European Regulatory Framework

TheEuropean Union (EU), viaprimary and secondary legislative regulations, aims at the development of a competitive, unified and highly liquid energy market, with equal access and a level-playing field among competitors, greater protection of consumers and overall at the creation of a solid basis so as to supply electricity and natural gas where it is needed.

The basic goals of EU energy policy in the context of free movement of persons, services and capital are solidified in art. 194 of the Treaty on the Functioning of the EU and consist of the completion of the internal energy market, the safeguarding of security of supply, sustainable development, and competition. More specifically:

a) Ensuring security of energy supply in the Union consists mainly of: i) the adoption of immediate measures for crisis mitigation,  ii) the adoption of new solidarity mechanisms for the weak,iii) the strengthening of trans-European energy infrastructure, iv) the diversification of energy sources and import routes, v) the creation of common external energy policy (“speaking with one voice”), as well as vi) the mentioned bellow under points b) and c) goals. Relevant legislative acts are the Directives concerning measures for security of supply for electricity and gas and for the mandatory maintenance of minimum stocks of crude oil and/or petroleum products.

In particular, regarding natural gas, following the Russo-Ukrainian crisis during the winter of 2008-2009, Regulation (EU) No 994/2010, concerning measures to safeguard security of gas supply was issued, aiming at the re-enforcement of mechanisms for crisis prevention and resolution.

However, the repeal of the aforementioned Regulation and the issuance of a newer one was deemed necessary, having as a basic pillar the further reinforcement of regional cooperation for crisis prevention and the establishment of common emergency plans through the creation of a solidarity mechanism between interconnected Member States (directly or via third countries) in order to secure supply at least for the solidarity protected customers. Hence, Regulation (EU) 2017/1938of 25 October 2017 was issued concerning measures to safeguard the security of gas supply.

Furthermore, in order to reinforce EU energy security, Decision No 994/2012/EU of the European Council was enacted establishing information exchange mechanisms with the Commission concerning intergovernmental agreements between Member States and third countries in the field of energy.  The decision in question was repealed on May 2nd 2017 by a newer Decision 2017/684/EU.

b)   Promotion of energy efficiency and energy saving and the development of new and renewable energy sources (RES), use of alternative fuels, as well as the development of an emissions trading systemRelevant legislative acts are the Directives concerning the:

  1. promotion of power generation from RES [Directive 2018/2001/EU, amends Directive 2009/28/EC and repeals the latter as of July 1st, 2020], which defines an EU wide binding target for RES of 32% – at least – of gross final energy consumption by 2030, by contribution of each Member State to the framework of the integrated national energy and climate plans,
  2. use of biofuels and other renewables in transport [Directive 2003/30/EU], according to which biofuels or other renewable fuels are promoted for the replacement of diesel or petrol in transport, so as to contribute to the attainment of the climate change targets. Member States should have placed in their market by 31 December 2010 biofuels and other renewable fuels 5.75 %, calculated on the basis of energy content, of all petrol and diesel used for transport purposes,
  3. development of alternative fuel infrastructures [Directive 2014/94/EE] concerning the framework of measures for the deployment of alternative fuel infrastructures (defined as electricity, hydrogen, biofuels as defined in Directive 2009/28/EC, synthetic and paraffinic fuels, natural gas, including biomethane, and liquefied petroleum gas (LPG)), and the minimum standards of such infrastructure  (including the recharging points for electric vehicles and natural gas and hydrogen vehicles refueling), in accordance with the specific national policy framework provisions,
  4. geological storage of CO2 [Directive 2009/31/EC], which enacts the legal framework for the environmentally safe storage of CO2, in the territory of the Member States, their exclusive economic zones and on their continental shelves, to contribute to the fight against climate change,
  5. greenhouse gas emission allowance trading system [Directive 2003/87/EC], which applies to energy activities, production and processing of ferrous metals and mineral industry, so as to promote the reduction of emissions (EU target for a decrease of at least by 40% until 2030) in a cost efficient and economically effective manner,
  6. energy efficiency [Directive 2018/2002/EU, which amends  Directive 2012/27/EU , repealing Directives 2004/8/EC and 2006/32/EC], which foresees an improvement of energy efficiency of at least 32.5% by 2030, as well as the energy performance of buildings [Directive 2018/844/EU], which mainly amends the provisions of  [Directive 2010/31/EU], so as to adapt to the new technologies and for their further enhancement in order to achieve the target for reduction of greenhouse gas emissions (taking into consideration that the building stock is responsible for 36% of the total EU CO2 emissions), providing for a 3% average annual renovation rate, and
  7. Regulation on the governance of the Energy Union and Climate Action [Regulation 2018/1999/EU,repealing Regulation (EU) 525/2013 as of 1 January 2021, that enacts a governance mechanism, so as to ensure the achievement of the 2030 and long-term objectives and targets of the Energy Union and to stimulate cooperation between Member States, on the basis of integrated national energy and climate plans covering 10-year periods. The Regulation in question, in conjunction with the aforementioned Directives for Renewable Energy 2018/2001/EU and Energy Efficiency 2018/2002/EU, comprise the framework which is predominantly known as the “Clean Energy Package”.

