves can’t be useful in this sector, special regulation is needed, which takes
account the characteristics of this market and completes the general rules of competition.


Member States “shall not discriminate between these undertakings as regards either rights or
obligations.” But some exemptions can be found: relicts of previous national legislation (for
example: long-term contracts) and some infringements determined by the directive. In spite of
principle of competition electricity supply is still a public service and member states still have
the right to determine public service obligations but in a common legal frame. The rules of public
service obligations have two groups: when member states shall determine PSO, and when it is
possible for member states to regulate these types of services.


The main element of electricity supply is the access to system and electricity transport. The good
state of systems is evitable and member states can’t leave out of consideration the person of
system operator. The directive emphasis this distinguished place of operators in electricity
supply. Transport is not free for competition, because only by the state appointed operators have
the right to provide these activities, so transmission and distribution operators have exclusive
rights, but they mustn’t take part in other activities: in generation and in services. This
restriction of competition can be owned to specialities of electricity sector, namely to system
fixity. On consumers side consumers can’t choose between operators by reason of exclusive rights,
but also operators can’t choose between systems’ users, if they refuse transmission, their
decisions have to be based on technical, non-discriminatory conditions. This measure is important
to guarantee the highest level of competition and to avoid collusion of market’s actors.


If system operator is part of a vertically integrated undertaking, the rules of unbundling come to
the front. Unbundling has four forms: ownership-, legal-, and management unbundling and unbundling
of accounts. Management or functional unbundling is the minimum obligatory level of unbundling. It
means, that persons, who takes part in management of the transmission system operator, can’t
participate in the decisions of the integrated electricity undertaking, which directly or
indirectly provide generation, and supply of electricity. These persons make their decision
independently and have effective decision-making rights, independent from the integrated
electricity undertaking. Unbundling of accounts: Member States shall ensure that undertakings keep
separate accounts for each of their activities, separately for transmission or distribution and
separately for supply and generation. National authorities have the right to access to the accounts
of electricity markets.


Opening up electricity market has not resulted free competition, although this principle can’t be
the aim of special regulation due to characteristics of this sector. With the rules of Directive
2003/54/EC the European Community would like to regulate the best conceivable level of competition
in all member states. Some elements of the Directive have preserved restrictions of competition,
while others have resulted competitive electricity market in member states.


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