ANNOTATION
Nikolay Kaveshnikov
The article analyzes the development and results of the EU policy to create a single liberalized energy market. A multi-level system of energy market management has been studied. It is shown that the regulatory environment is still very heterogeneous and is not able to provide the desired level of competition. Conclusions are drawn that the infrastructural unity of the energy market is still not enough to merge national energy markets into a pan-European one. Factors that complicate the process of market liberalization are identified.
The energy policy of the European Union (EU) began to take shape at the turn of the 1980s and 1990s. from the process of liberalization of the electricity and gas markets. It is this project, under the slogan of creating a single European energy market (ER), that today is a system-forming element of the EU energy policy. Particular attention to the electricity and gas markets is due to the fact that these industries are natural monopolies. Transportation of electricity and gas is carried out only through networks, respectively, network companies have the opportunity to dictate their terms to both independent producers and consumers. Moreover, vertically integrated companies have historically been a key player in the national markets, concentrating in their hands not only the network infrastructure, but also a significant part (and in a number of countries - entirely) of the production of energy resources (extraction / import of gas or generation of electricity) and its supply to end consumers. The specificity of industries is also their importance for the economy, national security, social and, to some extent, political stability, which predetermined a greater scale of state intervention - in many EU countries, the state is the controlling or sole shareholder of vertically integrated monopoly companies.
For the first time, the European Commission published the concept of large-scale reforms of the electricity and gas markets back in 1988. Justifying the need for these reforms, the European Commission noted that
“a more integrated European energy market will help reduce the cost of energy ... and improve the cost structure and rationalize the production, transmission and distribution of energy” [Commission working document. 1988, p. five]. The main goals of the reform were the liberalization and unification of markets, i.e. creation of a single liberalized electricity and gas market with a high level of competition. This was supposed to entail the equalization of energy tariffs in various Member States and their general reduction.
However, practical measures in this direction began only a decade later, with the adoption of the first electric directive (1996) and the first gas directive (1998), which were in the nature of a rather limited experiment. Only after making sure that the new system of market regulation could work in practice, the EU moved on to the next steps. In 2003, the second Electricity Directive No. 2003/54 and Gas Directive No. 2003/55 (Second Energy Package) were adopted, developing and detailing the main provisions of the reform. In September 2009, after nearly three years of discussion, the Third Energy Package (TEP) of measures to reform the energy market was adopted. The TEP is based on Directives No. 2009/73 and No. 2009/72, which establish common rules for the internal gas and electricity market1.
The study of the EU energy market as a political space2 involves a comprehensive analysis of the three key elements of this space in order to answer questions.
1. Is there a single EU energy market management system? How is the interaction of national, supranational and transnational governing bodies organized within this system, how are powers distributed among them? What is the combination of network and hierarchical forms of governance?
1 In addition, the Third Energy Package includes regulations on access to gas and electricity networks and a regulation on the Agency for Cooperation of Energy Regulators.
2 By political space, we mean “a set of political rules and regulations (i.e. institutions) based on a certain set of norms and values [Transnational political spaces ... 2011, p. 7]. See also examples of the analysis of the political spaces of the European Union.
2. Has the unity of the regulatory environment of the EU energy market been ensured? To what extent are legislation and regulatory practices harmonized across the EU? How effective is the regulatory environment in terms of achieving the key goal of EU policy - to ensure a high level of competition in the gas and electricity markets of all EU countries?
3. Has the infrastructural unity of the EU energy market been achieved, i.e. relationship between national energy markets and energy systems? Is the existing infrastructure capable of providing a level of cross-border supply sufficient to stimulate competition between energy companies from different EU countries and, accordingly, to unite national markets into a single pan-European energy market?
EU Energy Market Management System
To date, an integrated system for managing the space of the single energy market of the European Union has been formed. The basic rules for the functioning of the market are determined by EU law. Since the entry into force of the Lisbon Treaty, energy policy has come under the joint competence of the EU and the Member States. Legislative acts are adopted in accordance with the ordinary legislative procedure, based on the exclusive legislative initiative of the Commission and the cooperation of the two legislative institutions - the Council of Ministers and the European Parliament. However, it should be noted that the real influence of institutions in the legislative process differs significantly from the conclusions that can be drawn from the analysis of the text of the legislative procedure - the Council of Ministers remains the key legislator1. In the energy sector, a good example is the history of the adoption of the TEP. The final list of options for the division of functions (see below) was adopted precisely on the basis of a compromise developed in the Council of Ministers, although the European Commission (initially) and the European Parliament (almost until the last
1 For more information on comparing the role of the European Parliament and the Council of Ministers in the legislative process, see: [Kaveshnikov, 2012, p. 17-19].
moment) insisted on the mandatory application of the division of property.
