1

Faculty of Law Academic Year 2015-2016

Exam Session 1

Implementation of the EU Third Energy Package in Member States with strong monopolies

Cases of Ireland and Greece

LLM Paper By Chrysi Mitka

Student number : 01510502

Promoter: Prof. Inge Govaere

2

To my promotor, Prof. Govaere for embracing the idea and motivating me,

and my parents for their greatest support.

3

TABLE OF CONTENTS

TABLE OF ABBREVIATIONS 5

INTRODUCTION 6

CHAPTER 1: EUROPEAN LEGAL FRAMEWORK 8

SECTION 1.1 CREATION OF EU ENERGY LAW 8 SECTION 1.2 THE FIRST ENERGY PACKAGE 8 SECTION 1.3 THE SECOND ENERGY PACKAGE 10 SECTION 1.4 THE ROAD TO THE THIRD ENERGY PACKAGE 11 SECTION 1.5 IN DEPTH ANALYSIS OF THE UNBUNDLING PROVISIONS 13 SUBSECTION 1.5.1 WHY IT IS NEEDED-RELATIONSHIP WITH TPA 13 SUBSECTION 1.5.2 OWNERSHIP UNBUNDLING IN DIRECTIVES 2009/92 AND 2009/73 14

I) FIRST OPTION-OWNERSHIP UNBUNDLING II) SECOND OPTION-ISO III) THIRD OPTION-ITO

SUBSECTION 1.5.3 CONSIDERATIONS RELEVANT TO ARTICLE 345 TFEU 19

CHAPTER 2: EFFECTIVE IMPLEMPLEMENTATION OF THE EU UNBUNDLING PROVISIONS 21

SECTION 2.1 DEFINITION OF EFFECTIVE UNBUNDLING 21 SECTION 2.2 ASSESSING EFFECTIVE IMPLEMENTATION OF UNBUNDLING- FIRST GROUP 23 SUBSECTION 2.2.1 THE UK 23 SUBSECTION 2.2.2 THE NETHERLANDS 24 SECTION 2.3 ASSESSING EFFECTIVE IMPLEMENTATION OF UNBUNDLING- SECOND GROUP 26 SUBSECTION 2.3.1 FRANCE 26 SUBSECTION 2.3.2 GERMANY 28 SECTION 3 CONCLUSIONS 29 CHAPTER 3: THE CASE OF IRELAND 31 SECTION 3.1 HISTORICAL OVERVIEW OF THE IRISH ENERGY MARKET 31

4

SECTION 3.2 DEVELOPMENTS PRIOR TO THE THIRD ENERGY PACKAGE 33 SECTION 3.3 TOWARDS THE THIRD ENERGY PACKAGE 37 SECTION 3.4 EFFECTIVENESS OF UNBUNDLING IN IRELAND AND RELEVANT CONSIDERATIONS 43 CHAPTER 4: THE CASE OF GREECE 44 SECTION 4.1 HISTORICAL OVERVIEW OF THE GREEK ENERGY MARKET 44 SECTION 4.2 DEVELOPMENTS PRIOR TO THE THIRD ENERGY PACKAGE 46 SECTION 4.3 TOWARDS THE THIRD ENERGY PACKAGE 49 SECTION 4.4 EFFECTIVE (?) UNBUNDLING, THE CRISIS AND THE EXAMPLE OF IRELAND 51 CONCLUSION 57 BIBLIOGRPAPHY 59

5

TABLE OF ABBREVIATIONS

NRA NATIONAL REGULATORY AUTHORITY

TPA THIRD PARTY ACCESS

OU OWNERSHIP UNBUNDLING

ISO INDEPENDENT SYSTEM OPERATOR

ITO INDEPENDENT TRANSMISSION OPERATOR

CER COMMISSION FOR ENERGY REGULATION (IRELAND)

DCENR DEPARTMENT OF ENERGY (IRELAND)

RAE REGULATORY AUTHORITY FOR ENERGY (GREECE)

HRADF HELLENIC REPUBLIC ASSET DEVELOPMENT FUND

6

INTRODUCTION

The predominant aim of this paper is to present and critically assess, from a legal point of

view, the steps Ireland and Greece followed in order to implement the Third Energy Package

Provisions with respect to Ownership Unbundling.1

It should be noted that the two Member States were chosen for this analysis because they

present interesting cases for various reasons. Primarily, the geographical position and

formulation of the two countries (Ireland is an island, whereas Greece is a peninsula

surrounded by two seas and over a hundred inhabited islands) are two crucial factors which

have influenced, and will continue to influence, their choices regarding energy policy. In other

words, the countries’ location and formulation create special energy needs. The above have

been among the reasons both Greece and Ireland had entrusted their electricity and gas

operations each to a public company which dominated the market for decades. These

companies were (and still are) considered as key national assets. All the more, the energy

sector had been functioning as one of the most important public employers in either country,

providing for jobs to domestic population.

Moreover, the Third Energy Package, found the two countries, each in a severe economic

situation, due to the financial crises they were undergoing at the time (at the time of writing,

Greece has not yet recovered from the crisis). Being Members States of the Eurozone, both

countries concluded financial assistance agreements with the EU and IMF, including provisions

regarding the privatization, among others, of a number of national energy-related entities.2

In other words, both Greece and Ireland could be characterized as peculiar cases with respect

to energy matters. Precisely, their attempts for a reconstruction of the energy market, in order

to meet liberalization and competition objectives, according to the mandate of EU Energy Law,

overlapped with the above mentioned geographical, economic and social considerations and

all the more, they were sometimes the result of financial agreements falling outside the scope

of EU Energy Law (and the Third Energy Package more specifically).

It should be noted that the purpose of this paper is to analyze the implementation of the

Unbundling Provisions by Greece and Ireland from an EU Energy Law perspective. The legal

nature of the relative financial agreements and their respective provisions, as well as the

relationship between those and EU Energy Law are issues that exceed the limits of this paper

and they will not be addressed in detail.

Furthermore, in order to acquire a complete picture of the ‘EU Energy Unbundling Puzzle’, it

is crucial to examine not only the scope and purpose of the legal provisions, but also to analyze

the reasons behind their choice, as well as their effectiveness. Therefore, after presenting the

EU Unbundling Legal Framework in the first chapter, the second is dedicated to assessing the

effectiveness of unbundling in Member States which are categorized in two groups: The first

1 European Commission, ‘Market Legislation’ available at http://ec.europa.eu/energy/en/topics/markets-and-consumers/market-legislation accessed 11/5/2016 2 See Website of the European Commission, Financial Assistance in EU Member States http://ec.europa.eu/economy_finance/assistance_eu_ms/ireland/index_en.htm for Ireland and http://ec.europa.eu/economy_finance/assistance_eu_ms/greek_loan_facility/index_en.htm for Greece

7

group consists of the most interesting cases of Member States which implemented the

Ownership Unbundling Regime on their own initiative, before it became an obligation under

EU law, namely the cases of UK and the Netherlands.3 The second group contains Germany

and France, two of the most economically strong Member States, which had been strong

opponents to the ownership unbundling idea.4

The case of Ireland is the subject of the third chapter, while Greece is analyzed in the fourth

chapter.

The methodology followed in the paper is the descriptive one.

To summarize, the research questions addressed in the present paper are the following:

i) How is “effective unbundling” defined in the EU Third Energy Package?

ii) How has it been pursued by Ireland and Greece (MS with strong monopolies and

weak economies), has it been successful and, if not, are there remedies under EU

energy law?

iii) Is the definition of “effective unbundling” broader in reality and is it pursued by

the EU as such?

iv) What is the relationship between Ownership Unbundling and Privatization under

EU law?

3 P. Lowe, I. Pucinskaite, W. Webster and P. Lindberg ‘Effective unbundling of energy transmission networks: lessons from the Energy Sector Inquiry’ [2007] 1 Competition Policy Newsletter, Spring 2007 ,23, 29 available at http://ec.europa.eu/competition/publications/cpn/2007_1_23.pdf 4 ‘Eight EU Member States oppose Unbundling, table Third Way’ Euractive (1February 2008 last updated 28 September 2012) http://www.euractiv.com/section/energy/news/eight-eu-states-oppose-unbundling-table-third-way/ accessed 12/5/2016

8

1. European Legal Framework

1.1. Creation of EU Energy Law

The initial idea for energy market rules emerged from the realization by the European

Commission that the monopolistic5 nature of the energy sector in most Member States

created obstacles to the effective functioning of the European internal market.6 According to

the Internal Energy Market Working Paper of 1988, the instruments in need to address the

obstacles in the energy sector should be the ones provided by the then EC Treaty for the free

movement of goods and services and also the provisions on commercial monopolies,

competition and state aids.7

The importance of the abovementioned instruments lies on the fact that it was acknowledged

for the first time by the Commission that the rules on the free movement of goods apply also

to the energy sector.8 The categorization of electricity as a good was made by the European

Court of Justice in the Almelo case9 of 1992 and therefore, it comes as a natural consequence

that the supply of electricity is a service under the Treaty.10

Thus, in the actions taken against 8 Member States in 1991, the Commission argued that

according to Article 86 (2) of the EC Treaty, the then existing monopolies on the gas and

electricity sector constituted a breach to the free movement of goods.11 The Court confirmed

that Article 86 (2) of the EC Treaty provided a legal basis for initiating actions against

monopolies in a number of cases.12 Only a year later, in 1992, the Commission issued

proposals with the purpose to introduce common rules and thus, to create an internal energy

market.13

1.2. The First Package

It took four years for a consensus over the proposed legislation to be reached and when it

finally did, in 1996, it included a number of amendments to the initial plan of the

Commission.14 It is worth mentioning that the legal basis for the adoption of the Directives

5 C. W. Jones et al EU Energy Law. 1 : The Internal Energy Market : The Third Liberalization Package (3rd edn. Claeys en Casteels, 2010) para 1.3 for the different kinds of state-owned monopolies( = entities that have been granted exclusive rights in law or in reality to operate an economic activity in a specific sector) 6 European Commission, The Internal Energy Market,COM (88) 238, 5 7 ibid 18 8 M. Marquis and W. J. Fulbright ,Introducing Free Markets and Competition to the Electricity Sector In Europe (Wisdom House 2001) 24 9 See Case C-393/92 Gemeente Almelo and Others and Energiebedrijf IJsselmij NV [1994] ECR-I 1508 para 28 10 Jones (ed.)(note 5) 7 11 Jones (ed.)(note 5) 2 12 Ibid 3 13 European Commission, Proposal for a Council Directive concerning common rules for the internal market in electricity [1992] Ο.J. C65/04 and in the gas sector [1992] O.J. C65/13 14 Jones(ed.) (note 5) for the discussion about the adoption of the first directives at 74-76

9

was the then Article 100a EC15 (now Article 114 TFEU) which conferred the Council the power

to act with qualified majority in order to adopt measures aimed in the establishment and

functioning of the internal market.16

Directive 96/92 on electricity17 stated in the preamble that the establishment of the internal

market for electricity should take place progressively and while taking into account the

different structures of the electricity markets of the Member States.18 As a first step, the

Directive required the opening of 30% of the supply market to eligible customers by 2003.19

Other key features of the Directive, which formed the initial steps to the liberalization of the

market, were the provisions introducing competition in the generation sector,20 the

designation of a Transmission and Distribution System Operator21 , the unbundling of vertical

integrated22 entities with respect to their management and their accounts in order to achieve,

inter alia, transparency23and finally the provisions on third party access to the network.24

The Directive also provided for the possibility of the Member States to derogate25 from the

provisions aimed at fostering competition, in cases where the implementation would create

problems in the performance of public service obligations26 among other reasons.

The first Directive for the internal market of gas followed.27 It contained very similar

provisions to the ones in the electricity Directive, namely, opening up of 20% of the supply

contracts to eligible customers by 1998 and 28% by 2003.28It also included provisions on public

service obligations and unbundling of accounts29 -and not of management as it was required

by the electricity directive- of vertically integrated companies, as well as provisions allowing

third party access to the system.30

15 Which was inserted in the EEC Treaty by the Single European Act of 1986, see N.D. Sabin. ‘Member State Exemptions from Article 100A Harmonizing Measures: A Possible European Court Approach’ [1991] Volume 14 Boston College International and Comparative Law Review 1 http://lawdigitalcommons.bc.edu/cgi/viewcontent.cgi?article=1344&context=iclr accessed 16.2.2016 16 Ibid 17 Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity [1996] OJ L 027/20 [hereafter Directive 96/92/EC] 18 ibid, Recital 5 19 Article 19, Directive 96/92/EC (note 17) 20 Article 4 of the Directive 96/92/EC (note 17) introduced two procedures that Member States we able to choose to regulate the entering in the generation market, namely the tendering and the authorization procedure 21 Chapters IV and V of the Directive 96/92/EC (note 17) 22 According to Article 2 (18) of Directive 96/92/EC (note 17) vertical integrated entities are the ones performing a network and a production/supply activity in the electricity sector 23Chapter VI of Directive 96/92/EC (note 17) 24 Chapter VII of Directive 96/92/EC (note 17) In order to facilitate third party access to the system, the Directive provided for three options, namely negotiated access (Article 17 par.1), regulated access (17 par. 4) and/or the single buyer system (Article 18) 25 Article 3 par. 3 and Articles 23 and 24 of Directive 96/92/EC (note 17) 26 Member States shall define the concept of public service obligation having due regard to the provisions of the Directive and shall inform the Commission, as provided in Article 3 par. 2 of Directive (note 17) 27 Directive 98/30/EC of the European Parliament and of the Council of 22 June 1998 concerning common rules for the internal market in natural gas [1998] OJ L 204/1 [hereafter Directive 98/30/EC] 28 Article 18, Directive 98/30/EC (note 27) 29 Articles 12, 13 Directive 98/30/EC (note 27) 30 Negotiated or regulated, according to Articles 15 and 16 of Directive 98/30/EC (note 27)

10

An important factor calling for a level of disparity between the two Directives was the special

characteristics of each commodity. Gas, for example, can be stored and also take more than

one forms; therefore, specific provisions were introduced regarding storage of gas31and LNG32

(liquefied natural gas). The Directive provided also for provisions allowing derogations from

the liberalization rules in cases of sudden crisis33 or when a situation could lead to unreliability

of the gas market,34or in cases financial problems were caused to gas companies due to their

take or pay obligations.35

As a general rule, the time limit for the implementation of the two directives was two years.36

1.3. The Second Package

Only a few years after the entering into force of the First Package, the Commission concluded

that the progress towards the internal energy market for electricity and gas did not meet its

expectations.37The three most important problems, according to the Commission, were the

high concentration of the market, discrimination in access to networks and also the different

pace of implementation of the first directives by the Member States.38 Therefore, the

Commission proposed a second legislative package in order to tackle the existing problems

and improve the framework that had been introduced with the first directives. The second

electricity and gas directives were adopted in 2003 and came into force in 2004, repealing

their predecessors.39They brought many changes in the fields of third party access (TPA), legal

unbundling and the role of National Regulatory Authorities (NRA).40

Regarding TPA, the second electricity Directive made obligatory the use of regulated access

through published tariffs after their approval by the NRA.41The same regime was introduced

by the second gas Directive, whereas, in this case, many exceptions42 were put in place, taking

into account the special characteristics of the gas sector.43Moreover, the directives required

31 Chapter III, Directive 98/30/EC (note 27) 32 ibid 33 Article 24, Directive 98/30/EC (note 27) 34 Article 25, Directive 98/30/EC (note 27) 35 Article 26, Directive 98/30/EC (note 27) 36 Article 27 Directive 96/92/EC (note 17) and Article 29 Directive 98/30/EC (note 27) 37 P. D. Cameron, ‘Completing the internal market in energy: an introduction to new legislation’ in Cameron, Legal Aspects of EU Energy Regulation : Implementing the New Directives On Electricity and Gas Across Europe (Oxford University Press 2005) 10 38 Cameron (supra note 37) 9 39 Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC [2003] OJ L 176/37 [hereafter Directive 2003/54] and Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC [2003] OJ L 176 /57 [hereafter Directive 2003/55] 40 Cameron (supra note 37) 11 41 Article 20 (1) of Directive 2003/54/EC (note 39) 42 Cameron (note 37) 13, citing Articles 19 (1), 20 and 22of Directive 2003/55/EC concerning the regulated access regime and the respective exceptions 43 Less state intervention required and more discretion allowed to Member States, see Cameron (note 37) 12

11

a high level of scrutiny by the Member States when they applied the provisions on

exceptions.44

The second very important feature of the second energy package was the inclusion of

provisions relating to legal unbundling of vertically integrated undertakings,45 in addition to

the functional and accounting unbundling that had been imposed on them by the first

package.