c) Promotion of the optimum interconnection of energy networks, mainly through the characterization of projects as “Projects of Common Interest” (PCI) and funding from the European Investment Bank and the Cohesion Fund (art. 177 of the Treaty on the Functioning of the EU). According to Regulation (EC) No 2236/95, projects of common interest have priority in the granting of Community aid. Decision No 1364/2006/EC lays down the basic guidelines for trans-European energy networks which specify PCIs and priority projects among the trans-European electricity and gas networks.Regulation (EU) No 347/2013 sets the guidelines for trans-European energy infrastructure, defining 12 corridors and priority areas in energy networks and foreseeing expediting measures for the relevant permitting procedures of PCIs. The Regulation in question was amended by Regulation (EU) No 1391/2013so as to define the Union list of projects of common interest. Furthermore, Regulation (EU) No 1316/2013 establishes a mechanism for the facilitating of funding, the Connecting Europe Facility (CEF) aiming at the support of priority projects from 2014-2020 in the sectors of energy, transport and telecommunications.

The provisions of Regulation No 617/2010, which was substituted by Regulation (EU) No 256/2014, contribute to the effective implementation of the above, which in turn request that Member States notify the Commission of investment projects in energy infrastructure within the European Union.

d) Ensuring the functioning (integration) of the internal energy market, which is estimated to create a healthy and safe investment environment which will fund the development of infrastructure as well as provide the possibility to consumers to enjoy “value for money” energy services. The creation of competitive energy markets, taking into consideration the particularities of each Member State (eg. SGEI), as well as security of supply requirements, will contribute to the integration of the internal energy market.

The aforementioned policies aiming at the integration of the internal energy market have taken place gradually through consecutive legislative measures (“energy packages”) adopted between 1998 and 2009. To date, these legislative packages are as follows:

·           The 1st energy package (1998-2003), which primarily comprises Directives pertaining to common rules for the internal energy markets for electricity and natural gas, established the national regulatory authorities and introduced the right of Third Party Access (TPA), as well as the obligation for accounting and operational unbundling. It is noted that each Member State was allowed to choose on its own the necessary regulatory measures as well as the market design depending on the particular structural and operational conditions. The national regulatory authorities were given the ever so important role of market supervision and monitoring of compliance with the above principles and of regulation of the electricity supply tariffs. In this context, Directive 98/30/EC concerning common rules for the internal market in natural gas was issued.

·The 2nd energy package (2003-2009), comprising mostly Directives on common rules for the internal electricity and gas markets and Regulations on conditions for access to the network for cross-border exchanges in electricity and for access to the natural gas transmission networks, attempted to extend the results of the 1st energy package by introducing the right of consumers to freely choose and easily switch their supplier, as well as the obligation of legal separation between the activities of generation/supply and transmission or distribution. Specifically, Directive 2003/55/EC andRegulation (EC) No 1775/2005, were issued for natural gas, the latter of which sets the technical rules for access to the transmission networks, as well as the rules for capacity allocation and congestion management.