EU legislation on the common ER is based on directives 2009/73 (gas) and 2009/72 (electricity). By their legal nature, EU directives require implementation at the national level, i.e. adoption of national legislation detailing the framework provisions of the directives and adapting them to the situation in each individual EU country. In the area of ER regulation, this gives rise to certain problems associated with delays in the adoption of national legislation and attempts to interpret the unclear provisions of EU legislation in favor of maintaining a not quite competitive environment. The European Commission oversees the implementation of the directives (see below) in order to ensure the uniformity of ER regulation, but its actions are not always successful; even in the best case, control procedures require several years and do not guarantee a positive result.
Practical activities for regulation of the ER are entrusted to national executive bodies - national regulators. At present, the independence of regulators is based on legal and functional autonomy (both from business and from national governments), independent funding, special safeguards, and staff rules.
Let us list the main functions of regulators.
1. Tariff regulation. The regulator approves the tariff for energy transportation or the methodology for determining it. Thus, network operators, ideally, should be deprived of the opportunity to receive monopoly rent by inflating the transport tariff.
2. Investment planning. The regulator approves binding 10-year grid development plans. If grid operators fail to fulfill these plans, the regulator has the right to apply sanctions or involve third-party investors in the implementation of infrastructure projects.
3. Monitoring compliance with EU law and implementing national legislation. First of all, the object of control
la is the activity of network operators. As part of the investigation of violations, the regulator has the right to conduct inspections of enterprises and impose sanctions.
4. Dispute resolution. The regulator resolves disputes over access to transmission and distribution networks between third parties and network operators.
The idea of creating a pan-European regulator has so far received a modest implementation in the Agency for Cooperation of Energy Regulators (ASER, the Agency). The interaction of national regulators is a necessary condition for resolving issues related to cross-border supplies and the development of cross-border infrastructure, as well as for “the emergence of a common regulatory culture” [Gudkov, 2010, p. 59]. Back in 2000, regulators voluntarily united into the Council of European Energy Regulators, an association without formal powers. In 2003, the European Commission established an advisory body - the Group of European Electricity and Gas Regulators (EYASEO).
Since the 1990s, the Commission has sought to gain the power to routinely regulate the electricity and gas markets, but these initiatives have been consistently rejected by a number of member countries concerned about maintaining control over the operation of the industry. According to the TEP, a fundamentally new body for regulating the market has been created on the basis of the ENREO - the pan-European Agency for Cooperation of Energy Regulators. In its current activities, the Agency is independent of the EU countries and national regulators. In particular, this is ensured by the fact that the permanent governing body - the Administrative Council - is formed by the EU institutions.
ASED has broad advisory and limited supervisory and regulatory powers. Among the main advisory powers are the assessment of network codes (a positive assessment is necessary for the approval of the codes by the European Commission) and pan-European infrastructure development plans, control over the implementation of the above plans by national regulators, monitoring the level of competition in the ER. Since the end of 2011, the Agency has been involved in the fight against the use of insider information and price manipulation on the wholesale energy exchange markets.
As part of its regulatory activities, ASER, at the request of national regulators, resolves disputes and makes binding decisions on issues of cross-border energy transportation. Another extremely important regulatory authority of the Agency is the monitoring of investments in cross-border projects. Representatives of the Commission have repeatedly stated that the Agency will not replace national regulators. And indeed, formally, the 10-year pan-European infrastructure development plan is advisory in nature. However, national regulators are obliged to adopt binding national investment plans, taking into account the pan-European one. Thus, the Agency, by controlling the implementation of the pan-European infrastructure development plan, has the opportunity to influence the aspects of investment planning that are significant on an EU scale. In light of this, it seems quite reasonable to assume that the Agency can gradually transform into a full-scale pan-European energy regulator [Romanova, 2007]. At least in the history of European integration, it has happened more than once that, having “entered from the back door” into some area, the European Commission or EU agencies gradually pulled over a significant amount of authority. Such assumptions are especially significant in the light of the fact that the Administrative Council of the Agency is formed not by member countries, but by EU institutions. The European Commission or EU agencies gradually pulled over a significant amount of authority. Such assumptions are especially significant in the light of the fact that the Administrative Council of the Agency is formed not by member countries, but by EU institutions. The European Commission or EU agencies gradually pulled over a significant amount of authority. Such assumptions are especially significant in the light of the fact that the Administrative Council of the Agency is formed not by member countries, but by EU institutions.