Thirdly, the role of NRAs was strengthened, since they became responsible for monitoring the

functioning of the market and ensuring a transparent market field for competitors.46

The implementation deadline was set in one year after the adoption of the Directives, namely

by July 2004.47

1.4. The Road to the Third Energy Package

By launching an energy sector inquiry in June 2005, the Commission aimed at identifying the

malfunctions of the energy sector.48It concluded that effective liberalization of the electricity

and gas markets had not yet been achieved.49 More specifically, the Commission stated that

the most crucial problems of the concerning markets were the high market concentration, the

inadequate level of unbundling, discrimination and difficulty for new players to entry the

market, as well as lack of transparency.50

The findings of the sector inquiry came after51 two other communications, namely the

“Prospects for the Internal Market”52 and Green Paper.53 The “Energy Policy for Europe”54

communication that followed, in 2007,55 made clear that the intentions of the Commission

were to propose a new set of rules targeting the deficiencies that they had not been tackled

by the second energy package.56

After the Commission published its proposal,57 dialogues between the Commission, the

Council and the European Parliament followed, resulting in the adoption of the Third Energy

44 Cameron (note 37) 13 , citing Article 20 (2) of Directive 2003/54 and Article 22 of Directive 2003/55/EC 45 Article 10 (2) and Article 15 of Directive 2003/54/EC and Article 9 (2) and 13 of Directive 2003/55/EC 46 Article 23 of Directive 2003/54/EC and Article 25 2003/55/EC (note 39) 47 Cameron (note 37) 11 48 European Commission ‘Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the European gas and electricity sectors’ (Final Report) COM(2006) 851 final 49 ibid 2 50 Ibid 3 51 Jones (ed.) (note 5) 4 52 European Commission ‘Prospects for the internal gas and electricity market’ COM(2006) 841 final 53European Commission Green Paper of 8 March 2006 ‘A European strategy for sustainable, competitive and secure energy’ COM(2006) 105 final 54 European Commission ‘An Energy Policy for Europe’ COM(2007) 1 final 55 Jones (ed.) (note 5) 4 56 ‘An Energy Policy for Europe’ (note 54) 7 57European Commission, ’Proposal for a Directive of the European Parliament and the Council, amending Directive 2003/54/EC concerning common rules for the internal market in electricity’ COM(2007) 528 final

12

Package in 2009.58 It consists of the new electricity and gas Directives59 as well as the

Regulation for the establishment of the Agency for the cooperation of energy regulators

(ACER),60 and the Regulations concerning the access to the networks of electricity and gas,

respectively.61

Moreover, in 2009, another development took place: the Lisbon Treaty62 came into force. It

stipulated, in Article 4 (paragraph 2 i), that energy is an area of shared competence between

the EU and the Member States. The Treaty also contains a specific chapter dedicated to

energy, consisting of Article 194 TFEU. The Article states that one of the aims of the Union is

the establishment and effective functioning of the internal energy market63 and thus, the

competent institutions of the Union shall adopt the relevant measures for the achievement

of the objectives laid down in the article.64

As pointed out in the official website of the Directorate General for Energy,65the mains goals

of the Third Energy Package involve effective unbundling of suppliers from networks, fostering

independence of regulators as well as effective cooperation of TSOs on a Europe-wide level,

the establishment of ACER and finally, reaching a transparency level so that all consumers are

benefited from it.66

The third Directives were to become applicable by 3 March 2011, while the second Directives

were applicable until then.67

58 Jones(ed.) (note 5) 10 59Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC [2009] OJ L 211/55 and Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC [2009] OJ L 211/94 [hereafter Directive 2009/72 and Directive 2009/73, or third Directives] 60Regulation (EC) No 713/2009 of the European Parliament and of the Council of 13 July 2009 establishing an Agency for the Cooperation of Energy Regulators [2009] OJ L 211/1 61Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003 [2009] OJ L 211/15 and Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005 [2009] OJ L 211/36 62Consolidated Version of the Treaty on the Functioning of the European Union [2008] O.J. C 115/47, most recent version [2012] OJ C 326/47 [hereinafter TFEU]. 63 Paragraph 1 (a) of Article 194 TFEU 64 Paragraph 2 and 3 of Article 194 TFEU; however, the Third Energy Package has been adopted on the basis of the then Article 95 TEC, now Article 114 TFEU, providing for the harmonization of legislation regarding internal market, see Preamble of Directive 2009/72 (note 59) 65European Commission, Energy, Topics, Markets and Consumers, Market Legislation <https://ec.europa.eu/energy/en/topics/markets-and-consumers/market-legislation> 66 ibid ‘Overview of Legislation’ 67 Jones(ed.) (note 5) 8

13

1.5. In depth analysis of the Unbundling Provisions of the Third Energy Package

1.5.1 Why it is needed-Relationship with TPA

In order for a competitive energy market to be established, one of the most important

conditions is the facilitation of Third Party Access (TPA) in the network systems.68Since the

networks for transmission69 and distribution70 of electricity and gas are considered natural

monopolies,71 the same network has to facilitate the abovementioned activities, regardless of

who injects to, or withdraws energy from the system. In other words, generators and suppliers

of energy (electricity and gas) must be able to access the networks on the same conditions, so

as to be able to participate in the market and compete for selling their product, meaning to

compete about who is going to supply a customer with electricity and/or gas.72

As it has been mentioned above in the Chapter, the first73 and second74 electricity and gas

Directives had imposed accounting, managerial and legal unbundling requirements to

electricity and gas undertakings. The first two types of unbundling aim at safeguarding the

keeping of separate accounts and separate management of the network activities from the

competitive ones.75 The latter type requires that the network undertaking is established under

a separate legal personality than the vertically integrated company.76In all cases, the vertically

integrated undertaking remains also the owner of the network.77

According to the Commission proposal of 2007 regarding the energy sector, a great deal of

obstacles to the competitive functioning of the energy market was to be blamed on the

inefficiency of the then existing unbundling rules with the most important ones being the

incentive of the network operator to favor the position of the vertically integrated company

it was part of, both in terms of access to the system and information providing, as well as the

lack of willingness of the operator to pursue network investments based on network-related

factors, but rather based on the economic benefit of the integrated company.78

68 W. Fritz, ‘Network Access and Transmission and Distribution Pricing’ in D. Geradin (ed.), The Liberalization of Electricity and Natural Gas in the European Union (Kluwer Law International 2009) 37 69 High voltage level networks that transport electricity and gas in long distances, see Ibid 39 70 Lower voltage level networks that facilitate the supply of electricity (coming from transmission networks) to customers in a local or regional area, see ibid 71 Fritz (note 68) 37 72 Free supplier choice by customers leads also to trading of energy as a commodity in wholesale markets, that it also is dependent on TPA see S. Schulte-Beckhasen, ‘Energy Trading in the EU’ in in D. Geradin (ed.), The Liberalization of Electricity and Natural Gas in the European Union (Kluwer Law International 2009) 50,57 73 See supra note 17 for electricity and note 27 for gas 74 Supra note 39 75 Jones (ed.) (note 5) 11 76 Ibid 77 Article 10 par. 1 of Directive 2003/54/EC and Article 10 par. 1 of Directive 2003/55 (note 39) 78 European Commission ‘Explanatory Memorandum accompanying the Proposal for a Directive of the European Parliament and the Council, amending Directive 2003/54/EC concerning common rules for the internal market in electricity’ COM(2007) 528 final, 4 [hereafter Explanatory Memorandum]

14

Taking into account the abovementioned facts and also the inability of NRAs to effectively

monitor the unbundling requirements of network operators,79 the Commission came to the

conclusion that the legal, managerial and accounting unbundling were inefficient to promote

the effective functioning of the internal market of energy and thus, a stronger level of

unbundling should be introduced, that of ownership unbundling.80

1.5.2 Ownership Unbundling in Directives 2009/72 and 2009/73

i) First Option-Ownership Unbundling (OU)

According to Article 9 paragraph 1 (a) of the Directives 2009/72 and 2009/73, from 3 March

2012, transmission system owners shall function as transmission system operators. Regarding

the tasks of a TSO, the Commission stated in the Interpretative Note for the Unbundling

Regime,81 that they consist of the facilitation of non-discriminatory TPA to the system, the

collection of system related charges and payments, as well as of ensuring the well-functioning

of the system in terms of technical and managerial aspects and also of planning the

appropriate investments in need.82

Concerning the unbundling rules, Article 9 paragraph 1 (b) imposes the obligation for TSOs not

to be controlled directly or indirectly from persons controlling, or having any rights in any

production and/or supply undertaking of electricity and gas sector.83 The same unbundling

rules apply, vice versa, for production and/or supply undertakings.84 Moreover, according to

section (c), the person controlling or having rights in any production and/or supply entity shall

not be able to appoint members in any of the managerial and legally representative bodies of

the TSO. Lastly, section (d) prohibits persons from participating as members in any of the

abovementioned bodies of the TSO, while simultaneously holding a position or an interest in

a production and/or supply entity.

Recital 13 and 10 of the third Electricity and Gas Directives respectively state that the term

“control” is taken from the Mergers Regulation.85 According to the definition provided in the

Regulation,86 any rights or contracts or any other kind of arrangements that are capable of

conferring the ability to exercise decisive influence on an entity, in law or in fact, shall be

79 ibid 80 Explanatory Memorandum (note 78) 5 81 European Commission, ‘Interpretative Note on Directive 2009/72 /EC concerning common rules for the internal market in electricity and Directive 2009/73/EC concerning common rules for the internal market in natural gas: The Unbundling Regime’ (Staff Working Paper) Brussels,22 January 2010 [hereafter Interpretative Note] 82 ibid 8 83 Paragraph 3 of Article 9 of both third Directives (note 59) state that this obligation applies equally to situations where a gas and electricity undertakings are jointly involved in controlling of both the network and the generation/supply. 84 Paragraph 1 (b) (i) of Article 9 of the Third Directives (note 59) 85 Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) [2004]OJ L 24/1 86 The provisions of the Mergers Regulation as cited by the Commission iν the Interpretative Note, supra (note 81)

15

deemed as conferring control of that entity to the person in their possession.87 The

Commission makes clear that due regard shall be paid to the term “decisive influence”, since

this is the crucial factor for determining whether control has been conferred or not.88

Moreover, control can be direct or indirect, through an intermediary body; in both cases the

term control falls within the scope of the Mergers Regulation.89

Regarding the concept of “persons”, the Commission again refers to the provisions of the

Merger Regulation which clarifies that the definition includes natural and legal persons;90 the

latter can be of public or private legal nature.91 It also gives an example, stating that, in

practice, the persons having control in both entities will be either the holding company of both

the supply and network activity, or the parent company having branches in the supply or

network sector.92

For the concept of “rights”, there is a specific section of Article 9 providing the definition.

Paragraph 2 of the Article states that the rights mentioned in paragraph 1 include the voting

rights, the right of appointment of persons in the administrative, supervisory or legally

representing bodies of the entity and lastly, the right to a majority shareholding. By inserting

the phrase ‘the rights….shall include in particular’ (emphasis added) in the first sentence of

paragraph 2, the drafters make clear that the list of rights is non-exhaustive.

In the Interpretative Note, a specific clarification is given with regards to the right in a majority

shareholding. More precisely, it is stated that “the shareholding can only provide financial

rights, i.e. the right to receive dividends”.93 In other words, if the parent company, or a supply

(or production) company wishes to keep a financial right in a TSO after the unbundling, this

right can only be of financial nature and additionally, it shall not lead to the attainment of any

of the rights drawn in paragraphs 1, cases (b), (c) and (d). That means that the company

maintaining the financial right shall not be able to hold a majority share (the financial right

shall be of a minority), or exercise any voting rights, or any other kind of control, or appoint

members in the boards of the TSO. Regarding the latter, the Commission justifies the choice

to insert a specific limitation concerning the appointment of members in the boards of a TSO,

by the reason that, this way it is ensured that the company that has been the subject of

unbundling and maintains a non-majority right in the TSO is precluded from interfering with

the decisions of the TSO by any means.94

The same rules apply in the opposite situation, where a TSO wishes to maintain a financial

right in a supply or production undertaking.95

Paragraph 4 of Article 9 grants additional time (3 March 2013) for the implementation of

paragraph 1 (b) and (c) because they involve major changes in the corporate structure and

87 According to the Interpretative Note (note 81) 8, citing the Merger Regulation provisions, such rights can be the ownership of assets and the ability to form the board, exercise voting rights ect. 88 Interpretative Note (note 81) 8 89 ibid 90 Article 3 (3) of the Merger Regulation as cited by the Commission in the Interpretative Note (note 81) 91 Interpretative Note (note 81) 9 92 ibid 93 ibid 94 Interpretative Note (note 81) 10 95 ibid

16

governance of the formally vertically integrated undertaking, and thus more time is

required.96

Finally, Paragraph 6 of Article 9 complements Recitals 23 and 20 of the electricity and gas

directives respectively. In the recitals it is stated that the unbundling provisions shall not

interfere with the Member States’ choice of the public or private legal form for undertakings

when applying the unbundling requirements. Accordingly, Article 9 (6) states that when two

separate public bodies are in control of the network and of the production or supply

undertakings, they shall not be considered as the same person. This issue will be analyzed in

detail in the following sections.

ii) Second Option-Independent System Operator (ISO)

This sub-section (as well as the following) refers to the differences between the main form of

ownership unbundling as provided in Article 9 of Directives 2009/72 and 2009/73 and the

alternative, that of ISO (and ITO).

As stated in Article 13 (1) of the Electricity and 14 (1) of the Gas Directive, in Member States

where, by 3/9/2009, the transmission system was part of a vertically integrated company, full

ownership unbundling could be avoided and instead, an ISO was allowed to be appointed,

after a proposal of the network owner and the subsequent approval by the Commission. This

way, the TSO still remains part of the integrated company.

In order to safeguard the independence97 of the ISO from the vertically integrated company it

is part of, paragraph 2 of both Articles imposes a set of obligations that must be ensured by

the NRA prior the authorization of the ISO as TSO.98 These obligations include the complete

independence of ISO from generation and supply activities of the company, in other words to

comply99 with the unbundling rules of Article 9 paragraph 1 (b) (c) (d); the ability of the

operator to function properly and adequately by having all the necessary means and resources

to fulfill its purpose and also to be in a position to finance its activities according to the NRA

planning; to cooperate effectively with other European and regional operators. Serving the

same purpose, of ensuring independence, Articles 14 and 15 of the two Directives provide

rules for the legal and functional unbundling of the ISO from the vertically integrated

company.

Obligations with regards to the ISO are also imposed on the transmission system owner.

According to Articles 13 and 14 (5) of the Electricity and Gas Directives respectively, the owner

of the system shall provide all the necessary information and shall cooperative effectively with

the ISO; it shall provide liability safeguards with regards to network assets; it shall finance the

investments determined by the ISO, or allow third parties to finance them.100

96 E.Cabau ‘Unbundling of TSOs’ in Jones (ed.) (note 5) para 4.167 97 Cabau, (note 96) para 4.173 98 Paragraph 3 of Article 13 of electricity and 14 of gas directives 99 Cabau (note 96) para 4.174 100In cases where the owner has agreed for a third party to finance investments on the system and these concern expansions of the system, the owner will not be also the owner of these new expansions, according to the Interpretative note, supra (note 81) 13

17

As stated in paragraph 6, the NRA shall ensure compliance of the owner with the

abovementioned obligations, as well as compliance of both the ISO and the owner with the

provisions of the Directive.101

The tasks of an ISO (and ITO) are the same as in the case of a fully unbundled TSO, according

to paragraph 4 of Articles 13 and 14 of Electricity and Gas Directives.

Iii) Third Option (Independent Transmission Operator)

The Independent Transmission Operator (ITO) forms another alternative to ownership

unbundling. As in the case of ISO, this option could be applied on the condition that a TSO of

the Member State concerned was part of a vertically integrated company by 3 September

2009.102It is worth mentioning that the ITO system was added in the third Directives by the

Energy Council of June 2008,103 after the Commission had issued its proposal and it has been

characterized “a compromise”.104

The main features of the ITO model are drawn in Articles 17-23 of both Directives. In this

option, the TSO remains part of the vertically integrated company, but detailed rules105 are

established in order to safeguard the autonomy and independence of the ITO. According to

the abovementioned provisions, the ITO shall have in its disposal all the necessary resources,

such as financing, personnel, assets and rights to carry on its tasks as a TSO effectively and on

its own responsibility. The provisions also require that a Chinese wall regarding information

between the ITO and the vertical integrated undertaking is put in place; moreover, a complete

prohibition has been introduced with regards to any direct or indirect shareholding rights of

the vertical company in the TSO;106The relationship between the two entities shall be the same

that it would be under normal market conditions.107

Article 19 aims to ensure that members of the staff and management are independent from

the vertically integrating company. The article requires the NRA to monitor whether the

independence conditions have been fulfilled and also imposes a requirement for minimum

“neutral” years between ITO board members’ engagement in the board, or termination of

their term and the commencement of a new relationship with the vertically integrated

company.

A Supervisory body, which is also subject to the same independence conditions, is in charge

of appointing the members of the respective management organs of the ITO.108 Moreover,

101 Article 37 and 41 paragraph 3 of the Electricity and Gas Directives respectively, providing for a detailed list of the tasks of the NRAs regarding the ISO option, in addition to the obligations conferred to the with regards to TSOs in general. See Cabau (note 96) para 4.189 102 Article 9 (8) (b) of Electricity and Gas Directives (note 59) 103 J.G. Westerhof ‘The Third Internal Energy Market Package’ in M. M. Roggenkamp and U Hammer European Energy Law Report VI (Intersentia 2009) 30 104 ibid 105 Aricles 17 and 18 of Electricity and Gas Directives (note 59) 106 Article 18 para 3 of third Electricity and Gas Directives (note 59) 107 Article 18 para 6 of third Electricity and Gas Directives (note 59) 108 Article 19 para 1 of third Electricity and Gas Directives (note 59)

18

this body has been conferred the power by Article 20 to make decisions regarding matters of

shareholding and financial governance.

The overall compliance of the ITO with non-discrimination behavior is ensured by a

compliance program which is run by a compliance officer according to the specifications of

Article 21, while the NRA is able to enforce ITO to make a decision regarding an investment,

in case the integrated company opposes, as stated in Article 22.

In general, it is the task of the NRA to monitor and have the general regulatory oversight of

the functioning of the ITO and for that reason, paragraph 5 of Article 37 provides for a

minimum (“…at least the following..”) set of powers to be conferred to it.

