1. TITRE ACER/CEER Annual Report on monitoring the electricity and natural gas markets Alberto Pototschnig Director, ACER Lord Mogg President, CEER Chairman, ACER Board of Regulators Brussels, 29 November 2012

2. Outline. Report scope and structure. Key findings. Consumer empowerment. Final remarks 2

3. Report scope and structure. First joint annual electricity and natural gas market monitoring report by ACER/CEER. Article 11 of Regulation (EC) No 713/2009. Three main areas covered:. Electricity markets. Natural gas markets. Consumer protection and empowerment. Electricity (E) and gas (G) chapters sub-divided into retail, wholesale and network access 3

4. Outline. Report scope and structure. Key findings. Energy consumers empowerment. Final remarks 4

5. . E wholesale prices significantly converged at regional level due to market coupling. There remains significant scope for further market integration between regions across Europe. G wholesale hub prices increasingly converged in NW EU due to gas-on-gas competition. Convergence was lower elsewhere. Price decoupling still occurs in NW EU during winter. In Southern Europe prices were still decoupled 5 Key findings – Progress towards the internal market

6. . Retail prices followed wholesale price developments to some extent. G - In some MS retail prices tended to follow wholesale price rises more quickly than wholesale price decreases. E - Retail prices in countries without price regulation tended to adjust more quickly to changing wholesale prices. Smart meters penetration may impact retail markets in the future. Smart meters can provide frequent and timely information on consumption patterns. Retail market design must ensure that the entities responsible for data collection and management:. Foster active competition; and. Act as market promoters and facilitators 6

7. Key findings – E Barriers to market integration. The phenomenon of unplanned flows is growing and undermines the efficiency of the internal electricity market 7

8. Key findings – G Barriers to market integration. The utilisation of network capacity could be improved. Especially where contracted capacity is not fully utilised and where well- functioning secondary capacity markets are not present. Cross-border interconnection tariffs are extremely heterogeneous and their transparency and pricing could be improved. Costing and pricing methodologies are usually not published. Some IPs seem to be arbitrarily priced. Wholesale price responsiveness is hampered by the persistence of LTCs, which may give rise to inconsistent gas flows 8

9. . The growing penetration of RES-E poses a number of challenges:. The timeliness of grid connection. The increase in costs from network congestion. The curtailment of RES-E (rare but increasing). Combining RES-E penetration and market rules (e.g. balancing responsibilities) Key findings – E and G RES network access. Biogas injection is prioritised in at least two MS. However, biogas does not generally enjoy preferential tariffs. Biogas still accounts for a very limited share of total injected gas 9

10. Key findings – E and G retail markets. Large disparities in pre- and post-tax price levels persisted across the EU, even between MS with similar retail market frameworks. In both electricity and gas. For both household and industrial customers 10

11. Key findings – E and G retail markets. 17 MS in electricity and 15 in gas featured regulated prices. Switching rates remained generally low in 2011, irrespective of whether end- user prices were regulated. Regulated retail prices should be:. Set at levels which do not hinder a competitive retail market. Consistent with the provisions of the 3 rd Package. Removed where a sufficient level of competition develops 11

12. . Important gaps in a number of MS regarding consumer protection, empowerment and the fulfilment of specific requirements stipulated in the 3 rd Package. For instance:. Maximum period for switching supplier. Definition and treatment of vulnerable customers. Complaint handling. Dispute resolution procedures Key findings – E and G consumer protection 12

13. Outline. Report scope and structure. Key findings. Consumer empowerment. Final remarks 13

14. . European energy consumers and citizens must benefit still more from the internal energy market. ACER monitoring is important to test of whether markets are functioning in the consumers interest. Findings reinforce importance of improving markets for consumers. CEER longstanding commitment and activities on retail markets and customers 14 Putting consumers at the heart of energy markets

15. . Puts smaller customers first. Engages with and understands the diverse needs of customers. Delivers services that meet those needs. Anticipates future needs. Takes steps to protect the interests of future customers. Uses resources efficiently. Offers all customers a fair deal 15 Through CEER, NRAs are working to deliver a European energy sector that:

16. Four principles governing the relationship between the energy sector and its variety of customers:. reliability. affordability. simplicity. protection and empowerment CEER and BEUC committed to dialogue, engagement and action. Invite others to do the same Supported by 10 major energy sector organisations 16 CEER and BEUC 2020 Vision for Europes energy customers

17. . Engaging with policy makers to ensure customer impacts are considered. Improving the effectiveness in how we engage with customer organisations. Analysing and understanding customer impacts. Identifying and sharing best practices. Ensuring that issues are identified early, analysed objectively and evidence is clearly communicated. Analysing specific issues relating to how the energy sector operates and developing advice and guidance New Dedicated Customer Section on CEER website! 17 How can CEER contribute?

18. Outline. Report scope and structure. Key findings. Consumer empowerment. Final remarks 18

19. Final remarks To achieve IEM persisting gaps need to be addressed, e.g.:. Remove barriers to trade. Improve transparency (gas). Improve availability of gas capacity. Reinforce cross-border interconnections. Integrate renewables and address loop flow problems. Promote competition - also at retail level. Improve implementation of consumer provisions 19

20. Final remarks. National energy market designs need to become more European, to achieve market integration. 3rd Package must be transposed and implemented fully and effectively into national law. EC must monitor and pursue any infringements. EU-wide network codes and market rules must be developed and adopted as soon as possible. Voluntary regional initiatives and integration projects are key and pilot for future network codes. Continued monitoring is essential to indicate how energy markets actually operate, and to highlight where possible improvements are needed 20 Concerted action by all actors for the benefit of consumers

21. Thank you for your attention Thank you for your kind attention www.acer.europa.eu www.energy-regulators.eu 21