Business network associations play a significant role in the space management system of the unified EU ER. In accordance with the TEP, the European Networks of Operators of Gas/Electricity Transportation Systems (ETG-O-E and EN-G-O-O) have been established. Within the framework of these associations, network operators develop common security standards, commercial and technical codes, coordinate investments in cross-border infrastructure, and develop common rules for the transparency of network management. The most important powers of these two associations are the adoption of a pan-European ten-year network development plan and the development of cross-border network codes based on the instructions of the ASER (the latter must be approved by the European Commission).
A special place in the management system is occupied by the Florentine (electricity) and Madrid (gas) regulatory forums, created by the European Commission in the late 1990s. Recently, the forums meet twice a year. The specific composition of the
The number of forums varies, but they are always attended by representatives of national regulators, transport network operators, producers and consumers of energy resources, traders and trading platforms, EU policy and member states. “The data of the networks [Madrid and Florence Forums] are largely aggregating, since in the course of their work solutions are developed that are beneficial for many market participants and [acceptable] for national governments... The Commission, as one of the key network architects, seeks to acquire with their help a legitimate resource for the implementation of policy in those areas where it is limited” [Gromoglasova, 2009, p. 42-43].
Unity and efficiency of the regulatory environment of the EU energy market
An indispensable condition for a developed single political space of the EU energy market is a harmonized regulatory environment that provides generally comparable opportunities for business actors throughout the entire space of the energy market. Since the goal of reforms in the EU is to create competition in the ER, our study will focus on the main elements of the regulatory environment that are designed to increase the level of competition. Ideally, a comparative analysis of the legislation of the 27 EU countries should be carried out, but such a study is far beyond the scope of this work. Therefore, to assess the effectiveness and unity of the regulatory environment, we use statistical indicators that characterize the level of competition in the markets of individual EU countries. If the level of competition in national markets is increasing and is already quite high, then the regulatory environment is effective. If the level of competition in the EU countries is approximately the same, then the regulatory environment is by and large uniform in its key aspects. At the same time, we will get an answer to the question of how much the reforms carried out in practice contributed to the creation of a competitive environment. To assess the real situation in the markets, statistical indicators of the electric power industry will be used, since in this sector, for a number of objective reasons, the degree of competition is obviously higher than in the gas industry. to what extent the reforms carried out in practice contributed to the creation of a competitive environment. To assess the real situation in the markets, statistical indicators of the electric power industry will be used, since in this sector, for a number of objective reasons, the degree of competition is obviously higher than in the gas industry. to what extent the reforms carried out in practice contributed to the creation of a competitive environment. To assess the real situation in the markets, statistical indicators of the electric power industry will be used, since in this sector, for a number of objective reasons, the degree of competition is obviously higher than in the gas industry.
According to the ideas of the authors of the reforms, the competitive environment in the ER EU1 is based on the following principles.
1. Gradual granting to consumers of the right to freely choose energy suppliers, including the possibility to purchase energy resources from producers from other EU countries. Thus, the consumer ceases to be "attached" to the network company that serves his region. It was the freedom to choose a supplier that was conceived by the authors of the reform as a key mechanism for stimulating competition in the energy market and, accordingly, should have led to a drop in energy prices for end consumers. According to the 2003 directives, all commercial consumers became eligible on July 1, 2004, and households on July 1, 2007 (note that in some EU countries, markets were fully liberalized much earlier).
However, not in all countries, consumers actively use this right in practice. Predictably, the proportion of consumers switching suppliers is higher among large businesses. But even this figure exceeds 5% only in ten EU countries. To a lesser extent, small consumers have been able to benefit from ER liberalization.