19

1.5.3. Considerations relevant to Article 345 TFEU109

Article 345 TFEU binds the EU to remain objective with regards to Member States’ choices of

property model; in other words, the EU shall not impose unilaterally any nationalization,

expropriation, or privatization on Member States.110 Thus, the choice to Member States to

implement a certain property model shall be in the hands of Member States.111

Nevertheless, it has been argued that, given the overall liberal-driven character of the

Treaties, the provision is not entirely objective and, in fact, it favors the liberal functioning of

undertakings.112

The CJEU itself has followed an approach consistent with the free movement provisions,

narrowing the scope of 345 TFEU in cases where the four freedoms and the main aims of the

Union are not unjustifiably hampered.113

More specifically, in the 2012 joined cases114 concerning the prohibition of privatization of the

Dutch distribution electricity and gas networks, the Court, citing its case-law, stated that:

“However, Article 345 TFEU does not mean that rules governing the system of property

ownership current in the Member States are not subject to the fundamental rules of the FEU

Treaty, which rules include, inter alia, the prohibition of discrimination, freedom of

establishment and the free movement of capital.” 115

In the same case, the Court confirmed that the reasons behind the choice of Member States

with regards to the property system, shall be taken into account, in order to assess whether

a restriction on a freedom is justified or not.116In that regard, the Dutch law rules were

introduced with the aim to achieve the objectives of the second and third energy package of

proper and competitive functioning of the networks and thus, the Court stated that these aims

form a higher public objective and they can, in principle, justify a freedom restriction.117

With regards to Ownership Unbundling and Article 345 TFEU, it has been stated that the

unbundling regime is solely concerned with the party losing property and not with the one

acquiring it and thus, it is not in breach with the Article.118

109 For TFEU, supra (note 62) 110 M.D. Diathesopoulos, ‘Ownership Unbundling in EU & Legal Problems’ (December 29, 2010) 1, 18 available at SSRN: http://ssrn.com/abstract=1732212 or http://dx.doi.org/10.2139/ssrn.1732212 111 E.M. Ehlers ‘Electricity and gas supply network unbundling in Germany, Great Britain and the Netherlands and the law of the EU: A comparison (Insertia 2009) 417 112 A. McHarg “Social Obligations of Ownership and Regulation of Energy Utilities” in A. McHarg, Property and the Law In Energy and Natural Resources (Oxford University Press, 2010) 379 113 I. Guayo, G. Kuhne and M. Roggenkamp, ‘Ownership Unbundling and Property Rights in the EU Energy Sector’ in A. McHarg, Property and the Law In Energy and Natural Resources (Oxford University Press, 2010) 338 114 Joined Cases C-105/12 to C-107/12 Staat der Nederlanden v Essent NV,Essent Nederland BV,Eneco Holding N ,Delta NV [2013] ECR I-677 115 Ibid, paragraph 36 116 Joined Cases C-105/12 to C-107/12 (note 114) para 55 117 Joined Cases C-105/12 to C-107/12 (note 114) para 64-66 118 I. Guayo, G. Kuhne and M. Roggenkamp ( note 113) 338

20

Additionally, it has been stated that since the Commission was unable to enforce ownership

unbundling through (partial) privatization of State-owned energy companies, it compromised

by introducing the notion of different State bodies owning and being responsible for different

activities119 (eg. generation/transmission). The above solution has been criticized for not

respecting the principle of equality, with the public sector being treated more favorably, since,

only private undertakings have to give up one or another of the required activities, while the

public sector is able to use its many “faces” in order to diffuse the parallel ownership of

multiple entities.120

However, meeting the independence criteria governing all three unbundling options for

entities remaining inside the public spectrum seems an ambitious plan, since public entities

are connected one way or another to the government, no matter how closely or loosely. The

assumption that conflicting interests and any kind of corruption are avoided seems a utopia,

at least in some cases.

The above considerations have completed the European Union legislation relevant to

Unbundling. In the following chapter due regard is paid to the notion “effective unbundling”.

119 E.M. Ehlers (note 111) 418 120 E.M Ehlers ( note 111) 420

21

2. Effective Implementation of the Third Package Unbundling Provisions

2.1. Definition of Effective Unbundling

Recitals 11 and 12 of the Third Electricity Directive, as well as recitals 8 and 9 of the Third Gas

Directive, contain the definition of effective ownership unbundling according to the provisions

of the Directives. More precisely, the Recitals provide for a ‘checklist’ in order to determine

the effectiveness of the measures concerned. It consists of the following requirements:

Primarily, according to the abovementioned Recitals of the electricity and gas Directives

respectively, the unbundling measure implemented (namely, either the option of full

ownership unbundling, or ISO, or ITO) shall ensure that any overlapping of interests between

network operation and supply and/or production activities is eliminated.

The abovementioned requirement is further defined in the Recitals as embodying three

aspects: Firstly, the obligation of the Member States to ensure through one of the unbundling

options that the network operator does not discriminate against generation or supply

competitors with regards to access to the network (TPA); Secondly, transparent access of all

market participants to necessary information shall be facilitated by the network operator;

Thirdly, the operator shall be obliged to foster network investments. With regards to the

latter, any decisions regarding network investments shall take into account solely the

development and better functioning of the network; in other words, the network operator

shall adopt its position regarding investments in infrastructure while keeping a completely

neutral view to the position of market participants on the matter. Lastly, the abovementioned

results shall be effected under the umbrella of an efficient and transparent regulatory regime.

These obligations are cumulative. This is confirmed by the Commission’s Interpretative Note

on the Unbundling Regime, where the Commission refers to all of the abovementioned

elements as consisting aspects of requirement for effective (emphasis added) unbundling, that

should guide Member States when implementing one of the three models.121

Therefore, one could refer to the ‘checklist for the effectiveness of unbundling’ by applying

the Recitals’ conditions to the way Member States have implemented the unbundling regime,

in order to verify whether the purpose in question has been achieved.

Nevertheless, along with the necessity of the effectiveness checklist to be in place, the whole

contribution of Unbundling to the competitive functioning of the market needs to be part of

the assessment. This approach is in line with the overall purpose of primary EU law to establish

and promote a competitive energy market,122 as well as with the aim of the Third Energy

Package to eliminate problems in competition123 and establish “a well-functioning energy

market.”124

Thus, it could be argued that a broader definition of effectiveness should apply. Indeed,

according to Joscow,125 a fully ownership unbundled TSO (he refers to the electricity sector)

performs in the most efficient way compared to other models of ownership which lead to a

121 supra (note 81) 4-5 122 Article 194 TFEU 123 European Commission ‘Explanatory Memorandum’ (note 78) 3 124 Recital 6 of Directive 2009/72 (note 59) 125 P. L. Joscow, “Lessons Learned From Electricity Market Liberalization” (The Energy Journal, Special Issue. The Future of Electricity: Papers in Honor of David Newbery 2008, 9) http://economics.mit.edu/files/2093 accessed 13/5/2016

22

partial involvement of both entities in the transmission activities.126Even though at his

“textbook” he includes the option of less intrusive unbundling models127 (such as the ISO and

ITO), in his opinion, day-to-day operations as well as investments on the network should lie

with a single entity, that being the independent TSO.128

Notwithstanding, examining the issue from another legal angle, that of the general principles

of EU law,129 and more specifically from the perspective of proportionality, as referred to in

Article 5 paragraph 4 of the TFEU, according to case law of the Court130the measure must serve

the aim pursued, at least at a minimum level.131

Hence, one can observe that, in principle, providing for three unbundling models of gradual

severity, so that Member States are free to choose the model it suits them most, is in line with

proportionality’s requirement not to employ measures going beyond what is necessary to

achieve a result.132

The above conclusion is valid when the ‘effectiveness check list’ of the Directives, as described

above, is met.

It could also be argued that for a measure to be appropriate, it should add to the whole

development of the internal energy market, according to the objective of Article 194 TFEU as

analyzed above.

In this respect, the experiences of Member States having implemented either the OU model

or the ITO model could be proven of great value.

126 Ibid 26 127 Joscow (note 125) 12 128 ibid 129 See M. Horspool and M. Humpreys, European Union Law ( 8th edition, Oxford University Press 2014) 113 130 ECJ Case C-331/88 Fedesa [1990] ECR I -4023 para 14 131 “not manifestly inappropriate”, ibid 132 See ECJ Case C-58/08 Vodafone and others [2010] ECR I- 5026 para 51

23

2.2. Assessing Effective Implementation of Unbundling-First Group

2.2.1 The UK (England and Wales)

The UK could be characterized as the leader of unbundling, since, not only it was the first EU

Member State to liberalize its electricity market, but it did it on its own initiative, a decade

before the first European Directives were adopted.133

The liberalization program of the UK provided for the creation of three electricity generation

companies and one transmission company, by splitting up the CEGB.134The generation

companies were privatized some years later,135 whereas the transmission company became

the sole network operator; access to the gird for market participants was possible under the

acquiring of a license and payment of a regulated fee.136 The same conditions applied for the

functioning of the distribution networks which were operated by regional operators.137

The outcome of the liberalization program was that by the time of the adoption of the first EU

energy Directives, the UK had introduced free choice of suppliers for all customers of

electricity.138

With regards to the gas sector, as stated by former officials of the Directorate-General for

Competition in a 2007 opinion,139 the reason behind the urge of the UK to adopt the ownership

unbundling regime in the 1990s as a means for liberalization, was the inability of the former

vertically integrated company to meet the expectations of the market and its subsequent

inability to comply effectively and cost efficiently with the then existing regulatory

framework.140

Applying the effectiveness check list to the information provided in the abovementioned

article, one could reach to the conclusion that the UK’s unbundling program was stemmed

with success: In years after ownership unbundling and privatization took place, TPA

discrimination by the TSOs was tackled, investments reached a higher level than before,

transmission costs as well as market concentration were substantially reduced and new

infrastructure investments were planned (information about years 2000-2006).141

133 M. Marquis and W. J. Fulbright (note 8) 40 134 ibid 135 ibid 136 M. Marquis and W. J. Fulbright (note 8) 41 137 M. Marquis and W. J. Fulbright (note 8)51 138 M. Marquis and W. J. Fulbright (note 8) 55 139 P. Lowe, I. Pucinskaite, W. Webster and P. Lindberg (note 3) 140 ibid 30 141ibid; For the information regarding market concentration N. Kroes ‘Improving Competition in European Energy Markets Through Effective Unbundling’ [2007] Volume 31 Fordham International Law Journal 1387, 1431

24

Taking into account more recent data, according to the Commission’s assessment of the UK’s

electricity and gas market of 2014142 and 2015143, no reference was made with regards to the

(in)effectiveness of ownership unbundling. On the contrary, concerns about liquidity and price

transparency of the market have been raised, due to the prevalence of a number of vertically

integrated undertakings in the electricity generation and supply activities.144

Investments also seem to be following a rising trend, since infrastructure projects have been

authorized by the NRA for the period 2013-2021.145

To conclude, any problems146 Commission has identified with regards to the UK energy

market do not seem to be related to the ownership unbundling regime and thus, the

implementation of the unbundling provisions can be considered effective.

2.2.2. The Netherlands

The Dutch Electricity and gas downstream sector underwent a series of structural

transformations that begun in the 1980s and aimed at the full liberalization of the energy

market.147

In the following years, the Netherlands, similar to the UK, followed a proactive approach with

respect to unbundling and implemented a legal unbundling for electricity transmission

operators, going a step further from the requirement of functional unbundling of the First

Electricity Directive that was then in force.148 Gas legal unbundling took place along with the

implementation of the Second Gas Directive149and by 2004, both the high and low voltage

networks were operated by legally unbundled companies.150

With regards to the process of ownership unbundling of the transmission operators, although

the Dutch approach had initially favored the idea of concluding the unbundling along with the

privatization of the transmission companies, this approach was not followed at last.151 Instead,

the shares of the Electricity TSO Tennet, which were held by production companies, were

bought by the Dutch State in 2001.152 Moving on to the gas sector, transmission Company

GasUnie was unbundled in 2005 with the State buying the shares private companies (Shell and

Exxon) were holding.153GasUnie had already performed legal unbundling in 2004 by creating

142 European Commission ‘Single market progress report 2014, country report: the UK’ https://ec.europa.eu/energy/sites/ener/files/documents/2014_countryreports_unitedkingdom.pdf accessed 18/3/2016 [hereafter 2014 UK Report] 143 European Commission, ‘Country Fact Sheet United Kingdom’ (Staff Working Paper) accompanying Communication od the Commission to the European Parliament, the Council, the Economic and Social Committee, the Committee of Regions and the European Investment Bank ‘State of the Energy Union’ SWD(2015) 242 final [hereafter 2015 UK Factsheet] 144 2014 UK Report (note 142) 233; 2015 UK Factsheet (note 143) 4 145 2014 UK Report (note 142) 237 146 2014 UK Report (note 142) 230 147 M.M.Roggenkamp ‘ Full Transparency through Ownership Unbundling’ in M. M. Roggenkamp and U .Hammer European Energy Law Report VI (Intersentia 2009) 62-63 148 M.M.Roggenkamp ( note 147) 64 149 ibid 150 M.M.Roggenkamp ( note 147) 66 151 M.M.Roggenkamp ( note 147) 66-67 152 M.M.Roggenkamp ( note 147) 67 153 M.M.Roggenkamp (note 147) 68-69

25

another company to function as a TSO, that of Gas Transport Services.154Thus, the Dutch State

became the owner of both the electricity and gas transmission companies.

Regarding the results of the ownership unbundling option in the Netherlands, they have been

characterized very positive as far as investments are concerned.155 Precisely, in years after

ownership unbundling was implemented (2005), several investment projects were initiated,

such as the construction of a new LNG Terminal and a new gas storage facility.156 The above

developments have been connected with the market oriented character acquired by the

unbundled TSOs.157

Monitoring long term developments, the Commission’s reports of 2014158 and 2015159 for the

performance of the energy sector in the Netherlands revealed that concentration of the

electricity production market is not high and although, in the gas sector a higher level of

concentration is present, wholesale market liquidity and competition in retail markets remain

strong.160Moreover, in electricity retail markets, competition is improving year by year as the

supplier choices show.161

Furthermore, the problems of concentration in the Dutch gas sector are not related to the

ownership unbundling option. The fact that the Netherlands is a producer of gas leads to the

small number of undertakings carrying out production activities, since only one takes

advantage of the gas field in the region of Groningen.162

Overall, the abovementioned market facts are strong indicators that the pro-ownership

unbundling approach by the Netherlands has served the purpose of giving a boost to

investments and creating a competitive and well-functioning energy market.

154 M.M.Roggenkamp ( note 147 )66 155 M.M.Roggenkamp (supra note 147) 74 156 P. Lowe, I. Pucinskaite, W. Webster and P. Lindberg (supra note 3) 31 157 ibid 158European Commission ‘Single market progress report 2014 country report: the Netherlands’ http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52015SC0241&from=EN > accessed 19/3/2016 [hereafter 2014 Report: the Netherlands] 159 European Commission, ‘Country Fact Sheet the Netherlands’ (Staff Working Paper) accompanying Communication of the Commission to the European Parliament, the Council, the Economic and Social Committee, the Committee of Regions and the European Investment Bank ‘State of the Energy Union’ SWD(2015) 241 final [hereafter 2015 Report: the Netherlands] 160 2015 Report: the Netherlands (supra note 159) 4 161 2014 Report: the Netherlands (supra note 158) 226 162 2015 Report: the Netherlands (supra note 159) 4

26

2.3. Assessing Effective Implementation of Unbundling-Second Group

2.3.1. France

France provides for a very good example of a Member State that embraced the public

character of its utility entities from their early stages of development.

The actual shift towards the abovementioned approach took place after World War II, when

France nationalized its electricity upstream and downstream industry in order to prevent the

repetition of the power inefficiencies that occurred during the War;163 since then, small

private companies were active in the generation and supply of electricity.164 The law of 1946,

introducing also partial nationalization of the gas sector, provided for the establishment of a

two national energy entities, named Electricite de France (EDF) and Gas de France (GdF)

respectively;165 each would retain the ownership of the generation units as well as the sole

operation and ownership of the electricity and gas networks accordingly.166

When France was called upon to implement the First Electricity and Gas Directives, it was not

without any opposition from its part. The main idea of French officials and the public was that

the energy sector was benefited from the public model in a way that questioned the necessity

of effecting competition in the energy markets.167Nevertheless, the first Directives were

adopted for both electricity and gas.168

By the time of the transposition of the Second Directives in 2004, a major change had occurred

in the France energy sector: Both EDF and GdF had been transformed into limited liability

companies whose majority of shares was held by the State.169 Furthermore, the legal and

functional unbundling of the network activities were implemented, since a new, legally

independent unit of EDF, that of RTE, was appointed network operator.170

It is very important to mention that the status of “national public services” (emphasis added)

in France, such as telecommunications, energy and post services is granted a special

protection under the Constitution.171

This approach has been followed by the French courts whenever they were called upon to

rule on matters such as a partial privatization of a utility.172A swift occurred in 2004, when the

Constitutional Court ruled in favor of the partial privatization of GdF, which subsequently

made possible the merger of GdF with Suez (now GdF-Suez), in which the State holds 40% of

the shares.173

163 M.M. Roggenkamp, Energy Law In Europe : National, EU and International Regulation (2nd ed. Oxford university press 2007) para 8.100 164 M.M. Roggenkamp, Energy Law In Europe (note 163) 8.98 165 M.M. Roggenkamp, Energy Law In Europe (note 163) 8.100 166 ibid 167 M.M. Roggenkamp, Energy Law In Europe (note 163) para 8.117 168 M.M. Roggenkamp, Energy Law In Europe (note 163) para 8.231, 8.243 169 M.M. Roggenkamp, Energy Law In Europe (note 163) para 8.120, 8.233 170 M.M. Roggenkamp, Energy Law In Europe (note 163) para 8.249 171 J-C. Pielow and E. Ehlers, ‘Ownership unbundling and constitutional conflict: a typical German debate?’ [2008] Volume 2, Issue 3 European Review of Energy Markets 1, 29 172 J-C. Pielow and E. Ehlers ( note 171) 29-30 173 J-C. Pielow and E. Ehlers ( note 171) 30-31

27

The combination of these factors along with the willingness of France to apply the legal

unbundling provisions of the Second Directives to its energy players provides an overview of

France’s position with regards to ownership unbundling: it does not support a full privatized

ownership unbundling, since a strong public participation in the energy networks is an

inherent feature of the French energy sector.174

Indeed, France raised its objections with regards to the Commission’s Third Package proposal

for full ownership unbundling and it subsequently favored the inclusion of the ITO model in

the Directives,175 which it actually implemented, since in 2014 two out of three operators in

France had been unbundled according to the abovementioned model.176

Moving on to assess whether the implementation of the ITO model has been effective in

France, the situation seems complicated. According to the 2015 Commissions’ report for

France,177 market concentration (in favor of the incumbents) in electricity production,

wholesale and retail market is rather high and this reflects on the fact that suppliers have

rarely used their option to switch suppliers.178In the gas sector, switching supplier rates are

higher and thus the market is less concentrated.179However, it is astonishing that French

energy prices are among the lowest in the EU and also that the consumers rate the

performance of the national energy market as very satisfactory.180

However, none of the above deficiencies in competition have been related to the

effectiveness of the ITO model by the Commission in country reports, or by the French NRA

(CRE). The latter stated in a report of 2014 that France has already achieved actual( emphasis

added) separation of the networks from competitive activities, by implemented the Third

Package provisions, which has been a major step for the opening of the

market.181Nevertheless, there is a consistency between CRE and European Commission

reports that further improvement of the energy regulation in France is required to fostering

competition.182 Especially with regards to infrastructure investments, European Commission

has stressed out that the absence of a strong electricity interconnector with Spain creates

problems to competition and regional cooperation.183

174 This is proven by the fact that the State has retained a level of participation in all French TSOs see: European Commission, ‘Single market progress report 2014 country report: France’ <https://ec.europa.eu/energy/sites/ener/files/documents/2014_countryreports_france..pdf accessed 22/3/16 [hereafter 2014 Report: France] 80 175 Shepherd and Wedderburn LLP ‘Full ownership unbundling: no way or the third way?’ (Lexology,1 August 2008) < http://www.lexology.com/library/detail.aspx?g=d20fcc88-a581-47f0-838b-97142add72ee > accessed 22/3/16 176 2014 Report: France (note 165) 80 177European Commission, ‘Country Fact Sheet France’ (Staff Working Paper) accompanying Communication of the Commission to the European Parliament, the Council, the Economic and Social Committee, the Committee of Regions and the European Investment Bank ‘State of the Energy Union’ SWD(2015) 224 final [hereafter 2015 Report: France] 178 2015 Report: France (supra note 168) 4 179 ibid 180 ibid 181 Commission De Regulation D’ Energy ‘Activity Report 2014’ 4 available at http://www.cre.fr/en/documents/publications/annual-reports/activity-report-2014/read-the-report 182 2014 Report: France ( note 174) 78 and Commission De Regulation D’ Energy ‘Activity Report 2014’ (note 181) 4 183 2014 Report: France (note 174) 78

28

Concluding, it is difficult to assess whether the ‘effectiveness checklist’ has been met in

France. One the hand, due regard should be given to the fact that the French energy sector

has been dominated from a successful monopoly for a very long time and therefore transition

to a highly liquid and competitive market could not be but anything but challenging. One the

other hand, implementation of the ITO model does not seem to have contributed substantially

to the development of the French market.

