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Implementation and Application of Energy Community Law in the Contracting Parties of

the Energy Community

Energy Community SecretariatRozeta Karova, Ph.D.

Jean Monnet Seminar in European Union Law11 April 2012, Kyiv, Ukraine

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Outline of the presentation

Energy Community - objectives and means

Benefits from regional energy cooperation

Stakeholders

Institutional framework

Energy Community Treaty - activities

-The Energy Community Acquis – Title II

- Mechanism for Operation of Network Energy Markets – Title III

- Creation of a single energy market, Title IV

Implementation of energy acquis in the Contracting Parties

Decision Making Process

Enforcement - Dispute Settlement Mechanism

Concluding remarks

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Energy Communityobjectives and means

OBJECTIVES

a) Create a single and stable regulatory space coupled with a stable market framework attracting investment

b) Integrated regional energy market that increases cross-border trade in energy, guarantees energy supply and takes into consideration climate and social aspects

c) The regional energy market should be fully integrated in the EU internal energy market

MEANS

- application of the EU acquis communautaire

- through the implementation of the Energy Community Treaty

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Benefits from Regional Energy Cooperation

Removal of legal and administrative barriers Legal certainty Attracting more investments

Access to larger and predictable energy marketsFree movement of network energyTitle IV: The Creation of a Single Energy Market

9 Contracting Parties & 27 EU member states

Establishment of Coordinated Auction OfficeCommon cross-border capacity allocation – better, transparent capacity utilization

Coordinated approach to investmentsProjects with regional dimension identified

Availability of reliable, low-cost and environmental friendly sources of energyImproving the energy security

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StakeholdersParties, Participants, Observers

Parties:The EU and 9 Contracting Parties:AL, BiH, CR, FYR MK, MNE, SR, UNMIK + MD (1 May 2010); UA (1 February 2011)

15 Participants: EU MS

4 Observers:Armenia, Georgia; Norway; Turkey

Donors

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Institutional framework

FORAFORA

NRANRA

Gov.Gov.

Min.Min.

Indep.Indep.

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The acquis adopted by the Energy Community Treaty Electricity Gas Environment Competition Renewable energy

Evolution of the acquis

Energy Community Treaty – activities (1):The Energy Community Acquis, Title II

Adopted by the Ministerial Council:- Security of electricity & gas supply, 2007- Energy efficiency, 2009, 2010- Third package (6 October 2011)

Recommendations, 2010:- RES-Third energy package

Planned for adoption RES, Oil stocks and harmonisation of energy statistics (2012)

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Energy Community Treaty – activities (2):Mechanism for Operation of Network Energy Markets, Title III

Setting up specific regulatory framework for the efficient operation of gas and electricity markets

-Single mechanism for cross-border transmission (Art. 28)

-Provision of energy to citizens (Art. 31-33)

-Harmonisation of market designs & measures fostering free establishment of Network Energy companies (Art. 34)

-Promoting RES & EE (Art. 35)

-Safeguard measures (Art. 36-39)

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Energy Community Treaty – activities (1):Creation of a single energy market, Title IV

Creation of gas and electricity market without internal frontiers:

-Removal of internal frontiers for trade in Network Energy (Art. 41-42)

External energy trade policy

- Regulation of imports and exports of Network Energy to and from third countries (Art. 43)

Mutual assistance in the event of disruption (Art. 44-46)

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Energy Acquis in the Contracting PartiesState of play

National dimension Transposition of the acquis – progress in 2011o primary legislation - gap between the Contracting Partieso secondary legislation – Implementation Partnership memoranda signed with few CPs

Practical implementation – challenges aheado regulated end-user prices and cost-reflectivity of tariffso bad debts, losses, collection rates o unbundlingo market opening o ensuring eligibility

Regional dimensiono Low level of energy tradingo Opening of the wholesale markets and CAO – electricityo Gas infrastructure projectso Security of supply

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Implementation of the Energy Community AcquisFocus on Ukraine

Recent activities and challenges - Legal framework to be developed further:

o draft Electricity Law and draft Natural Monopolies Law under preparationo No State aid Law adopted yeto Gas Law adopted in 2010

- Eligibility to be ensured:o from 1 January 2012 for all non-household customerso from 1 January 2015 for all customers

- Institutions establishedo NERC and Antimonopoly Commission

- Market and regulatory reforms

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Decision Making Process Title VI EnCT

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Decision Making Process (2)

Title Measures concerning (Art of EnCT)

Proposal Majority Geog. scope

II: Extension of the acquis* ex. 3rd package

- Art. 24 & 25 EC Simple majority

CPs

III: Mechanism for Operation of Network Energy Markets *establishing CAO

- Art. 28- Art. 31-39

PartyECS

2/3 majority* Positive vote-EC

CPs + AT, GR, HU, IT, SI

IV: The Creation of Single Energy Market

- Art. 41-46 Contracting Party

Unanimity CPs + 27 EU MS

Article 100 EnCT:-amendments of the EnCT-implement new acquis & extend EnCT to other energy products (ex. oil)-accession of new CP (ex. MD & UA)

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Enforcement: Dispute Settlement Mechanism (1)Articles 90-93 EnCT: Failure of a CP to comply with EnC law

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Enforcement: Dispute Settlement Mechanism (2)

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Concluding Remarks

From a pre-accession tool for the SEE countries to step towards the creation of a pan-European energy market

The Contracting Parties - not only participants into the Stabilisation and Association Process, but also participants into the European Neighbourhood Policy

Strong benefits from regional cooperation in energy - not related only to the EU membership

Regional Energy Market - even after some of the Contracting Parties accede the EU

Regional Energy Markets = steps towards establishing the internal energy market

The Energy Community is a “success and model for regional cooperation on energy matters” (European Commission, 10 March 2011)

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Thank you for your attention!

Rozeta KAROVAEnergy LawyerEnergy Community SecretariatAm Hof 4, Level 5A-1010 ViennaEmail: rozeta.karova@energy-community.orgwebsite: http://www.energy-community.org/