Directorate General for Energy and Transport Johannes ENZMANN European Commission DG Energy and Transport Unit Electricity and Gas GIE Annual Conference Athens, 3-4 November 2005 Achieving the Internal gas market – are further legislative measures necessary?

Directorate General for Energy and Transport Is the current legislative framework sufficient?  Legislative framework made up of  2 nd IGM Directive from 1/7/04  Regulation (EC) No 1775/2005 on access conditions to the gas transmission network, OJ L289 of 3 Nov 2005, p 1  Directive concerning measures to safeguard security of gas supply from 16/5/06  Voluntary agreements: GGPSSO  Progress report according to Article 31(3) of 2nd IGM Directive takes stock of achievements

Directorate General for Energy and Transport Legal state of implementation Transposition finished InfringementDerogation Austria, Belgium, Czech Republic, Denmark, France, Germany, Hungary, Italy, Latvia, Lithuania, Netherlands, Poland, Slovakia, Slovenia. Sweden, UK Estonia, Ireland, Luxembourg, Spain, Finland, Greece, Portugal, Cyprus, Malta  Table just reflects the legal state of play, but does not give any indication on the actual compliance of the respective transposition laws with the provisions of the Directive  Commission will insist on implementation in spirit, not only in letter

Directorate General for Energy and Transport The European approach  Creation of one internal market for energy rather than 25 liberalised, but separated national markets  Diversity of Member States and the principle of subsidiarity  Approach based on Directives, that means: Mandatory with respect to objectives, but free with respect to the means to achieve the objectives

Directorate General for Energy and Transport The European model of liberalisation – the underlying idea of the Directive  Principal instruments to achieve competition:  rTPA on the basis of ex-ante tariffs or methodologies  Legal and functional unbundling of TSO and DSO  Mandatory set up of regulatory authorities  In connection with the principles of non-discrimination and transparency  Competition to develop by customers choosing their supplier freely thereby triggering competition among suppliers  Competitive sector: network users competing against each other, thereby rendering gas supplies as effective and efficient as possible  Regulated sector: market facilitator

Directorate General for Energy and Transport Fundamental feature: proper unbundling and  Legal and functional unbundling  Network operators without any interests in supply  Structure of interests geared towards  marketing capacity  efficient use of networks  In compliance with requirements of non- discrimination and transparency ...and in any case, entirely independent of any supply

Directorate General for Energy and Transport Fundamental feature: non-discriminatory and transparent access  Regulation on access conditions supplements the provisions of the Directive by providing a level playing field in terms of access conditions  Common understanding of the provisions is of utmost importance  Explanatory notes on some of the substantial provisions of the Regulation, such as:  Capacity allocation mechanism  Congestion management  Transparency requirements  Commission may request advice from ERGEG

Directorate General for Energy and Transport Some elements of a functioning European market for natural gas  Operators as market facilitators allowing system users to exploit market opportunities  System characterised, among other things, by:  Complete absence of operational barriers to enter and exit the system  Level of transparency which provides a level playing field for all system users  Considerable share of gas traded at liquid hubs  Effective secondary capacity trading among system users with a view to optimising capacity and supply portfolios  Hub-to-hub trading creating regional markets and finally integrating the whole European market  Decoupling of physical and contractual flows  Increased number of market players active at retail and wholesale levels

Directorate General for Energy and Transport Conclusions  Does the current legislative framwork prove to be sufficient?  Answer depends, not only, but also on TSOs  Providing non-discriminatory and transparent access conditions  Thereby pro-actively acting as market facilitators  Important role of regulators  Further findings can be expected by  Progress report  Sector inquiry  Final decisions of the Commission due at a later stage