2.3.2. Germany

Germany’s energy structure shows similarities with the French one, since prior to

liberalization, production and transmission energy activities were performed by vertically

integrated companies184while distribution was performed by numerous local companies

related to or owned by the respective municipalities.185The difference lies on the fact that in

Germany, four major energy vertically integrated companies were established,186 in contrast

with France were EdF has been the sole major player.

Experiences with liberalization of the energy sector have been the result of the

implementation of the respective EU Directives.187 Germany transposed the First and Second

Package efficiently and on time, although not with a proactive approach: it only enforced the

minimum requirements of the Directives.188 Moreover, it is worth mentioning that according

to the 2007 Sector Inquiry findings, a case of apparent discrimination had been detected by

one of the German vertical integrated energy companies.189

The same approach was followed by Germany with regards to the Third Package when, along

with France, backed the less strict model of ownership unbundling, the ITO.190Germany’s

strong objection to the Commission’s proposal of ownership unbundling191 was based, inter

alia, on the argument that the first option could be deemed contrary to certain constitutional

provisions, namely the ones concerning the protection of the fundamental right of

property.192

When it comes to implementation of the Third Package Unbundling requirements, the

situation seems rather complicated. First of all, Germany has officially chosen the ITO

model.193 In electricity, two of the major vertically integrated companies followed the path of

ITO,194 meaning, appointing a separate TSO, while abiding by the detailed rules of the

Directives, whereas the other two opted for the complete ownership unbundling by selling

184 M.M. Roggenkamp, Energy Law In Europe (note 163) para 9.14 185 M.M. Roggenkamp, Energy Law In Europe (note 163) para 9.11, 9.14 186 That being E.ON AG, Vattenfall Europe AG, EnBW AG, RWE AG, see M.M. Roggenkamp, Energy Law In Europe (note 163) para 9.15 footnote 29 187 M.M. Roggenkamp, Energy Law In Europe (note 163) para 9.88; G. Brunekreeft, G. Goto, M. Meyer, R. Maruyama, T. Hattori, ‘Unbundling of Electricity transmission system operators in Germany-An experience report’ (2014) Bremen Energy Working Papers No. 16,Jacobs University Bremen 1, 5 188 G. Brunekreeft, G. Goto, M. Meyer, R. Maruyama, T. Hattori (note 187) 5,6 189 P. Lowe,I. Pucinskaite, W. Webster and P. Lindberg (note 3) 25 190 G. Brunekreeft, G. Goto, M. Meyer, R. Maruyama, T. Hattori (note 187) 6 191 Shepherd and Wedderburn LLP (note 175) 192 J-C. Pielow and E. Ehlers (note 171) 22-23 193 G. Brunekreeft, G. Goto, M. Meyer, R. Maruyama, T. Hattori (note 187) 40 194 G. Brunekreeft, G. Goto, M. Meyer, R. Maruyama, T. Hattori (note 187) Figure 4 page 14

29

their TSO shares.195Therefore, two models of unbundling have been implemented in Germany.

The reasons behind the choices of the companies vary, stemming from different needs,196

traditions,197 prior ownership,198 and market considerations.199 In gas, 15 TSOs have been

certified by the competent NRA.200

Has unbundling been effective? According to the information deriving from the Commission’s

assessment in the Reports of 2014201 and 2015,202 the German energy market performs well

in general, since competition in the gas supply sector is very satisfactory, while in electricity

the four largest companies remain the strongest market participants.203

However, by 2012, the largest electricity generation companies in Germany retained the

substantial wholesale market share.204

Moreover, electricity retail market is considered highly competitive with a shortcoming being

its high prices, which have been a result of additional levies.205

As far as investments are concerned, situation in Germany looks problematic. The country has

delayed in completing the relevant electricity infrastructure projects, which are considered

crucial for assisting Germany in solving its congestion problems.206 Gas infrastructure

investment levels need also to rise up, if Germany wishes to meet its planned targets.207

To sum up, in applying the Directives’ ‘checklist’, there is no obvious information about a

malfunctioning of the unbundling system in Germany when it comes to non- discrimination

by TSOs with regards to providing information and TPA. However, a number of problems with

regards to investments are identifiable.

2.4. Conclusions

It is rather obvious that the different paths the abovementioned Member States followed with

regards to unbundling led their energy sectors to different levels of competition and

regulation. Even though there is no information about any discriminative behavior of the

TSOs, or any other major flaw of the system, one should keep in mind that the purpose of the

unbundling provisions is to eliminate the problems more plausible to arise under the vertical

195 ibid 196 G. Brunekreeft, G. Goto, M. Meyer, R. Maruyama, T. Hattori (note 187)15 197 G. Brunekreeft, G. Goto, M. Meyer, R. Maruyama, T. Hattori (note 187)16 198 G. Brunekreeft, G. Goto, M. Meyer, R. Maruyama, T. Hattori (note 187)17 199 ibid 200 European Commission,’ Single market progress report 2014 country report: Germany ‘ https://ec.europa.eu/energy/sites/ener/files/documents/2014_countryreports_germany.pdf > [hereafter 2014 Report: Germany] 90 201 2014 Report: Germany (note 200) 202 European Commission, ‘Country Fact Sheet Germany’ (Staff Working Paper) accompanying Communication of the Commission to the European Parliament, the Council, the Economic and Social Committee, the Committee of Regions and the European Investment Bank ‘State of the Energy Union’ SWD(2015) 225 final [hereafter 2015 Report: Germany] 203 2014 Report: Germany (supra note 200) 91 204 ibid 205 2015 Report: Germany (supra note 202) 4 206 ibid 207 ibid

30

integration structure. In that regard, the ITO model seems to have failed with respect to its

biggest supporters. One can easily observe that France’s and Germany’s choice to lobby and

implement the ITO model, served their purpose of keeping things almost as they were before

introducing the unbundling provisions to their energy markets. Neither EdF, nor the four

major German companies lost substantially their high market share. The latter undermines

the improvement of competition in the production sector. If market concentration remains

high, then non-discriminatory TPA and effective functioning of the network operator adds

little value to the aim of a competitive and “well-functioning internal market”.208

Moreover, investments in both countries did not follow a rising trend, which is one of the

predominant aims of ownership unbundling. As a Jacobs University Working Paper of 2014209

points out, the ITO model, in its substance, is a stronger form of legal unbundling and it does

not result in solving the lack of investment incentive problem. All the more, it creates a new

one, which is the difficulty in coordination between the parent company-owner of the system

and the ITO, regarding investment decisions and their execution.210

Does the European Commission share the same view? In its 2014 Report on the ITO model,211

the Commission appeared satisfied, especially with regards to the independence

requirements.212Moreover, the Report states that ITOs provide all guarantees for adequate

investments and there is no concrete proof that investments are being promoted better under

the Ownership Unbundling model.213 Nonetheless, the Commission stressed out that 2014

was too early to assess the results delivered by the ITOs’ 10 year investment plans.214

Applying again the proportionality principle, as it was stated at the beginning of the Chapter,

assessing whether both the OU and the ITO models are in line with it, heavily depends on the

position one takes towards the objective pursued: On the one hand, it seems that the

Commission ITO Report was strictly concerned with the implementation by ITOs of the

“effectiveness checklist” as prescribed in the Directives and therefore, the ITO is an

appropriate model for the objective pursued. On the other hand, we have seen that economic

theory for market liberalization sees Ownership Unbundling as the best solution.215

Is it possible that the Commission is not consistent with its interpretation on the results

required by unbundling arrangements or, that it employs other mechanisms in order to reach

the results prescribed in economic theory but are not being met under the ITO model, or even

under the Ownership Unbundling model?

With respect to the Member States we examined in this Chapter, the answer to the above

question is a negative one. Would one answer the same for the cases of Ireland and Greece?

The next chapters will provide the answer.

208 See Recital 7 Directive 2009/72 (note 59) 209 G. Brunekreeft, G. Goto, M. Meyer, R. Maruyama, T. Hattori (note 187) 9 210 Ibid 20 211 European Commission, ‘Report on the ITO model’ (Staff Working Document) SWD (2014) 312 final [hereafter Report on ITO model] 212 Ibid 3 213 Report on ITO model (note 211) 6 214 ibid 215 See, supra P.L. Joscow (note 125) and G. Brunekreeft, G. Goto, M. Meyer, R. Maruyama, T. Hattori (note 187)

31

3. Implementation of the Unbundling Provisions in Member States with weak

economies and strong monopolies

The case of Ireland

3.1 Historical Overview of the Energy Market in Ireland

Since the 1920s, following the founding of the Irish State, the Irish policy makers embraced

the idea of entrusting the electricity sector to the State.216 Even though there had been a

debate over the choice of the private or public model, the main factor which pointed towards

the state option was that the lack of safeguards that private investors would serve the

countryside as efficiently as the more profit-making populated areas.217

Thus, the Electricity Supply Board (ESB) came to life, as a result of the 1927 Electricity Supply

Act.218 The aim was for ESB to act as a public service, entrusted with the task to facilitate the

production and supply of electricity to the whole country.219

Even though there was not a clear provision in the Act that a monopoly was formally

established, the excessive powers of ESB to acquire power businesses, as well as to authorize

and alter the scope of supply areas, as provided by the Act, had the effect of creating a de

facto monopoly in the whole electricity chain.220

Moreover, since Ireland’s electricity production was based partly on peat production, another

State authority, named, the “Turf Development Board”, was established with a statutory Act

in 1936 with the purpose to facilitate and promote peat production for energy uses;221 it was

later renamed “Bord da Mona” in 1946.222 This State-Sponsored body was closely connected

to the ESB, since, according to the governmental policy, half of the former’s peat production

was being bought by ESB, in order to be used in the peat-fired electricity factories.223 In the

1950s, a Governmental Development Program imposed ESB to build and operate four new

peat stations that they contributed largely in the extensive peat usage during the 1970s,

whereas the usage of peat decreased in the 1990s and thus, by the early 2000s all the peat

stations had stopped operating.224However, by 2005, the construction of three new peat

stations had been planned.225

Peat production was more than another source of energy for Ireland. The production takes

place in rural areas and it has been a major source of employment for the Irish

communities.226Therefore, for employment reasons, the government introduced the

216E. D. Cross, Electric Utility in the EU, Electric Utility Regulation In the European Union : a Country by Country Guide (Chichester: Wiley, 1996) 69-70 217 E.D. Cross (note 216) 69 218 E.D. Cross (note 216) 70 219 ibid 220 ibid 221 D. Clack, Brief History of the Peat Industry in Ireland, available at <http://www.heartland.ie/articles/brief-history-peat-industry-ireland> accessed 30/3/2016 222 Ibid 223 E.D. Cross (supra note 216) 72 224 D. Clark (supra note 221) 225 ibid 226 See E.D. Cross (supra note 216) 72 and D. Clark (supra note 221) stating that the peat stations were built for “socio-economic reasons”

32

abovementioned peat-promoting policies and obliged ESB to pay high prices for a large

portion of the peat Board’s (Bord da Mona) production.227 Thus, the role ESB played in the

society was proved to be more than just an electricity company: apart from promoting

employment policies, was also responsible for facilitating electricity in rural and remote areas

of the country;228

Furthermore, the monopoly powers of ESB were so extensive that there was no provision in

the 1927 Act or in another statute to, at least, foresee for the potential introduction of TPA to

the network229 or the licensing of new producers.230

The above regime lasted until the 1990s, when the first considerations regarding market

reconstruction and liberalization started to commence, mostly driven from the initiation of

the European Commission’s efforts to introduce a more liberal regulatory market

environment for energy in the EU.231

With regards to gas, the same formulation as in the energy regulation was followed.

According to the Gas Act of 1976232, the powers of Bord Gáis Éireann (Irish Gas Board) covered

all gas related activities, namely, inter alia, the purchase or import of gas, transmission and

distribution through pipelines, maintenance and development of the pipelines, export of gas

and construction of new pipelines subject to a Ministerial approval, supply of gas to customers

and issuance of bills and acceptance of payments, as well as fixing price rates.233

At this point, a short analysis of the legal nature of the abovementioned State authorities

should be provided. The respective Boards for electricity, peat and gas were established under

the legal form of Statutory Corporations.234 According to Irish legislation, statutory

corporations derive their powers235 from their founding Act,236 which describes in detail the

functions of the establishing Board, the relationship with the respective Minister (who is

responsible for appointing the Board Members), the monitoring of its accounts, the terms

according to which it can borrow or raise capital, the supervisory role of the parliament with

regards to its activities and others.237In other words, all the crucial aspects for the functioning

of the Statutory Corporation are provided by the Statutory Act. As a result, any amendment

227 E.D. Cross (note 216) 72 228 E.D. Cross (note 216) 72 229 Production licances were given only after ESB’s approval, see E.D. Cross (note 216) 79-80 230 E.D. Cross (note 216) 70-71 and 77-78 231 See E.D. Cross (supra note 216) 78 and first chapter for the evolution of EU energy law 232 Gas Act (Number 30, 1976), available at < http://www.irishstatutebook.ie/eli/1976/act/30/enacted/en/html > accessed 30/3/2016 233 Gas Act (Number 30, 1976) (note 232), Part II, Section 8 234 M. MacCarthaigh ‘The Corporate Governance of Commercial State-owned Enterprises in Ireland’ (2009)Institute of Public Administration CPMR Research Report 9, 9 ,where it is also mentioned that Apart from statutory corporations, State sponsored bodies can also take the legal form of public or private companies, established under the Companies Act, available at http://www.ipa.ie/pdf/cpmr/reports/CPMR_RR9_Corporate_Governance_of_Stateowned_Enterprises_Ireland.pdf > accessed 30/3/2016 235 ibid 236 In this case the 1927 Electricity Supply Act, Turf Development Act 1946 , Gas Act 1976, Website of the Department of Communications, Energy and Natural Resources, Home, Energy Topics, State Energy Bodies < http://www.dcenr.gov.ie/energy/en-ie/State-Energy-Bodies/Pages/home.aspx > accessed 30/3/2016 237 M. MacCarthaigh 8 (note 234)

33

of the abovementioned elements shall take place along with the amendment of the respective

Act.238

Having provided a brief history and explanation of the main aspects of the energy market

organization in Ireland, the steps towards liberalization of the market will be covered in the

next section.

3.2 Developments prior to Third Energy Package

In early 1990s, discussions around the restructuring of the (electricity) market and

reorganization of the ESB had begun.239 The new government showed a positive attitude

towards the EU Energy Law developments pursued by the European Commission and thus, it

committed to introduce some changes that would bring ESB closer to the then proposed

European rules for an internal competitive market.240 Still, the objective was for ESB to

continue operations as a single entity.241

At the beginning of 2000s, Ireland gave force to the First Electricity Directive with the 2000

European Communities Regulations (SI. 445/2000).242 The Regulations aimed in transposing

the Directives to Irish legislation and to introduce the relevant amendments to the then

existing legislation.243By that time, the relevant electricity law was the Electricity Regulation

Act of 1999 (No. 23 of 1999) as amended by the Gas Act of 2000.244

For gas, the transposition of Directive 98/30/EC took place with the entry into force of the Gas

(Interim Regulation) Act of 2002.245

The transposition of the First Directives has been characterized as “advanced”, at least when

it comes to the implementation of the respective EU rules.246 In the following paragraphs the

focus will lay on the TSO unbundling and TPA provisions, as well as their effect on competition

and investments.

Regulations 445/2000247 provided for a series of amendments in order to bring the Irish

electricity legislation in line with the First Directive; among others, these included the

following: any upstream or downstream electricity activity to be covered by a respective

license;248Regulations 5(1) and 34 (1) required the establishment of a public liability company

(according to company law-Company Act 1963 and following amendments) which would be

238 ibid 239 E.D. Cross (note 216) 70 240 ibid 70-71 241 ibid 242 P. Mc Govern,’Ireland’ in P. Cameron Legal Aspects of EU Energy Regulation: Implementing the New Directives On Electricity and Gas across Europe (Oxford university press, 2005) 200 243 See ‘Explanatory Note’ in the S.I. 445/2000 Regulation, European Communities (Internal Market in Electricity) Regulations, [2000], available at < http://www.irishstatutebook.ie/eli/2000/si/445/made/en/print#article1 >accessed 1/4/2016 [hereafter 445/2000 IME Regulation] 244 Article 2 (1), 445/2000 IME Regulation (supra note 243) 245 P. Mc Govern (note 242) 200 246 See P. Mc Govern (note 242) 199 247 445/2000 IME Regulations (note 243); the regulations referred below form parts of the 445 IME Regulations. 248 Regulation 4 of 445/2000 IME Regulation(note 243)

34

granted the sole license in order to operate as a TSO; According to Regulations 5 and 6, ESB

remained the sole owner of the Transmission System, as well as the operator of the

distribution system; the TSO was burdened with all obligations of a TSO under the First

Directive, which include, among others, facilitation of TPA in a non-discriminatory way249 and

effective operation and development of the system;250the functions of the TSO and the Board

(as the owner) shall be entirely separate and even indirect influence is not allowed, as stated

in Regulation 9; according to regulation 10,the newly established TSO shall be provided with

all necessary resources in order to fully operate (obligation that was further implemented by

Regulation S.I. 145/2002); the same applied to personnel;251the internal relationship between

the TSO and the Board (including matters, such as payments ESB is entitled to, as the owner)

was required to be governed by a special agreement, named “Infrastructure Agreement”,

which was subject to the approval and monitoring by CER, according to Regulation 18;

unbundling of accounts was required for all undertakings active in the electricity sector

according to Regulation 27.

