1. REGULATORY AUTORITIES SETTING-UP AND MISSION DURING MARKET OPENING Nina Grall-EDLER 3rd MEDREG IMME Seminar – 11/12 September 2013 - Tunis

2. 1.M ARKET OPENING – THE ROLE OF REGULATORS 2.W HAT IS NEEDED FOR EFFECTIVE REGULATORY WORK ? 3.M ARKET INTEGRATION / H ARMONISATION – T HE I MPACT OF REGULATORY CROSS - BORDER COOPERATION 4.W HAT CAN BE EXPECTED FROM E FFECTIVE R EGULATION ? OVERVIEW

3.  S TARTING ASSUMPTIONS FOR ELECTRICTY NETWORKS  natural monopolies – investment costs  essential facilities  regulation required to ensure fair competition  A REAS OF P OTENTIAL B ARRIERS T O C OMPETITION D EFINE R OLE / R ESPONSIBILITIES OF R EGULATORS  THE ROLE OF REGULATORS THE ROLE OF REGULATORS [1]

4. THE ROLE OF REGULATORS THE ROLE OF REGULATORS [2] P OTENTIAL DISCRIMINATION / M ISFUNCTIONING R EGULATORY A CTIONS / R ESPONSIBILITIES access to network connection to network level / equality of network fees network use abuse of dominant market position / anti-competitive behaviour setting TPA and CAM rules setting connection fees setting network fees ensure transparency, setting balancing rules and CMP favorable market conditions e.g. capacity / volume release  in cooperation with COMP authorities facilitating investments ensuring security of supply RES integration customer protection

5.  R EGULATORY I NDEPENDENCE  Practical implementation  Compliance and committment of other state bodies  A CTIVE R EGULATORS  defining, not administrating the market!  active cooperation with COMP authorities – ref. ex ante / ex post role  F ULL S ET OF R EGULATORY P OWERS  Implementation by letter and spirit WHAT IS NEEDED WHAT IS NEEDED [1]

6.  I NDEPENDENCE [Third Energy Package]  Legally distinct and functionally independent  Acting indepently  Taking autonomous decisions  Exercising powers impartially and transparently  Annual budget  Human and financial resources  Management  S TRONG R EGULATORY P OWERS [Third Energy Package]  Issue binding decisions  carry out investigations on functioning of the market  Impose proportionate measures to promote competition  Require any information from undertakings  Impose effective, proportionate and dissuasive penalties WHAT IS NEEDED WHAT IS NEEDED [2]

7.  W HY M ARKET INTEGRATION / CROSS BORDER TRADE ?  increased liquidity / competition  impact of more suppliers / traders  increased security of supply  more generation sources  supporting network operation (security)  generation reserves, balancing  Some markets cannot function properly on national level only – lack of liquidity, lack of market players  cost of non-integration  economies of scale, competitive structures  MARKET INTEGRATION REQUIRES HARMONISED MARKET RULES ACROSS BORDERS  technical / operational rules  market rules – network access, capacity allocation, congestion management, balancing  financial rules – transit compensation CROSS BORDER COOPERATION CROSS BORDER COOPERATION [1]

8.  E XAMPLES  voluntary [1]  formally established but non binding: ERGEG, ECRB  voluntary [2]  formally established but non binding: CEER, ERRA  obligatory  binding : ACER  E XPERIENCE - VOLUNTARY VS. O BLIGATORY C OOPERATION  Impact on committment – by regulators and stakeholders CROSS BORDER COOPERATION CROSS BORDER COOPERATION [2]

9.  E CONOMIC G ROWTH / INCREASE OF SOCIAL WELFARE  Breaking up inefficient national monopolies  cost efficiency positively impacts state budget  Strengthening the economic conditions of national energy network industries – by ensuring cost-reflective tariffs  Increasing service quality and consumer protection  Additional job opportunities  Controlling network security  Coordinated treatment of energy policies that affect each other  RES integration – infrastructure development – energy efficiency – sustainability – security of supply – competition WHAT CAN BE EXPECTED FROM EFFECTIVE REGULATION

10.  „H ONEST “ L IBERALISATION P OLICY I S K EY  Regulated energy prices  Regulated chain – generation, single buyer models  No political interventions into regulatory work / strong regulator  R EFLECT IMPACTS OF OTHER POLICY AREAS  RES  infrastructure BUT...

11. THANK YOU VERY MUCH FOR YOUR ATTENTION! QUESTIONS?DISCUSSION CONTACT Nina Grall-Edler Head of ECRB Section – Regulatory Affairs Energy Community Secretariat E: nina.grall@energy-community.org W: www.energy-community.org

12. B ACKGROUND S LIDES

13. 1.Legally distinct and functionally independent  Independent from industry (2nd p) + any public body  Decide on own management  no hierarchy-links, no office / personell sharing 2.Act indepently a.Not seek or take instructions b.No other institution to give instructions 3.Take autonomous decisions a.Ex ante  No external interference in decisions `  Develop own Work Program without need for consent b. Ex post  Decisions immediately binding  Decisions cannot be subject to review / approval / veto  exemption juridical review IN DETAIL – INDEPENDENCE IN DETAIL – INDEPENDENCE [1]

14. 4.Separate annual budget with autonomy in its implementation  Can be part of the state budget  Approval by parliament possible  but limited to global financial framework, no influence on NRA priorities!  Appointment of NRA baord members possible  but not resulting in instructions! 5.Human and financial resources  Adequate to execute powers [ref. ITO!]  Benchmark: other NRAs / bodies (e.g. national banks) 6.Management  Fix term 5-7 years, renewable once  Rotation scheme  Members appointed before the implementation of the 3rd package: max 7 years +  Relief from office only if not compliant with independence criteria IN DETAIL – INDEPENDENCE IN DETAIL – INDEPENDENCE [2]

15. 7.Exercising powers impartially and transparently  „Impartially“: neutral, based on objective criteria and methodology  „transparently“  Adopt and publish procedures / decision making rules  Publish information on organisation and structure, including contact points  Consult stakeholders before taking decisions – at least by publishing drafts, ideally including PCs / hearings / publication of comments and their reflection  Reasoned opinions – appropriate for juridical review Remarks  Setting of national energy policy by government not affected  Independence does not contradict cooperation IN DETAIL – INDEPENDENCE IN DETAIL – INDEPENDENCE [3]