The 3 rd Package – implied changes to NRAs and their European cooperation

1. The 3rd Package – implied changes to NRAs and their European cooperation Asta Sihvonen-Punkka Director General of EMA Vice-Chair of ERGEG Baltic Electricity Mini-Forum 24th of April, 2009 Riga

2. Issues to be addressed • The National Regulatory Authorities • Designation and independence • Objectives • Duties • The Agency for the Cooperation of Energy Regulators • The role and duties of the Agency • NRAs participation in the Agency • Concluding remarks

3. Independence and designation of NRAs MSs shall guarantee the independence of the NRA and ensure that it exercises its powers impartially and transparently • NRA legally distinct and functionally independent • Shall act independently from any market interest • Shall not seek or take direct instructions from any government or other public or private entity when carrying out regulatory tasks

4. What are the preconditions for NRA independence? • Decision making: Autonomous decisions independently from any political body • Budget: Separate annual budget allocations with autonomy in the implementation • Resources: Adequate human and financial resources to carry out its duties • Management: Board or top management for a fixed term of five up to seven years, renewable once

5. General objectives of NRA include cross-border issues • Promoting IEM • Developing competitive and properly functioning regional markets • Eliminating restrictions on trade in electricity between MSs including developing CB capacities and enhancing market integration • Ensuring that system operators and users are granted appropriate incentives to increase efficiencies and foster market integration

6. Duties of NRAs • Fixing or approving ex ante • Network tariffs or methodologies • Terms and conditions for network access and connection • Balancing services • Terms and conditions for access to cross-border infrastructure including capacity allocation and CM • Monitoring duties (e.g. Network security and reliability rules, transparency, market opening, competition at wholesale and retail level, ISO) • Setting or approving standards or requirements for quality of service and supply

7. Powers of NRAs • To issue binding decisions on electricity undertakings • To carry out investigations • To require information from the electricity undertakings to fulfil the tasks • To impose effective, proportionate and dissuasive penalties (for TSOs up to 10% of the turnover of the previous year)

8. Agency for the Cooperation of Energy Regulators • A community body with legal personality • Purpose: “..to assist the regulatory authorities..in exercising at Community level the regulatory tasks...and to coordinate their actions” • Agency shall comprise • Administrative Board • Board of Regulators • Director • Board of Appeals

9. Agency’s tasks I • Provide an opinion on • draft statutes, list of members, draft rules of procedure of the ENTSOs to the Cion • draft annual work programme of ENTSOs to the Cion • draft network codes to the ENTSOs • draft non-binding 10-year network development plan to ENTSOs • Submit a draft framework guideline to the Cion • Submit a network code to the Cion and recommend that it be adopted

10. Basic timeline based on Regulation 6 Months 12 Months 3 Months COMITOLOGY ENTSO prepares network codes Agency reviews network codes Agency prepares Framework Guidelines EC requests Agency to submit framework guidelines EC requests ENTSO to submit network code ENTSO submits network code to Agency Agency submits network code to EC when satisfied, recommending approval via Comitology EC defines priorities for network codes

11. Agency’s tasks II • Monitor and analyse • The implementation of the network codes and Guidelines • Progress in implementation of projects to create new interconnector capacity and 10-year network development plan • Regional cooperation of TSOs

12. Agency’s tasks vis-á-vis the NRAs • Provide an opinion at the request of any NRA or Cion on whether a decision taken by NRA complies Community legislation • Follow compliance with the opinion, inform the Cion and MSs concerned • At NRAs request, provide an opinion on the application of Community legislation (Cion to be consulted) • Can propose to Cion to prepare binding rules on NRA cooperation

13. Tasks as regards cross-border infrastructure • If NRAs cannot agree within 6 months or upon a joint request from the NRAs, the Agency shall decide on regulatory issues, which include terms and conditions for access and operational security of cross-border infrastructure • Procedure for capacity allocation • Time frames for allocation • Sharing of congestion revenues • Charges levied on users of the infrastructure (merchant lines) • Decisions on exemptions

14. Concluding remarks • The independence, duties and powers of NRAs levelled up and harmonised • The new European regulatory framework with legally binding European rules! • The cooperation of energy regulators institutionalized in the Agency (similarly for electricity and gas TSOs in ENTSOs) • The regulatory gaps significantly reduced • A huge step to enhance market integration

15. Thank you for your attention! www.energy-regulators.eu Mark your diary for the World Forum on Energy Regulation IV October 18-21, 2009 Athens, Greece www.worldforumiv.info