With regards to gas, on the same pace with the First Gas Directive, Gas (Interim Regulation)

Act of 2002 provided for the licensing of gas activities ( including construction and operation

of pipelines according to section 12), according to section 16; the appointment of BGE as

responsible for the gas transportation system is provided in section 11; BGE remained the

owner of the transmission and distribution systems, although having its accounts separated

with regards to all of its activities (including supplying gas) as stated in Section 17 (3); the Act

introduced competition in gas transportation and supply activities,252 since, according to

Section 12 (1) persons were allowed to construct pipelines, provided that they obtain a

permission of CER (for downstream pipelines) or the Minister (for upstream pipelines); Section

14 granted eligible customers the right to apply for TPA access to the TSO, according to

published tariffs approved by CER. The section also included detailed rules with regards to TPA

obligations of TSO and the supervisory role of CER.

One can easily observe that there is an important difference between the Irish electricity and

gas regulations: Regulation 445/2000 introduces legal unbundling on top of accounting

unbundling with regards to ESB, since it provides for the establishment of a subsidiary, EirGrid,

to function as a TSO, obligation that was not yet due under the First Directive; On the contrary,

the 2002 Gas Act provides only for the accounting unbundling of BGE.

Regardless of the big step towards legal unbundling of ESB, things did not run smoothly, since

EirGrid did not begin to operate immediately as a TSO under the new legal unbundled form of

a subsidiary, as provided by the Internal Market Regulations.253Instead, the respective

transmission unit of ESB within the auspices of the Board continued to function as a

provisional TSO, even though the unit’s independence was called into question.254Therefore,

full separation of entities with respect to their legal form had not yet taken place.255

249 Regulation 11 of 445/2000 IME Regulations(note 243); also, ESB, as the owner, is obliged to operate in a non-discriminatory way, according to Regulation 20 250 Regulation 8 (1 a-i) of 445/2000 IME Regulation(note 243) 251 Regulation 14 of 445/2000 (note 243) 252 See P. Mc Govern (note 242) 203 253 P. Mc Govern (note 242) 203 (para 10.17) 254 ibid 255 ibid

35

Regulation 328/2003 was the piece of legislation making the way for the actual operation of

EirGrid as a TSO, providing for the appointment of the first CEO of the company by its

Directors.256As a result, EirGrid took over transmission operation activities on 1 July 2006.257

By that time, the Second Electricity Directive had come into force. Ireland passed Regulations

60/2005258, in order to amend the previous regulations and bring them in line with the new

Directive. Among others, Regulations 60/2005 introduced TPA for all customers in Regulation

6 (d); also Regulation 11 (1) required non-discriminatory behavior in favor of the incumbent

with respect to TPA and for that to be ensured, it introduced a compliance program to be put

in place according to section 11 (2). Moreover, Regulations 60/2005, at point 7, amended

Regulation 9 of S.I. 445/2000 concerning independence of the TSO, by specifying the

mandates the owner of the network (ESB) shall comply with: these could be minimum

maintenance and development of the interconnection and the network. However, the list was

not exhaustive, since, Regulation 7 of Regulations 60/2005 stated that other requirements

“may” be considered necessary by the TSO.

The Second Gas Directive was implemented with regulations 325/2005 amending the relevant

TPA access rules, Regulations 426/2004, 452/2004 and 60/2005.259The latter concerned the

legal unbundling of gas TSO from BGE.260 In more detail, Regulation 5 stated that a new

company responsible for transmission operation shall be established, under Company Law

legislation, in which BGE shall have at least 50 percent of the shares. Again, an infrastructure

agreement was deemed as the tool to determine the relationship between the TSO and the

Board as the owner of the system.261As far as ownership of the system was concerned,

Regulation 9 followed the minimum requirement of legal unbundling as envisaged by the

Second Gas Directive and did not mandate BGE to transfer the ownership of the network in

the new established subsidiary.262With regards to independence of the new company from

BGE, Regulation 12 required the primary to be fully independent from the latter with respect

to its organization and day to day operation, as well as with respect to the development of

the system. However, BGE, acting as owner of the system was entitled to review and approve

the annual development plan drafted by the TSO.263Also, BGE was granted the right to appoint

Board Members provided that they were not in charge of day-to-day operations.264

Overall, one can observe that the TSO’s status of independence, after legal unbundling took

place, was the minimum, as required by the Second Directive. The latter is reaffirmed by the

subtitle of the relevant regulation 12 of Regulations 60/2005: ‘Independence in “certain”

respects’ (emphasis added).

256 SI No 328 of 2003 - European Communities (Internal Market in Electricity)(Amendment) Regulations [2003] ‘Explanatory Note’ 257 The Competition Authority, Towards a Sustainable Energy Future for Ireland (submission to the DCMNR, 1 December 2006, Submission S/06/009) 25 258 European Communities (Internal Market in Electricity) Regulations [2005] [hereafter S.I. 60/2005] 259 See Department of Communications, Energy and Natural Resources, Home, Energy, Legislation http://www.dcenr.gov.ie/en-ie accessed 7/4/2016 260 Regulation 5 section (1) of S.I. 60/2005 (note 258) 261 Regulation 8, S.I. 60/2005 (note 258) 262 Regulation 9 (4), S.I. 60/2005 (note258) 263 Regulation 12 (3 b), S.I. 60/2005 (note 258) 264 Regulation 12 (6 d), S.I. 60/2005 (note 258)

36

In 2007, after the publication of the Energy Green Paper,265 the White Paper followed.266

According to the view of the Competition Authority in its submission to the Green Paper, the

Irish Electricity market was in need of fundamental structural reforms to meet its targets for

a sustainable and competitive market.267The Authority’s opinion was that the three most

crucial reforms should be: to split up the generation unit and take some units away from ESB,

to implement a full ownership unbundling to the network entities (and not rely on the then

existing legal unbundling) and lastly, to put in place an arrangement in order to facilitate

wholesale market activity throughout the island of Ireland.268

With regards to unbundling, the Competition Authority was of the opinion that the legal

unbundling arrangements, as they were depicted in Regulations 60/2005 were inadequate in

serving the purpose of an effective separation of the network from the competitive activities

of ESB.269More specifically, the sharing of responsibilities between the owner, ESB and the

TSO, EirGrid, had the result that no effective decision making lied with the TSO with respect

to crucial matters such as network construction and timely and effective (emphasis added)

development of the system.270Moreover, the fact that the owner of the network has been the

strongest player in the generation market did not serve the purpose of inviting new players in

the generation sector, since the abovementioned TSO arrangement entailed a risk of network

discrimination in favor of the strongest player.271 Lastly, the Authority pointed out that legal

unbundling creates a need for a special regulatory and monitoring framework that burdens

both the administration and the consumers and thus, it is deemed to be a less efficient option

than full ownership unbundling.272

As a conclusion, the position of the Competition Authority with respect to unbundling was

that it should go beyond the requirements of the Second Directive and all the more, it should

go all the way to a full ownership unbundling.273Adding to the above, the Authority saw the

provisions of the EU Second Directive as a strong mandate for Member States to enforce the

above proposed structural reforms;274 however, the Irish approach, stuck on black letter law,

failed to take the necessary steps in order to create a real and beneficial network separation

that would facilitate competition in a market such as the Irish one which, due to its distant

location and limited size, has not been a top destination for foreign market entrants.275

The White Paper, published in 2007, set out the key priorities of the Irish Government with

regards to energy issues, for a time period until 2020.276More precisely, these included: a

secure and sustainable energy supply in Ireland while enforcing competition along with

265 The Competition Authority (note 257) 2 266 DCENR, Delivering a Sustainable Energy Future for Ireland (Government White Paper, The Energy Policy Framework 2007-2020) [hereafter White Paper 2007] 267 The Competition Authority (supra note 257) 2 268 ibid 269 The Competition Authority (supra note 257) 25-26 270 ibid 271 ibid 272 The Competition Authority (supra note 257) 27 273 ibid 274 The Competition Authority (supra note 257) 26 275 The Competition Authority (supra note 257) 27 276 White Paper 2007 (supra note 266) 5

37

transparency and cooperation of the two Governments involved in the island’s energy

market.277

With respect to unbundling, the White Paper referred to the insistence of many participants

in the Green Paper consultation procedure, for a stronger level of unbundling, which would

transfer the ownership of the network to EirGrid.278

Firstly, in achieving the specific goal of “efficient reliable and secure networks”279 the

approach followed in the White Paper was the one supporting State-ownership of the

networks, while promoting the investment programs of State-owned companies’ active in

energy networks.280The above view was also followed with respect to the goal of promoting

competition in the energy sector: the actions the Government committed to take, involved,

among others, maintenance of State ownership of the networks, while implementing sector

reforms, such as, opening up the gas market, enforce actual legal unbundling for BGE by 2007,

monitoring the functions of BGE, implement legal unbundling for electricity distribution

networks, grant EirGrid ownership of the network, reduce ESB’s market share in generation,

while enforcing the role of BGE and Bord da Mona in generation and supply of electricity,

enforce the role of CER in reducing market power of ESB and find alternative buyers for an

amount of production of an ESB power plant.281

The Government justified its proposal for maintenance of State-ownership of networks by

stating that due to Ireland’s small size and isolated location, a certain number of powerful, big

energy players were in need in order to keep up with the other major European and

international players.282

Lastly, the White Paper went on to emphasize the importance of ESB, BGE, Bord da Mona and

EirGrid in strategic, economic and social aspects of Ireland and it confirmed that their

operation, as Semi-State entities, has been successful over the years.283

3.3 Towards the Third Energy Package

As discussed in the previous section, in the 2007 White Paper, the Irish Government decided

to adopt a full ownership unbundling model in the electricity transmission sector, by granting

EirGird ownership of the network assets.

What followed that decision was an analysis ordered by the Ministry of Energy, in order to

assess the possible results of the ownership options.284 Along with that, the Employee Share

Ownership Plan of ESB ordered an independent research on the ownership options of the

networks to be carried out by LECG.285

277 See ‘Executive Summary’, White Paper 2007 (supra note 66) 5-7 278 White Paper 2007 (supra note 266) para 2.5.3. 279 White Paper 2007 (supra note 266) para 3.5. (emphasis added) 280 White Paper 2007 (supra note 266) para 3.5.2. 281White Paper 2007 (supra note 266) para 3.16.11. 282 White Paper 2007 (supra note 266) para 3.16.2. 283 White Paper 2007 (supra note 266) para 3.19.1. 284LECG, ‘Implementing the Third Energy Directive in Ireland: Options for the transmission network’, (Final, 23 April 2010) para 2.11 [hereafter LECG Report] 285 LECG Report, para 1.3 (note 284)

38

At this point, it should be noted that by the time the LECG report was published (23 April

2010), the EU Third Electricity and Gas Directives had come into force; therefore, the

discussion about the status of EirGrid inevitably was tied to the ownership unbundling

arrangements envisaged in the new Directives. According to the findings of the report, the

then existing arrangements of network ownership and operation were highly equivalent to

the ISO model, as drawn in the Third Directives.286More specifically, EirGrid was characterized

as a “deep ISO” in contrast to a “shallow ISO”, with the difference lying on the fact that the

previous is also responsible for network planning including investment decisions, whereas the

latter carries out only day to day operations.287The Report concluded that EirGrid was

functioning sufficiently enough as an ISO,288 indicating the following: EirGrid, as a deep ISO

was already in control of investment decisions and therefore, adopting the ownership

unbundling model would not add any value to that;289market opening and introduction of

competition in generation was evolving, since implementing the Asset Strategy Agreement

between CER and ESB290 , in 2009, the Spanish Company Endesa and ESB made a deal so that

the previous acquired four power plants and a power station291 and thus, it became a strong

market player in the generation sector, mitigating ESB’s market power;292promoting

interconnections with neighborhood markets was also in a good track under the ISO

regime293and any change in the ownership status would result in unavoidable delays in

implementation of these plans,294as well as in high costs.295

With regards to the Irish ISO’s conformity with the EU Directive’s provisions, LECG Report

pointed two provisions that might be proven problematic, the most important being the

involvement of ESB in a few aspects of the investment planning of network, through its

position as responsible for financing the construction of the plan, whereas the Directive

obliges the ISO to be the sole involved in the above.296

Concerning the gas sector, as discussed in the previous section, Regulation 760/2005

mandated the legal unbundling of BGE, which was actually implemented with the

establishment of the independent company Gaslink, to operate as the gas transmission ISO

following a certification by CER in 2008.297

In 2009, the debate over unbundling of EirGrid was still ongoing, with the Chairman of the

Competition Authority calling for the full unbundling option, since ,in his opinion, even the

286 ibid para 1.13 (note 284) 287 Ibid para 2.4 288 ibid para 1.37 289 ibid para 1.13, 1.18 290 ibid 1.23 291 O. Kelly ‘Endesa gets permit for Wexford gas station’ The Irish Times ( 2 August 2010) http://www.irishtimes.com/news/endesa-gets-permit-for-wexford-gas-station-1.631426 accessed 10/42016 292 LECG Report (note 284) para 1.23

293 See ibid para 1.26, 1.27 294 ibid para 1.28, 1.30 295 ibid para 1.31 296 ibid para 2.20 297 CER, Annual Report 2008, http://www.cer.ie/docs/000451/cer09207.pdf accessed 10/4/2016 58-59

39

possibility of ESB to have access in sensitive market information under the legal unbundling

arrangements could hamper competition.298

Following the above developments, 2010 proved to be the milestone year for Ireland. In early

2010, the “New Era” plan of the government was announced, in order to tackle financial

problems, which, among others, included the privatization of arms of ESB and BGE;299 the plan

caused opposition’s strong objections.300

Moreover, what was of even greater importance for Ireland was the signing of the financial

agreement with the EU and IMF on 28 November 2010.301

At this point, it is important to refer to the basic principles governing the EU Financial

Assistance to Member States and they have been governing the financial agreement of both

Greece and Ireland.

The most basic idea is that of “conditionality”. The latter forms the basis upon which the

Member States of the Eurozone provide and receive financial assistance within the auspices

of the European Mechanisms.302 Conditionality is referred in both the newest version of Article

136 para.3 TFEU and the EU legal instruments governing the financial assistance

mechanisms.303 In essence, conditionality comprises of all those obligations (of

macroeconomic nature) a recipient Member State has to meet, in agreement with its lenders,

in order to receive the agreed financial assistance.304 These obligations affect an extremely

wide range of the recipient State’s activities, including privatizations.305

With regards to energy, the Irish Program required the Irish Government to assess the

functioning of the electricity and gas markets and then to consult the European Commission

for options of privatization of energy companies, if it was determined that they would improve

State revenues as well as competition.306

However, the Government, without following the above mentioned steps, adopted the view

that ESB should be partially privatized, even though there had not been any ownership

298 B. Prasifka ‘ESB's power over a vital national interest is bad for the country’ The Irish Times (2 February 2009) http://www.irishtimes.com/opinion/esb-s-power-over-a-vital-national-interest-is-bad-for-the-country-1.690781 accessed 10/4/2016 299 S. Collins ‘Bruton says party will not back plan to save €3bn in budget’ The Irish Times (22 March 2010) http://www.irishtimes.com/news/bruton-says-party-will-not-back-plan-to-save-3bn-in-budget-1.641013 accessed 10/4/2016 300 ibid 301 Department of Finance/ Home/What We Do/EU and International/Ireland’s Program (EU-IMF Program) http://www.finance.gov.ie/what-we-do/eu-international/irelands-programme-eu-imf-programme accessed on 10/4/2016 302 M. Ioanidis, ‘EU Financial Assistance Conditionality after 'Two Pack' (20 February 2014) 2 available at SSRN: http://ssrn.com/abstract=2398914 303 M. Ioanidis (note 302) 3 304 M. Ioanidis (note 302) 16 305 M. Ioanidis (note 302) 17 306B. O'Halloran ‘Decision by end of next year on ESB sale’ The Irish Times ( 2 December 2010) http://www.irishtimes.com/news/decision-by-end-of-next-year-on-esb-sale-1.684224 accessed 10/4/2016

40

separation between its functioning units (eg. generation-networks).307 BGE was also named a

possible target for privatization.308

In their opinion309 in the Irish Times, Academics Dr. Donal Palcic and Dr. Eoin Reeves pointed

out the difference between the government’s idea for privatizations and the creditors’ one:

according to them, the former aimed in creating jobs and raise state money, whereas the

latter considered privatizations of State-owned companies as a necessary reform in order to

reduce national debt and improve competition.310They also considered the decision of the

Government to move forward with privatizations, without having a concrete mandate by the

creditors, as a short-term solution, which might fail to take into account long term needs of

the industry and could lead to another failure of privatization, repeating the mistakes of the

telecommunications’ company privatization, Eircom.311

The abovementioned position of the government had changed by early 2012, since instead of

sharing sales of the integrated ESB, it decided to sale a part of its generation unit and therefore

to split the ownership of the separate functions of ESB.312

With regards to BGE, the plans about its future were open for a long time, since after the initial

decision of the government to sell the whole Board,313 then, in 2013, the sale was cancelled;314

At the end, BGE’s competitive activities315 was sold to Centrica in 2014.316

The above developments had major repercussions on the implementation of the Third

Package Unbundling Provisions.