The 3rd energy package (2009-to date). Despite the important progress accomplished in the energy sector, obstacles were still noticed relating to healthy competition in the wholesale gas and electricity markets, due to the fact that the markets remained primarily national with relatively limited cross-border trade and high concentration levels. In order for the European Commission to detect the obstacles to the development of effective competition in these markets, the European Commission launched in 2005 the Energy Sector Inquiry, which was completed in 2007. Based on the results of this sector inquiry and in order to tackle the identified problems in the gas and electricity market, the 3rd energy package was adopted, which mainly contains Directives on common rules for the internal market in electricity and the internal market in natural gas, a Regulation establishing the Agency for Cooperation of the Energy Regulators (ACER), as well as Regulations on conditions for access to the network for cross-border exchanges in electricity and for access to the natural gas transmission networks. The main amendments brought about by this new legislative package consist of the ownership unbundling of the transmission activities from the generation/supply activities, the reinforcement of responsibilities and independence of the regulatory authorities and the cooperation among regulators, system operators and the European Commission, as well as the enhancement of transparency of information. In particular, with respect to natural gas, the 3rd energy package comprises the following:

a)      Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC,

b)      Regulation (EC) No 715/2009  on the conditions for access to the natural gas transmission networks and repealing Regulation (EC) 1775/2005, which contains measures on congestion management and provides for the establishment of the European Network of Transmission System Operators for Gas (ENTSO-G), and

c)       Regulation (EC) No 713/2009 establishing an Agency for the Cooperation of Energy Regulators.

The aforementioned  3rd energy package is supplemented by a series of Directives and Regulations, primarily the following:

–          Directive 2003/96/EC concerning the restructuring of the Community framework for the taxation of energy products and electricity (under revision).

–          Directive 2008/92/EC concerning a Community procedure to improve the transparency of gas and electricity prices charged to industrial end-users, which obliges Member States to ensure that the relevant prices and pricing mechanisms are announced to Eurostat twice per year.

–          Regulation (EU) No 1227/2011 on wholesale energy market integrity and transparency (known as “REMIT” Regulation), according to which ACER is vested with the responsibility of monitoring energy wholesale natural gas and electricity markets through the collection and processing of data related to market transactions. ACER is also given the responsibility of investigation of possible abusive market practices, as well as the coordination of appropriate penalties for breaches of the provisions of REMIT, the application of which is the responsibility of the Member States. REMIT was supplemented by the provisions of Implementing Regulation (EU) No 1348/2014 on data reporting, implementing Article 8(2) and Article 8(6) of Regulation (EU) No 1227/2011. [For further information please see relevant “Requirements of REMIT” sub-section of the “Regulatory Framework” section.]

–        Commission Decision 2010/685/EUamending Chapter 3 of Annex I to Regulation (EC) No 715/2009 concerning the technical information necessary for network users to gain effective access to the system.

–          Commission Decision 2012/490/EU amending Annex I to Regulation (EC) No 715/2009, regarding congestion management procedures on the natural gas transmission networks (CMP), effective since September 2012, which were supplemented by  Commission Decision (EU) 2015/715.

–          Regulation (EU) No 984/2013  establishing a Network Code on Capacity Allocation Mechanisms in Gas Transmission Systems and supplementing Regulation (EC) No 715/2009, which was repealed by Regulation 2017/459/EU (CAM) in force as of April 2017

–          Regulation (EU) No 312/2014 establishing a network code on balancing in gas transmission networks (BAL), in force as of 1 October 2015.

–          Regulation (EU) No 703/2015 of the Commission establishing a network code on interoperability and data exchange rules (Interoperability), in force since 1 May 2016.

–         Regulation 2017/460/EU establishing a network code on harmonised transmission tariff structures for gas (TAR), the provisions of which shall apply as of 31 May 2019.

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