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Understanding the Role of Regulatory Issues and Standard-Setting in Energy Markets

This overview addresses key regulatory issues in energy markets, focusing on the liberalization of natural gas and electricity sectors. It explores the evolution of energy policy since the mid-1990s, examining the implications of market opening, unbundling, and transparency. Additionally, it highlights the UN Framework Classification (UNFC) for fossil energy and mineral resources, emphasizing its importance in enhancing international communication and efficiency in resource management. UNECE’s role in informing non-EU countries about these changes and facilitating cross-border dialogue is also discussed.

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Understanding the Role of Regulatory Issues and Standard-Setting in Energy Markets

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  1. CONTENTS • One example each • Regulatory issue • Standard-setting issue • Why these issues are important • What is ECE’s interest/role • Procedures, method of work, etc.

  2. REGULATORY ISSUE Opening up and liberalization of natural gas and electricity markets

  3. ENERGY POLICY PARADIGM SHIFT • Prior to mid-1990s • Characterized by economies of scale • Inherent monopolies (natural gas & electricity) • Government guidance/supervision • Post mid-1990s • Market liberalization in buying and selling • Transport and distribution infrastructure: inherent monopoly

  4. EU COMMON RULES • Market opening (timing & level of opening) • Unbundling (Chinese walls, legal, ownwership) • Third party network access • Tarification, transparency • Regulatory systems

  5. PROFOUND IMPACT • Liberalization & re-regulation • Market and industry structures • Nature of competition • How business is conducted • Behaviour of governments • Problems & concerns

  6. UNECE’S ROLE/INTEREST • Assess & understand transformation/ potential implications • Dialogue and exchange experiences • Transfer EU country experience to non-EU countries • Approach: • Reports, studies, etc. • Addressed by Cttee, WP, Ad Hoc Experts, Workshops • 2 UNECE Gas Centre Task Forces • EU Directives • Transportation issues

  7. PERFORMANCE TO DATE • Significant market opening • Incomplete liberalization (EU) • 17 countries notified • 5 under active investigation (anti-competitive behaviour) • Efficiency gains/lower prices? • Concerns • Consolidation • National champions • Regulatory diversity

  8. STANDARD SETTING United Nations Framework Classification For Fossil Energy and Mineral Reserves and Resources

  9. WHAT IS THE UNFC? • Classification system for Fossil Energy and Mineral Reserves & Resources • Framework to harmonize existing terminologies & definitions • Simple, universally applicable scheme for classifying and evaluating • Flexible system for application at global, national, industrial, institutional or financial level

  10. Classification Principles Total in-place Field project status and feasibility Economic and commercial viability Geological knowledge • G1 Reasonably assured • G2 Estimated • G3 Inferred • G4 Potential • E1 Economic • E2 Potentially economic • E3 Intrinsically economic • F1 Justified • F2 Contingent • F3 Undefined UN Framework Classification (UNFC)

  11. WHY THE UNFC? • Enhance international communications • Support business processes & improve efficiency of resource management • Facilitate international financial reporting • Enhance security of energy supplies (transparency) & associated financial resources

  12. HISTORY OF UNFC • Initiated in 1992 • 1997 ECOSOC resolution for mineral and solid fuels (60 countries tested or using) • 2004 ECOSOC resolution for Fossil Energy and Mineral Resources (to apply system worldwide) • Develop one common global code for energy & minerals (incl. definitions, specifications, guidelines) • Plus institutional governing structure to keep UNFC relevant & updated

  13. STAKEHOLDER PARTICIPATION OR SUPPORT • Governments, incl. G7 Ministers of Finance and Governors of Central Banks, NGOs and business community/private sector • International organizations/ associations, incl. IAEA, IEA, IEF, OPEC, WEC and WPC. • Professional associations incl. AAPG, CRIRSCO, EFG, IASB, IOSCO, IVSC and SPE.

  14. AHGE BUREAU • Norway (1), Russian Federation (1) & US (1) • NGO (1) & private sector (2) • OPEC (1) • Combined Reserves International Reporting Standards Cttee (CRIRSCO) (1) • Society of Petroleum Engineers (SPE) (1)

  15. UNFC Governing Structure

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