In 2013, CER communicated to the European Commission its draft decision on the Certification

of EirGrid as an unbundled TSO under Article 9(9) of Directive 2009/72.317 The Commission

307 D. Palcic and E. Reeves ‘Incoherent privatization policy a cause for concern’ The Irish Times (31 January 2012) < http://www.irishtimes.com/opinion/incoherent-privatisation-policy-a-cause-for-concern-1.454766 > accessed 10/4/2016 308 ibid 309 ibid 310 ibid 311 ibid 312 ‘Selling State assets’ The Irish Times (23 February 2012) <http://www.irishtimes.com/opinion/selling-state-assets-1.468610> accessed 10/4/2016 313 ibid 314 See B O’ Halloran ‘State sell-offs on the back burner after gas failure’ the Irish Times (29 November 2013) http://www.irishtimes.com/business/economy/state-sell-offs-on-the-back-burner-after-gas-failure-1.1610807 accessed 10/4/2016 315 C. Hancock ‘Bord Gáis workers’ share payout is money for old rope . . . our money’ the Irish Times (19 February 2014) http://www.irishtimes.com/business/financial-services/bord-g%C3%A1is-workers-share-payout-is-money-for-old-rope-our-money-1.1696433 accessed 10/4/2016 316 J. Simmons ‘Strong Irish M&A activity likely to continue into 2015’ the Irish Times (5 January 2015) http://www.irishtimes.com/business/strong-irish-m-a-activity-likely-to-continue-into-2015-1.2054477 accessed 10/4/2016 317 CER, ‘Annual Report’ (2013) 46 available at http://www.cer.ie/docs/000451/CER15017%20CER%20Annual%20Report%20and%20Accounts%20-%202013%20(English).pdf ; Article 9(9) of Directive 2009/72 states that another model (additional to the existing) can be adopted instead of the ITO one, if proven that it serves better the purposes of unbundling.

41

took the view that the proposed arrangements in order to safeguard an effective level of

unbundling of EirGrid from ESB were sufficient.318

More specifically, the Commission considered that the fact that transmission asset

management was to be carried out from a separate (unbundled) legal entity of the ESB Group,

namely ESB Networks Limited319guaranteed effective separation of transmission activities

from generation and supply activities of the vertical integrated company.320Moreover,

personnel321 and compliance regulations322 with regards to the separate company were found

to be well in place. With regards to the issues of investment funding by ESB, the Commission

stressed out the need for safeguards that investments in the transmission network receive

separate funding than the competitive activities of the ESB group and it concluded that

funding through a separate legal entity does facilitate that purpose.323Investment decisions

made by EirGrid form a “legal obligation” to ESB324 and according to CER, even the financial

difficulties Ireland went through in recent years, did not affect ESB’s performance of its

obligations;325in any case, EirGrid, supported by CER, is granted with extensive rights to force

ESB to implement an investment decision.326However, according to the Commission, an

amendment in Irish law should be introduced, so that EirGrid can finance and own a network

investment in case ESB is unwilling or unable to do so.327

As a result, the Commission entrusted CER with the implementation of the above

amendments and concluded that, with those in place, the application of EirGrid as a TSO under

Article 9(9) could be successful.328

However, Ireland delayed in implementing the unbundling rules and, thus, the Commission

took legal action against it first, with a formal notice in 2011 then, with a reasoned opinion in

2012 and 2013 and finally it asked the Court to impose a daily penalty for the delay.329

At last, Ireland transposed in full the unbundling provisions required by the Third Electricity

Directive with Regulation S.I. 16/2015.330 According to the latter (in section 12), the Ownership

Unbundling model is put in place for TSO applicants, except for TSOs which have been

authorized under the rule of Article 9 (9) of Directive 2009/72. Therefore, EirGrid, remains as

a TSO under Article 9 (9) of Directive 2009/72.

318 Commission Decision of 12.4.2013 pursuant to Article 3(1) of Regulation (EC) No 714/2009 and Article 10(6) of Directive 2009/72/EC – Ireland – Eirgrid / ESB C(2013) 2169 final, Article 1 [hereafter EirGrid Decision] 319 ibid para 42 320 Ibid 47-48 321 ibid 56. With regards to senior staff of ESB meeting with ESB Networks Limited, the Commission agreed with the view of CER to enforce stringer independent rules, see para 55 322 EirGrid Decision 4.1.4 and more specifically para 69-70 323 EirGrid Decision (note 318) 71-72 324 Ibid 73 325 ibid 74 326 ibid 75 327 ibid78-79 328 Ibid Article 1 329 European Commission Press Release ‘Internal energy market: Commission refers Ireland to Court for failing to transpose EU rules’ (Brussels 20/2/2014) http://europa.eu/rapid/press-release_IP-14-155_en.htm accessed 12/4/2016 330 SI No 16 of 2015 - European Communities (Internal Market in Natural Gas and Electricity) (Amendment) Regulations 2015 http://www.irishstatutebook.ie/eli/2015/si/16/made/en/print accessed 12/4/2016

42

With regard to gas, the situation became more complicated, heavily affected by the

privatization attempts by the government.331At first, also in 2013, CER drafted a decision to

certify BGE as an ITO and asked for the respective opinion of the European Commission.332

CER requested that a preliminary certification of an ITO is given to BGE while the sale of its

competitive activities was proceeding,333 under the condition that all relevant ITO provisions

were in place until April 2014 and not immediately, as the latter could create extra financial

difficulties and thus impede BGE’s sale.334The Commission insisted on the parallel

implementation of ITO rules along with the sale proceedings, with the aim for BGE to be

granted certification by April 2014 under either model.335 Therefore, BGE was certified as an

ITO in July 2013 with a preliminary decision by CER.336

After the sale of the competitive part of BGE to a private company,337former BGE’s network

arm (consisted of former operator Gaslink and Board Gais Networks338) was renamed

“Ervia”339 and became full ownership unbundled and the ownership unbundling model was

introduced by Regulation 16/2015.340

331 CER Annual Report (2013) (note 317) 46 332 ibid 333 European Commission Opinion of 23.5.2013 pursuant to Article 3(1) of Regulation (EC) No 715/2009 and Article 10(6) of Directive 2009/73/EC – Ireland – Certification of BGÉ ITO C(2013) 3117 final 2 334 Ibid 3-4 335 Ibid 4-5 336 CER Annual Report (2013) (note 317) 46 337 J. Simmons ‘Strong Irish M&A activity likely to continue into 2015’ the Irish Times (5 January 2015) http://www.irishtimes.com/business/strong-irish-m-a-activity-likely-to-continue-into-2015-1.2054477 accessed 12/4/2016 338 European Commission, ‘Single market progress report 2014 country report: Ireland’ https://ec.europa.eu/energy/sites/ener/files/documents/2014_countryreports_ireland.pdf Accessed 12/4/2016 [hereafter 2014 Report: Ireland] 117 339 Website of Ervia/Who We Are/Ervia Explained http://www.ervia.ie/who-we-are/ervia-explained Accessed 12/4/2016 340 SI No 16 of 2015 (supra note 330)

43

3.4 Effectiveness of Ireland’s Unbundling Arrangements and Relevant Considerations

According to the 2015 Commission’s Report on Ireland,341 the Irish gas market seems to

perform well in general, since competition in generation and supply has increased and the

market share of former BGE has been reduced substantially.342

In electricity, progress in retail competition appears slower and new regulations might be in

need.343 However, the switching pace in both wholesale and retail markets exceeds the EU

average levels.344

The above show that Ireland benefited from the structural changes introduced in its energy

sector in years 2010-2015.

The relevant question in this respect seems to be whether the above positive results in

competition have been the mere result of implementing the unbundling provisions of the

Third Directives, or the structural reforms (privatizations) required by the Irish financial

agreement.

The answer seems to be that both played a strong part in transforming the Irish energy

environment. It is also worth mentioning that the Irish approach with respect to ownership

unbundling and privatizations proved to be at least a positive, if not a proactive one.

It might be true that, at first, Ireland hesitated to implement the full unbundling model or

privatize business arms of its precious Semi-State enterprises. However, the liberal-driven

considerations were apparent since the White Paper of 2007. Without the intervention of the

creditors in 2010, it is highly possible that Ireland would act in a slower pace in implementing

the above reforms, mostly due to political debates and previous bad privatization experiences.

A striking point is that Ireland managed to protect its views on the energy sector since, it kept

networks under public hands (ESB, Ervia), as it had planned. Moreover, the sale of production

units had been introduced by the Irish Government before the signing of the financial package.

In other words, even with the pressure of the creditors for Ireland to deliver certain results,

Ireland managed to do it without compromising its own agenda, while at the same delivering

the results the creditors expected.

Would the case have been different if there was not mutual understanding and overlapping

agendas? The case of Greece will show.

341 European Commission, ‘Country Fact Sheet Ireland’ (Staff Working Paper) accompanying Communication od the Commission to the European Parliament, the Council, the Economic and Social Committee, the Committee of Regions and the European Investment Bank ‘State of the Energy Union’ SWD(2015) 228 final [hereafter 2015 Ireland Factsheet] 342 2015 Ireland Factsheet (note 345) 4 343 ibid 344 ibid

44

4 The Case of Greece

4.1 Historical Overview of the Energy Market in Greece

At the end of the 19th century, electricity made its appearance in Greece and the first State

power corporation was established in 1889.345In following years, multinational private

enterprises, the most important ones being Belgian and American, started to be active in the

Greek electricity production and electrification of the inhabited areas.346By 1929, a great

number of cities and communities had been using electricity.347

However, it was after World War II, that foreign investments, originating mostly from the USA,

flawed the Greek territory in order to assist the development of the electricity system, which

led to the improvement of the electricity grid and allowed the electricity connection of the

majority of the populated areas of the country.348

Nevertheless, the electrification of remote and low-density populated areas (e.g. islands) was

not an attractive investment for the multinational companies, being considered as a very

difficult and risky task and not that lucrative at the same time.349As it has been mentioned in

the introduction, the Greek territory comprises a great number of inhabited islands, spread in

the Aegean and Ionian Seas, both of large and small size, with their population ranging from

dozens to hundreds of thousands. Thus, until the 1950s, electrification in islands and inland

remote and rural areas was the initiative of domestic private enterprises or municipalities

which constructed small production units to meet the needs of specific areas.350The operation

of a large number of enterprises in Greece led to the increase of prices of petroleum and coal

(mostly lignite), the main resources used by electricity production units.351

The above considerations led to the establishment of “Public Power Corporation” in

1950352,353.According to Law 1468/1950, PPC was granted exclusive rights in construction of

thermo and hydroelectric units and subsequent production , transmission, distribution and

supply of electricity in the whole Greek territory.354According to a subsequent legal Act, that

of 3523/1956, all licenses and contracts which had been granted to parties other than PPC,

were no longer to be valid and thus PPC was appointed as the sole player of the market, having

excessive rights in the whole electricity chain, such as expropriating and thus acquiring

independent units and providing compensation for its activities, even to municipalities.355

345 RAE, ‘History of electrical energy in Greece’, available at http://www.rae.gr/site/categories_new/consumers/know_about/electricity/history.csp# accessed 19/4/2016 346 ibid 347 ibid 348 E.D. Cross (supra note 216) 53 349 RAE ‘History of electrical energy in Greece’ (supra note 345) 350 ibid 351 ibid 352 ibid 353 Moreover, according to Cross, nationalization of the electricity sector had been pursued by the Greek State and that the operation of foreign investors was not planned to be permanent see E.D. Cross (supra note 216) 53 354 T. P. Fortsakis, Energy Law in Greece (Kluwer Law International/Ant.N. Sakkoulas 2009) para 442 355 ibid

45

With regards to PPC’s legal nature, it was clarified in Law (Legislative Decree) 3785/1957,

which confirmed that PPC comprised elements of entities of both private and public legal

persons and that it was subject to regulation tailor-made for it;356 as a matter of fact, general

public law did not apply to it as such.357 Thus, PPC was considered a “sui generis” private legal

entity, whose sole shareholder was the Greek State, while its aim was to serve the general

interest.358 The above status of PPC was not altered materially by subsequent laws until 1991,

when Presidential Decree 360/1991 entered into force and allowed the exit of PPC from the

public sector with its transformation to a private law company with full State participation.359

As stated above, from its establishment, PPC performed all tasks relevant to the Greek

electricity sector. A breeze of change was attempted by Law 1559/1985 in order to achieve

entry of new players in the production sector.360With this Act, auto production was allowed

(in limited cases) and in all circumstances the outcome had to be sold to PPC.361 A few years

later, Law 1914 (amended by Law 2000/1991) provided for the market entry of independent

generators, ceasing the previous regime of production restrictions, subject to both PPC’s and

the Ministerial Council’s approval, making the framework complicated enough.362 Once again

the production was obliged to be sold to PPC.363

With the same view, Law 2244/1994 aimed to encourage independent production, which was

to be sold to PPC.364 The Minister of Energy was granted with wider rights with regards to

authorization procedures of the production units, as an attempt to narrow PPC’s discretionary

power, whose position was limited to the proposal and technocratic assessment of the

situation.365

Regarding transmission and distribution rights, as well as TPA, these did not exist under the

abovementioned instruments, since PPC was holding the pure monopoly of those sectors.366

Overall, PPC evolved into “the most important company in Greece”367, not only by covering all

electricity needs of the country, but also by being very profitable and providing for the vast

majority of jobs.368

With regards to the gas sector, it is considered very new, since gas was introduced in the Greek

market on a large scale only in 1995.369 More precisely, the decision to include gas in the

country’s energy mix, adopted in 1987, was a result of considerations behind strategic reasons

(to reduce the country’s dependence on petroleum), environmental reasons as well as market

reasons (improvement of competition).370 Algeria and Russia were the first exporters of

356 E.D. Cross (note 216) 56 357 ibid 358 T.P. Fortsakis (note 354) para 442 359 E.D. Cross (note 216) 56 360 E.D. Cross (note 216) 58 361 E.D. Cross (note 216) 58-59 362 E.D. Cross (note 216) 60 363 ibid 364 ibid 365 E.D. Cross (note 216) 62 366 E.D. Cross (note 216) ibid 62-63 367 E.D. Cross (note 216) 56 368 ibid 369 RAE ‘History of natural gas in our country’ available at http://www.rae.gr/site/categories_new/consumers/know_about/gas/greece.csp accessed 19/4/2016 370 T.P. Fortsakis (supra note 354) para 91

46

natural gas to Greece, while PPC was the first and largest customer in the country, signing a

supply contract with DEPA in 1994.371 Thus, Law 2364/1995 was the legal act establishing the

gas market.372

The first actor of the gas sector was DEPA (Public Gas Corporation), which was established in

1988 as a subsidiary of the Public Petroleum Corporation.373 DEPA’s major shareholder was

the Greek State with a 65%, while the remaining shares were held by Hellenic Petroleum (ELPE

S.A.).374 According to Law 2364, DEPA was appointed as the sole operator of the gas market,

having monopoly rights over every activity relevant to natural gas.375Distribution of gas was

planned to take place via EDAs, (Gas Distribution Companies) established by DEPA, operating

in the largest regions of the country, namely Attica, Thessaloniki and Thessaly.376

The above situation formed the basis on which the liberalization of the electricity and gas

sector was to take place through the (first) EU Energy Directives.

4.2 Developments prior to Third Energy Package

In order to implement the provisions of the First Electricity Directive, Greece enacted Law

2773/1999377. More specifically, the Law provided for the establishment of the National

Regulatory Agency for Energy, namely RAE;378

Articles 9-11 introduced the licensing regime for authorization of independent production,

according to the geographical location of the power plant: in case the power plant was in

mainland, only the respective license (article 9) was required; if the production facility was to

operate on an island not interconnected to the System379 or the Distribution Grid, then a

tendering procedure was set up and if the latter brought no sufficient results, the competent

Minister, following RAE’s approval, could appoint PPC as the license holder, in order to achieve

an interrupted flow of electricity in the non-interconnected areas(article 11 para. 1). As an

exception, generation plants not meeting a certain capacity threshold did not require a prior

license according to Article 10. In addition to the production license, an installation and

operation license of the unit was required, making the whole licensing framework extremely

bureaucratic and inefficient both for the regulatory authorities and the market participants.380

371 DEPA ‘History’ available at http://www.depa.gr/index3.php//content/article/002001008/64.html accessed 19/4/2016 372 T.P. Fortsakis (note 354) para 93 373 DEPA ‘History’ (note 371) 374 T.P. Fortsakis ( note 354) para 98 375 ibid 376 T.P. Fortsakis (note 354) para 169 377 Law 2773/1999, (Official Gazette Vol. A, Number 286) [hereafter Law 2773/1999] 378 Article 4, Law 2773/1999 (note 377) 379 The System, according to Article 2 of Law 2773/1999, consists of the high-transmission lines as well as the interconnections established in the Greek territory. It does not include production installations, lines incorporated in the (Distribution) Grid and Grids of non-interconnected islands. 380 T.P. Fortsakis (supra note 354)para 454; see paragraph 464, due to bureaucracy, even PPC was not able to obtain all necessary licenses for every one of its operating installations and thus, a provisional universal license for PPC was issued until 2005 that was renewed until 2008 and then until 2013.

47

Article 14 of Law 2773/1999 introduced legal unbundling with respect to PPC’s transmission

activities. As a result, a new legal entity was created381, governed by general company law

(Law 2190/1920) named “Hellenic Transmission Operator (HTSO).” The Greek state became

the major shareholder of the new company with 51% of the shares, while the remaining 49%

became available to the production license holders interconnected to the System;382 however,

initially, PPC was named the sole shareholder of the 49%.383 Respecting the legal unbundling

rules provided by the Directive, PPC remained the owner of the System according to Article

12, while HTSO was appointed as the sole384 operator of the System, entrusted with all

functions introduced by the First Electricity Directive (inter alia non-discriminatory TPA,385

day-to-day operations, maintenance and development of the System ect).386

Article 19 para 2 introduced the regulated regime for TPA to eligible customers, stating that

TPA shall be granted according to an Operation Code drafted by the HTSO and approved by

the Minister after RAE expressed its opinion.

With regards to Distribution Grid, both its ownership as well as its operation remained on the

hands of PPC according to Article 21. Eligible customers were defined in Article 25, exempting

from its scope the Non-Interconnected Islands. Accounting unbundling for all vertical

integrated companies active in electricity was introduced by Article 30. Finally, PPC’s

transformation into a S.A. as prescribed by Article 43, was enforced by Presidential Decree

333/2000.387

It is rather obvious that Greece decided to opt for the minimum rules of the First Electricity

Directive with the exception of legal unbundling that was enforced by the establishment of

HTSO. Thus, despite the enforcing of the main liberalization provisions, the results proved

more than disappointing.388

First of all, with regards to generation, no substantial change occurred after liberalization took

place, since no other producers became active in the market and thus, PPC remained the

dominant producer389 as well as exporter of electricity in Greece.390 The reasons for the failure

of the real opening of the generation market have been assessed by RAE and, as stated by

Kolia,391 reflected the various advantages that were granted to PPC by the then new

legislation.392

To make matters worse, actual accounting unbundling lagged behind, since RAE assessed that

the fist proposal of PPC was not sufficient to deliver adequate results according to the then

381 With Presidential Decree 328/2000, as cited by T.P. Fortsakis (supra note 354) para 446, footnote 2 382 Article 16 Law 2773/1999 (note 377) 383 ibid 384 Article 18 para 1 Law 2773/1999 (note 377) 385 Article 19 para 1: “access to the System shall be granted …on a non-discriminatory way”(note 377) 386 For the complete list of tasks of HTSO see Article 15 Law 2773/1999 (note 377) 387 Presidential Decree 333/2000 (Official Gazette Vol. A, Number 278) 388 See M. Kolia ‘Chapter 9: Greece’ in P. Cameron Legal Aspects of EU Energy Regulation: Implementing the New Directives On Electricity and Gas across Europe (Oxford university press, 2005) para 9.01 389 M. Kolia (note 388) 9.39 390 M. Kolia (note 388) 9.27 391 M. Kolia (note 388) 9.39 392 Among others, complexity of electricity licenses while PPC was granted a “provisional” universal license, as stated above in the Chapter.

48

existing legislation.393Kolia refers to a specific shortcoming of accounting unbundling, which

was the non-separation of accounts with regards to both distribution/supply activities in the

mainland as well as PSO activities of PPC on the islands.394

Additionally, problems arose in the relationship between the System Owner and the Operator

soon enough, since by 2003, RAE had spotted a non-cooperative approach of PPC with regards

to delivering the network projects that, the competent, HTSO had approved.395

Finally, by then end of 2004, the Second Electricity Directive had not been transposed in the

Greek Legislation.396Nevertheless, Law 3426/2005397 was enacted and amended the Energy

Law of 1999, bringing it in line with the Second Electricity Directive. According to the new

version of Article 12, due to its amendment by Article 22a of Law 3426/2005, the development

and expansion of the System lies with the TSO, after concluding the respective agreement

with the owner of the System (para 3);with regards to feasibility of the TSO’s development

plans, crucial role in their approval play both RAE and the Minister of Development.398In

addition, Law 3426/2005 set the time limit for the operation of the new TSO on the 1st of July

2007.399

With regards to gas, as it was mentioned above, DEPA S.A. was formed by Law 2364 as the

sole vertical integrated company active in import and transmission (as well as sell of gas to

EDAS and eligible customers)400 and EDAs were appointed as regional distributors and

suppliers in the designated areas.401 DEPA’s participation in EDAs was 85 percent, while the

remaining was owned by the local authorities.402 Later on, in 2000, the three EDAs established

three Gas Supply Companies (EPAs) following successful international tendering

procedures.403Under the new structure, DEPA held 51% of the shares, while the remaining

was owned by the private investor.404Moreover, EPAs acquired by EDAs all rights concerning

the distribution and supply activities through licenses, valid for thirty years.405Thus, EPAs

became responsible for facilitating customers’ connection to gas according to pre-published

terms.406

As a transmission operator, DEPA was obliged to keep separate accounts for its transmission

activities.407

The shift towards liberalization in the gas sector took place with the enactment of Law

3428/2005,408 which transposed into national law the Second Gas Directive.409 Even though

393 M. Kolia (note 388) 9.45 394 M. Kolia (note 388) 9.46 395 M. Kolia (note 388) 9.56 396 M. Kolia (note 388) 9.01 397 Law 3426/2005 (Official Gazette Vol. A, Number 309) 398 T.P. Fortsakis (supra note 354) para 494 399 Article 22 para 1 Law 3426/2005 (note 397) 400 Article 3 para 5 Law 2364/1995 401 Article 4 Law 2364/1995 402 M. Kolia (note 351 ) 9.13 403 DEPA ‘History’ (note 371) 404 ibid 405 M. Kolia (note 388) 9.13 406 M. Kolia (note 351 ) 9.23 407 Article 3 para 3 Law 2364/1995 408 Law 3428/2005 (Official Gazzete Vol A Number 313) 409 T.P. Fortsakis (supra note 354) para 96

49

Greece was granted additional time to fully implement the Directive (November 2006) due to

its status as an “emergent market” in gas, the country followed a proactive approach and

speeded the liberalization process.410

Article 7 of Law 3428/2005 provided for the establishment of the TSO, named DESFA S.A.

through the transferring of shares of DEPA S.A. to it. Therefore, DEPA became the sole

shareholder of DESFA.411 The new company was established pursuant to PD 33 and 34 of

2007412 following the transferring to DESFA of the ownership of the National Gas Transmission

System as well as staff and property, as provided by paragraphs 3 and 4 of Article

7.413Moreover, DESFA was entrusted with all tasks of a TSO under the Second Gas Directive414

and became operational in April 2007 as a legally unbundled company.415

Even though the liberalization-driven character of the above provisions is apparent, elements

of the legislation, such as the appointment of Board Members of DESFA by the Government

for the first ten years,416 reflect the willingness of the State for retaining strong involvement

in the operation of the market.

Finally, with regards to distribution, Article 21 of Law 3428/2005 formed the legal basis for

the merger of the EPAs into a new EDA S.A. owned entirely from DEPA S.A.417

4.3 Towards the Third Energy Package

It is of high importance to mention that the transposition of the Third Energy Package in

Greece, as in Ireland, overlapped with a time, when, the repercussions of the global economic

crisis had stared to appear. Greece, not being able to meet its debt obligations, signed a series

of financial agreements with the EU and IMF, firstly, in 2010 and then in 2012 and 2015.418

Coming back to the Third Energy Package, Greece transposed the Third Electricity and Gas

Directives, by enacting Law 4001/2011.419

First of all, with regards to electricity, Article 99 of Law 4001/2011 provided for the secession

of the transmission activities from the former TSO (HTSO)420 and their transfer to a new legal

entity, named ADMIE S.A., a total subsidiary of PPC S.A. ADMIE, thus, became the owner of

410 ibid 411 Article 7 para 5 Law 3428/2005 (note 408) 412 Presidential Decree 33-34/2007 (Official Gazzete Vol A Number 31) 413 T.P. Fortsakis (supra note 354) para 141 414 Article 8 Law 3428/2005 (note 408) 415 DEPA ‘History’ (note 371) 416 Article 11 para 3 PD 33-34/2007 ( note 372) 417 T.P. Fortsakis (supra note 354) para 172 418 Detailed list of the Agreements on the DG ECOFIN http://ec.europa.eu/economy_finance/assistance_eu_ms/greek_loan_facility/index_en.htm accessed 25/4/2016 419 Law 4001/2011 (Official Gazette Vol. A Number 179) 420 The former HTSO was also the market operator and according to paragraph 1 of Article 117 of Law 4001, following the transfer of the transmission activities to the new entity (ADMIE S.A.), HTSO, was renamed LAGIE S.A.

50

the transmission System, following the contribution of PPC’s Electricity Transmission

Directorate General and the relevant activities of HTSO to the new subsidiary.421

Moreover, Greece opted for the ITO model of Directive 2009/72.422 Therefore, according to

Article 113 of Law 4001, ADMIE applied for TSO certification to RAE and the latter

communicated its draft decision to the EC in August 2012.423

In its opinion, the EC expressed its concerns with regards to certain unclear arrangements

between the two companies. Firstly, the transitional period of 12 months, during which PPC

was to provide support services to ADMIE, was considered too long.424 Furthermore, it should

be ensured that totally different auditors are employed for each company,425 as well as that

all employers of the Management Team fulfill the independence requirements of the

Directive.426Following the above recommendations, the final certification by RAE was given by

Decision 962A/2012.

With regards to gas, the certification of DESFA as a TSO became highly related to its

privatization, according to the mandate of the 2012 financial agreement.427

The story begun in December 2013 when the Azeri State Oil Company, SOCAR, signed a deal

with the Hellenic Republic Asset Development Fund (HRADF)428 in order to acquire 31% of the

HRADF shares and 35% of the shares of Hellenic Petroleum (ELPE) on DESFA.429 Thus, DESFA

was required to apply to RAE for certification as a TSO, according to Articles 64 and 65 of Law

4001/2011, transposing the Third Gas Directive Unbundling provisions. More specifically,

Article 11 of the Directive (Article 65 of Law 4001) concerned the certification of a TSO under

the control of person(s) from third countries.

Thus, in May 2014, RAE issued its draft decision on the certification of DESFA as an ITO and

communicated to the EC.430 The EC agreed on the fact that DESFA was eligible to apply as an

ITO, since it was part of a vertical integrated company by September 2009.431 Nevertheless,

the EC formed the opinion that given the unique situation that was going to be established,

having a third-country company to be the major shareholder of the Greek Gas TSO, a number

421 Article 98 para 1 Law 4001/2011 (note 421) 422 Article 97 para 1 Law 4001/2011 (note 421) 423 European Commission, Opinion of 2012 pursuant to Article 3(1) of Regulation (EC) No 714/2009 and Article 10 of Directive 2009/72/EC - Greece - Certification of ADMIE S.A. 2 424 Ibid 3 425 ibid 426 ibid 427 See Second Economic Adjustment Program for Greece, 31-33 http://ec.europa.eu/economy_finance/assistance_eu_ms/greek_loan_facility/index_en.htm accessed 25/4/2016 428 The HRADF had acquired the State’s shares on DESFA according to the Greek Law of 2011 implementing the financial agreement of 2010, see A. Gerontas, Public Economic Law (2nd Edition, Sakkoula Publications 2011) 614 (in Greek) 429 HRADF ‘Press Release’ (21 December 2013) available at http://www.hradf.com/sites/default/files/attachments/20131221-press-release-desfa-el1.pdf accessed 26/4/2016 430 RAE, ‘Decision 287/2014’ available at http://www.rae.gr/site/file/categories_new/about_rae/actions/decision/2014/2014_A0287?p=files&i=0 431 European Commission, Opinion of 17/10/2014 correcting Opinion C(2014) 5483 final of July 2014 pursuant to Article 3(1) of Regulation (EC) No 715/2009 and Article 10(6) and 11(6) of Directive 2009/73/EC-Greece-Certification of DESFA [hereafter Commission Opinion DESFA] page 3.

51

of additional requirements needed to be met. The latter should aim at safeguarding security

of supply of gas both in Greece and EU as well as conformity with the independence

requirements of an ITO.432

More specifically, the Commission requested that a number of safeguards are introduced

(through an intergovernmental agreement) in order to address potential risks that could arise

due to acts of the Azeri Government contrary to EU law.433 Precisely, the risks could consist in

the following: making it difficult for DESFA to deliver its investment obligations, or its

compliance obligations under EU law, as well as they could impede the regular flow of natural

gas to the EU.434The Commission suggested that suspension of voting rights of the major

shareholder (SOCAR) should be used as a tool to address the above concerns.435

Indeed, Law 4001/2011 was amended and article 65A was inserted to it, implementing the

above mentioned voting-right suspension by RAE for the time required to address the issues

arisen and after the right to a hearing has been granted to owner of voting rights.436 Following

that, RAE published its final decision granting certification to DESFA as an ITO in September

2014.437

4.4 Effective (?) Unbundling, the crisis and the example of Ireland

In order to assess the level of effectiveness of the Greek Unbundling arrangements, the

following approach is followed: At first, a review of the ITO model will be made. Secondly, the

focus is shifted to the energy market developments that have taken place after the Second

and Third Adjustment Program for Greece have been signed (years 2013-2016).438

Beginning with the electricity sector, as it has been discussed above, by the end of 2012 the

Greek transmission system was owned and operated by ADMIE S.A. organized under the ITO

model. According to the Compliance Report of 2013, concerning the activities of ADMIE,439 in

broad lines, the arrangements were deemed to be effective, since, neither major complaints

were filed nor were excessive shortcomings reported.440

Two points are of greater interest: the Report referred to the fact that the connection

arrangements of PPC were being facilitated by ADMIE according to market rules (through

typical commercial agreements), whereas third users were in charge of constructing their

connection under the monitoring of ADMIE.441 Secondly, the Compliance Officer was of the

opinion that since ADMIE is responsible for all constructions regarding the electricity System,

432 Commission Opinion DESFA 4 433 Commission Opinion DESFA 7 434 ibid 435 ibid 436 Article 15 Law 4286/2014 (Official Gazzete Volume A Number 194) 437 RAE, ‘Decision 523/2014’ (Official Gazzete Volume B number 2572) 438 Detailed list of the Agreements on the DG ECOFIN (supra note 418) 439 See Article of Third Electricity Directive 440 2013 ADMIE Compliance Report (Athens, March 2014) 15-16 available at http://www.admie.gr/fileadmin/groups/ADMIE_DSRTH/Ektheseis_YpSymmorfwshs/Etisia_Ekthesi_2013.pdf (in Greek) 441 2013 ADMIE Compliance Report (note 440) 12

52

a sense of priority should be given to the latter, provided that all users are benefited by

them.442

In the Report Compliance of 2014, the focus is shifted towards the economic situation of the

Company, given the country’s financial crisis. It is stated that notwithstanding the liquidity

problems of the market, the company has been economically self-sufficient and thus, able to

facilitate loans for itself, if needed.443 However, due to the negative economic climate,

investments have taken a downward trend.444

With regards to the commercial relations between ADMIE AND PPC, as mentioned above, they

have to be governed by market conditions, applicable to all System users.445The Report stated

that the above requirements are met and a universal tariff system applicable to all users has

been put in place, even though its approval by RAE was pending.446

Concerning investments, the Compliance Report states that in 2013, major steps have been

taken, since the relevant tendering procedures for the connection of the Aegean Islands to

the inland Electricity System were successfully completed.447At the same time, a major priority

of ADMIE included its participation to the European PCI investment of Greece-Israel-Cyprus

interconnection.448

Regarding user connection to the System, the Report replicates that PPC’s infrastructure is

being constructed traditionally (emphasis added) by ADMIE.449

Moreover, a delay has been reported with regards to market clearance by ADMIE, due to PPC’s

difficulties in fulfillment of its financial obligations as the dominant electricity supplier.450

Overall, the 2014 Report concludes that the core obligations of ADMIE as a TSO (non-

discrimination, TPA, protection of sensitive information) are met.451However, it states that the

Compliance Program should be amended in order to cover more grey areas (such as PPC-

ADMIE’s commercial relationship) as well as to enforce transparency.452

It is obvious from the above that the “effectiveness checklist” requirements are met in the

case of ADMIE as an ITO, as the reported shortcomings are not substantial. However, what is

also obvious is the strong position of PPC in the market.

Indeed, according to a research paper of 2013,453 even though Greece has adopted 7 out of

the 10 steps prescribed for effective market liberalization, including unbundling, it has failed

to create a fully effective liberalized electricity market.454 The ones not having been met are

the policy makers’ willingness to fully liberalize the market, the inadequate operation and

442 ibid 443 2014 ADMIE Compliance Report (Athens, March 2015) 4, http://www.admie.gr/fileadmin/groups/ADMIE_DSRTH/Ektheseis_YpSymmorfwshs/ETHSIA_EKTHESH_2014.pdf (in Greek) 444 ibid 445 2014 ADMIE Compliance Report (note 443) 5 446 ibid 447 2014 ADMIE Compliance Report (note 443) 8 448 ibid 449 Ibid 10 450 Ibid 13 451 ibid 17 452 Ibid 18 453 N. Danias, J.K. Swales, P. McGregor “The Electricity Market Reforms: Political and Regulatory Considerations” (Energy Policy 62) [2013] 1040 454 N. Danias, J.K. Swales, P. McGregor (note 453) 1045

53

political dependency of RAE and the lack of an adequate level of competition in the generation

sector.455

According to the criteria of Littlechild, as referred to in the research, unbundling of

monopolistic from competitive activities appears as the first step in the liberalization list.456 In

this regard, the authors stress out that the State remains the main owner of the most

important energy entities in Greece.457

It is highly relevant that the authors associate liberalization not having been effectively

achieved, with the strong level of State participation and its influence on market entities:458 It

is a fact that PPC has been used to serve various political agendas throughout the years and

that creates problems to market evolution, since market entrants are not attracted by a

politically influenced market.459

The above have been considerations form part of Greece’s financial agreements. More

specifically, the Second Memorandum of Understanding, signed in 2012460 clearly states that,

inter alia, privatizations (sale of hydro and/or lignite fired PPC’s power plants) in order to

enhance competition in the electricity generation sector are in need, on top of (emphasis

added) meeting the unbundling requirements of the Third Directives.461

Indeed, in years following the signing of the second financial package (2012-2014), the

Governments attempted to find the appropriate privatization arrangement with respect to

PPC,462 while, at the same time, vivid oppositions to any kind of privatization were taking

place, mostly led by politicians and workers’ unions.463 The (partial) privatization of ADMIE

was also being discussed.464

Thus, Law 4273/2014465 provided for the establishment of a new power company, active in

production, trading and supply of electricity, via the divestiture of 30% of the production and

client portfolio of PPC.466

However, things did not go as planned and, in early 2015, the newly elected government

decided to not further implement the above plan, but rather to keep PPC under State

ownership.467

455 ibid 456 N. Danias, J.K. Swales, P. McGregor (note 453) 1041 457 N. Danias, J.K. Swales, P. McGregor (note 453) 1042 458 N. Danias, J.K. Swales, P. McGregor (note 453) 1045 459 ibid 460 2nd Adjustment Program (note 427) 461 2nd MoU as part of the 2nd Adjustment Program (note 427) 35 462 On privatization plans see C. Liaggou ‘Plan to split PPC is announced’ on E-Kathimerini.com (15 May 2013) http://www.ekathimerini.com/151233/article/ekathimerini/business/plan-to-split-ppc-is-announced accessed 2/5/2016 463 ‘PPC showdown looms as union threatens rolling strikes’ on E-Kathimerini.com (1 July 2014) http://www.ekathimerini.com/161196/article/ekathimerini/news/ppc-showdown-looms-as-union-threatens-rolling-strikes accessed 2/5/2016 464 ‘PPC: Selling ADMIE is not feasible’ on Naftemporiki.gr (7 June 2015) http://www.naftemporiki.gr/finance/story/962768/dei-entelos-asumfori-i-polisi-tou-admie accessed 2/5/2016 465 Law 4273/2014 ((Official Gazzete Volume A Number 146) 466 Article 1 Law 4273/2014 467‘ Greece to freeze plans to privatize power utility PPC, new Energy Minister says’ on E-Kathimerini.com (28 January 2015)

54

Nevertheless, the obligation to perform structural changes in the energy sector was included

in the third Memorandum of Understanding, signed in August 2015 by Greece and the

European Commission on behalf of the European Stability Mechanism.468 The reason for that

was stated to be, among others, the monopolistic and other kind inefficiencies of the Greek

energy markets.469

The main objective of the reforms, inter alia, are to fully open the gas market for all customers

by 2018, to lower the retail and wholesale market PPC dominance by 25% until 2015 and by

50% by 2020.470

With regards to privatization, the MoU states that the Greek Government was obliged to

deliver a detailed plan on ADMIE’s privatization, unless an alternative scheme is provided.471In

any case, the approach followed shall deliver a result of “Full Ownership Unbundling from PPC“

(emphasis added).472

The Greek Government expressed its will to keep the majority of PPC’s shares under public

control, which also formed a pre-election promise.473At the end of the year, the governmental

proposed scheme for ADMIE was announced, providing for 51% of the shares to pass from

PPC to the State, 29% to be offered to the stock market and the remaining 29% to be acquired

by a private investor.474 The above option was referred to as inter State unbundling.475 An

option like the above, clearly respects article 345 TFEU.

Nevertheless, the above described plan was made under the conditionality that its

effectiveness would be assessed and only if deemed feasible it would move forward.476 If not,

full separation of ADMIE from PPC through selling the latter’s shares shall occur.477

One could argue that the latter provision clearly breaches Article 345 TFEU, since it enforces

a privatization on a Member State, even as an alternative. It is relevant, of course, to assess

the circumstances under which the abovementioned plan was agreed upon, in which crucial

role plays the term of “conditionality”. The latter was analyzed with respect to the case of

Ireland. In any case, it appears to be a challenging task to draw the line on whether

conditionality has gone a bit far. Greece’s elected government had made clear to both its

voters and its creditors that privatization was not in its plans. Should have the lenders met the

http://www.ekathimerini.com/166653/article/ekathimerini/business/greece-to-freeze-plans-to-privatize-power-utility-ppc-new-energy-minister-says accessed 2/5/2016 468 Memorandum of Understanding on behalf of the European Commission Acting on Behalf of the ESM and the Hellenic Republic and the Bank of Greece (19 August 2015) 25-26 available at http://ec.europa.eu/economy_finance/assistance_eu_ms/greek_loan_facility/pdf/01_mou_20150811_en.pdf [hereafter Third MoU] 469 Ibid 470 Ibid 471 ibid 472 ibid 473 ‘Greece wants to keep majority stake in PPC, says Skourletis’ on E-Kathimerini.com (28 September 2015) http://www.ekathimerini.com/201973/article/ekathimerini/business/greece-wants-to-keep-majority-stake-in-ppc-says-skourletis accessed 5/5/2016 474 European Commission ‘Report on Greece's compliance with the second set of milestones of December 2015’ (21 December 2015) 7, available at http://ec.europa.eu/economy_finance/assistance_eu_ms/greek_loan_facility/pdf/2nd_set_milestones_note_to_ewg_en.pdf 475 ibid 476 ibid 477 ibid

55

Greek government half way and explore only options of similar nature, rather than imposing

a strict privatization plan as an alternative?

The case of Ireland does not provide any comparable evidence, since in that case, the Irish

Government had shown a pro-active approach towards privatization, even more than the

creditors had asked for.

In the case of Greece, as we explained, a similar attitude was and is still missing. It is possible

that the discussion should be shifted towards the concept of sovereignty of the recipient

states. It has already been stated that a country having been excluded from the markets and

thus, requesting for financial help, loses a part of its sovereignty, since it is not able anymore

to fully implement its own views on its domestic economic policy.478

What is also relevant to the concept of sovereignty is the weak role of national parliaments

with respect to the conditions that are being attached to the financial assistance, since they

only have the limited power to be informed about the deal and also the ‘rhetorical’ power to

reject the loan agreements and the respective MoU.479Obviously, they never proceed with a

radical approach like the above.

To return to the position of the EU, by imposing the OU model, when it has already approved

the ITO model by certifying ADMIE, it seems like the EU either rejects its own legislation, or it

considers it inadequate (at least for the case of Greece and in some extent for Ireland as well

as we have analyzed) and our conclusion is confirmed that under the Third Energy Package

unbundling is assessed by the EU not only according to the “effectiveness checklist” but also

according to its overall contribution to a competitive market.

To conclude with ADMIE, at the time of writing, the initial plan is being explored by the

government and the creditors.480As for PPC481, the former government’s decision to privatize

30% of it, is being cancelled and under the current plan, a competition will be introduced by

commencing NOME auctions so that PPC’s share is reduced.482

Other energy-related privatizations were included in the Annex I483 of the MoU, namely the

privatization of DESFA,484 and DEPA.485

As it was mentioned above, DESFA was agreed to be sold to SOCAR in late 2013 and in 2014 it

was certified as an ITO. Following that, the DG Competition of the Commission opened an

investigation on the planned sale, raising its concerns on the effects of the merger on access

478 E. Venizelos ‘State Transformation and the European Integration Project, Lessons from the financial crisis and the Greek Paradigm (CEPS No. 130/February 2016) SELIDA https://www.ceps.eu/publications/state-transformation-and-european-integration-project-lessons-financial-crisis-and accessed 5/5/2016 479 M. Ioanidis (note 302) 42 480 C. Liaggou ‘Agreement reached on timetable for sale of power grid operator’ E-Kathimerini.com (20 April 2016) http://www.ekathimerini.com/208125/article/ekathimerini/business/agreement-reached-on-timetable-for-sale-of-power-grid-operator accessed 5/5/2016 481 Annex I (note 461) 23 482 ‘P. Skourletis: this is how ADMIE and PPC were saved from the MoU’ ,H AYGI, (http://www.avgi.gr/article/6471518/p-skourletis-etsi-sothikan-apo-ta-mnimonia-dei-kai-admie accessed 5/5/2016 483 Annex I ‘Asset Development Plan’ (30 July 2015) to Third MoU (see note 468) http://ec.europa.eu/economy_finance/assistance_eu_ms/greek_loan_facility/pdf/01_mou_annex1_20150730_en.pdf 484 ibid 8 485 Ibid 25

56

to the Greek market.486The proposed amendments have been for SOCAR to provide additional

guarantees, or another investor to be added to the picture.487

Up until the time of writing, (May 2016) the sale has not been concluded and DESFA remains

an ITO.

The conclusions on the case of Greece are presented in the final Conclusion along with the

overall conclusions of the paper. At this point it is stated that given Greece’s crucial

geographical position as well as peculiar composition it seems wiser to retain electricity and

gas networks under State ownership, or at least keep State participation on a high level.

Hence, enforcement of competition could be succeeded by privatizing, even partially, DEPA

and some of the competitive parts of PPC, as it had been planned by the previous government.

486 European Commission ‘Press Release: Mergers: Commission opens in-depth investigation into proposed acquisition of Greek gas transmission system operator DESFA by SOCAR’ (5 November 2014) 487 Annex I (note 483) 8

57

CONCLUSION

As it has been discussed in the First Chapter, the Third Energy Package included three

Unbundling options namely the OU, the ISO and the ITO. Member States such as the UK and

the Netherlands fully supported the OU model, while the ITO was an expression of

compromise and merely a lobbying success of Germany and France.

We have also seen that countries implementing the OU and relevant reforms, such as

privatizations, have been clearly benefited from them.

With regards to the ITO model, it formed an opportunity for some Member States, such as

Greece and Ireland, to “escape” the more intrusive model of OU and thus to retain their State-

companies and de facto monopolistic market structure. As a result, it is proven that the ITO

model, or the “compromise”, only delayed the effective implementation of the unbundling

requirements in Member States with strong monopolies, such as Greece and Ireland.

Nevertheless, implementation of the OU model was enforced in these two Member States

through the financial agreements they concluded with the EU and IMF. As a part of the

conditionality principle the agreements were governed by, most of the times OU was

accompanied by the obligation to privatization.

In that regard, Ireland generally projected a proactive approach and it was proved flexible

with respect to the proposed energy market reforms.

Greece on the other hand, fully supported the milder ITO model. Things became more

complicated when it was called upon to deliver the reforms of the financial agreements, since

the previous government that reluctantly supported the proposed reforms faced a

tremendous domestic opposition, while the lastly elected one has a completely negative view

on privatizations.

A conclusion one can draw from the above analysis is that the Commission assesses the

“effectiveness” of the unbundling requirements in a widely different way when it comes to

countries with different markets and sizes. More precisely, for France and Germany, the ITO

was proven effective. For Greece and Ireland on the other hand, meeting the “effectiveness

checklist” designed for an ITO was not sufficient.

The above deduction is supported by economic analysts, stating that privatization and

unbundling are strongly interrelated when it comes to energy market liberalization. It is

unquestionable that both steps were in need in cases such as the Greek and Irish energy

sector, operating under strong monopolies up until the European unbundling requirements

came along.

Notwithstanding, we have seen that privatization is prescribed neither by the Third Energy

Package nor the TFEU. On the other hand, one could argue that the liberal interpretation of

Article 345 TFEU from the CJEU might alter the above conclusion. Nonetheless, privatizations

fostering the competitive internal energy market should be decided by the Member State

concerned and not to be imposed by the EU.

In that regard, it is relevant to assess in what extent the decision of Member State under

financial assistance to adopt privatizing measures is their own decision. We already referred

to the changes in the definition of sovereignty under the concept of conditionality, which

governs the financial assistance in the Eurozone. The argument can go both ways and it is not

the aim of this paper to address this particular issue. It is only stated that it seems that

lowering the standards of State sovereignty serves, in principle, the purpose of both the

58

recipient of assistance as well as the borrowing states; in any case, a certain line must not be

crossed.

As a final comment on the Third Energy Package, it would have been more beneficial to having

included only the option of OU in the Third Directives. That way, the predominant aim of

liberalization of markets with strong monopolies, such as the Greek and Irish, would have

been pursued by a piece of EU legislation and not as a part of a negotiated financial

agreement, which at some extent puts the sovereignty of the assistance-receiving MS into

question.

Alternatively, another approach could have been followed, according to which, the Directives

could provide for unbundling options according to the market needs of each Member States

(or group of Member States). In any case, falling under the EU energy legislation, a highly

intrusive measure such as a privatization (or unbundling) of an energy entity would not only

appear more legitimate, but it would also be more easily perceived by the national

populations.

The approach towards unbundling, being ,maybe, the most important energy market-related

measure taken by the EU, should be carefully evaluated, as it could provide valuable

experience for the development of the Energy Union,488 especially when it comes to

coordinating the different needs and capabilities of the Member States.

488 European Commission, Communication from the Commission, State of Energy Union, COM (2015)572 final ,available at http://ec.europa.eu/priorities/energy-union/state-energy-union/docs/communication-state-energy-union_en.pdf

59

BIBLIOGRAPHY

Primary Sources

1. European Legislation

Primary Legislation

Consolidated Version of the Treaty on the Functioning of the European Union [2008] O.J. C

115/47, most recent version [2012] OJ C 326/47

Secondary Legislation

Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996

concerning common rules for the internal market in electricity [1996] OJ L 027/20

Directive 98/30/EC of the European Parliament and of the Council of 22 June 1998 concerning

common rules for the internal market in natural gas [1998] OJ L 204/1

Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003

concerning common rules for the internal market in electricity and repealing Directive

96/92/EC [2003] OJ L 176/37

Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003

concerning common rules for the internal market in natural gas and repealing Directive

98/30/EC [2003] OJ L 176 /57

Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009

concerning common rules for the internal market in electricity and repealing Directive

2003/54/EC [2009] OJ L 211/55

Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009

concerning common rules for the internal market in natural gas and repealing Directive

2003/55/EC [2009] OJ L 211/94

Regulation (EC) No 713/2009 of the European Parliament and of the Council of 13 July 2009

establishing an Agency for the Cooperation of Energy Regulators [2009] OJ L 211/1

Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009

on conditions for access to the network for cross-border exchanges in electricity and repealing

Regulation (EC) No 1228/2003 [2009] OJ L 211/15 and Regulation (EC) No 715/2009 of the

European Parliament and of the Council of 13 July 2009 on conditions for access to the natural

gas transmission networks and repealing Regulation (EC) No 1775/2005 [2009] OJ L 211/36

National Legislation: Ireland

Available at http://www.dcenr.gov.ie/energy/en-ie/Pages/legislation.aspx#

and http://www.irishstatutebook.ie:

S.I. 445/2000 Regulation, European Communities (Internal Market in Electricity) Regulations

[2000]

SI No 328 of 2003 - European Communities (Internal Market in Electricity)(Amendment)

Regulations [2003]

SI No 60 of 2005 - European Communities (Internal Market in Electricity) Regulations [2005]

SI No 16 of 2015 - European Communities (Internal Market in Natural Gas and Electricity)

(Amendment) Regulations [2015]

60

Department of Finance/ Home/What We Do/EU and International/Ireland’s Program (EU-IMF

Program) http://www.finance.gov.ie/what-we-do/eu-international/irelands-programme-eu-

imf-programme accessed on 10/4/2016

Documents of CER (Commission for Energy Regulation)

CER, ‘Annual Report 2008’ http://www.cer.ie/docs/000451/cer09207.pdf accessed

10/4/2016

CER ‘Annual Report (2013)’

Competition Authority Ireland

The Competition Authority, Towards a Sustainable Energy Future for Ireland (submission to

the DCMNR, 1 December 2006, Submission S/06/009) 2

White Paper Ireland

DCMNR, Delivering a Sustainable Energy Future for Ireland (Government White Paper, The

Energy Policy Framework 2007-2020)

Report Ireland

LECG, ‘Implementing the Third Energy Directive in Ireland: Options for the transmission

network’, (Final, 23 April 2010)

National Legislation: Greece

Law 2773/1999, (Official Gazette Vol. A, Number 286)

Presidential Decree 333/2000 (Official Gazette Vol. A, Number 278)

Law 3426/2005 (Official Gazette Vol. A, Number 309)

Law 3428/2005 (Official Gazzete Vol A Number 313)

Presidential Decree 33-34/2007 (Official Gazzete Vol A Number 31)

Law 4001/2011 (Official Gazette Vol. A Number 179)

Law 4286/2014 (Official Gazzete Volume A Number 194)

Law 4273/2014 ((Official Gazzete Volume A Number 146)

Detailed list of the Greek Financial Agreements on the DG ECOFIN

http://ec.europa.eu/economy_finance/assistance_eu_ms/greek_loan_facility/index_en.htm

Second Economic Adjustment Program for Greece,

http://ec.europa.eu/economy_finance/assistance_eu_ms/greek_loan_facility/index_en.htm

HRADF ‘Press Release’ (21 December 2013) available at

http://www.hradf.com/sites/default/files/attachments/20131221-press-release-desfa-

el1.pdf

Memorandum of Understanding on behalf of the European Commission Acting on Behalf of

the ESM and the Hellenic Republic and the Bank of Greece (19 August 2015)

Documents of RAE (National Regulatory Authority)

RAE, Decision 287/2014

http://www.rae.gr/site/file/categories_new/about_rae/actions/decision/2014/2014_A0287

?p=files&i=0

61

RAE, ‘Decision 523/2014’ (Official Gazzete Volume B number 2572)

Documents of ADMIE

2013 ADMIE Compliance Report (Athens, March 2014) 15-16 available at

http://www.admie.gr/fileadmin/groups/ADMIE_DSRTH/Ektheseis_YpSymmorfwshs/Etisia_E

kthesi_2013.pdf (in Greek)

2014 ADMIE Compliance Report (Athens, March 2015) 4,

http://www.admie.gr/fileadmin/groups/ADMIE_DSRTH/Ektheseis_YpSymmorfwshs/ETHSIA_

EKTHESH_2014.pdf (in Greek)

CRE Report (FRENCH National Regulatory Authority)

Commission De Regulation D’ Energy ‘Activity Report 2014’ available at

http://www.cre.fr/en/documents/publications/annual-reports/activity-report-2014/read-

the-report

CJEU Cases

C-393/92 Gemeente Almelo and Others and Energiebedrijf IJsselmij NV [1994] ECR-I 1508

Joined Cases C-105/12 to C-107/12 Staat der Nederlanden v Essent NV,Essent Nederland BV,

Eneco Holding N ,Delta NV [2013] ECR I-677

ECJ Case C-58/08 Vodafone and others [2010] ECR I- 5026

ECJ Case C-331/88 Fedesa [1990] ECR I -4023

Books

Jones, C. W. et al, EU Energy Law. 1: The Internal Energy Market : The Third Liberalization

Package (3rd edn. Claeys en Casteels, 2010) 1154 p.

Marquis, M. and Fulbright W. J, Introducing Free Markets and Competition to the Electricity

Sector in Europe (Wisdom House 2001) 354 p.

Cameron P, Legal Aspects of EU Energy Regulation: Implementing the New Directives On

Electricity and Gas Across Europe (Oxford University Press 2005) 578 p.

Geradin D. (ed.), the Liberalization of Electricity and Natural Gas in the European Union

(Kluwer Law International 2009) 307 p.

Roggenkamp M. M. and Hammer U, European Energy Law Report VI (Intersentia 2009) 294 p.

McHarg A, Property and the Law in Energy and Natural Resources (Oxford University Press,

2010) 478 p.

Roggenkamp M.M, Energy Law in Europe: National, EU and International Regulation (2nd ed.

Oxford university press 2007 1488 p.

Cross E.D., Electric Utility in the EU, Electric Utility Regulation In the European Union: a Country

by Country Guide (Chichester: Wiley, 1996) 357 p.

Fortsakis T.P, Energy Law in Greece (Kluwer Law International/Ant.N. Sakkoulas 2009) 264 p.

Gerontas A, Public Economic Law (2nd Edition, Sakkoula Publications 2011) 650 p. (in Greek)

62

Horspool M. and Humpreys M, European Union Law (8th edition, Oxford University Press 2014)

640 p.

Articles

Sabin N. D. ‘Member State Exemptions from Article 100A Harmonizing Measures: A Possible

European Court Approach’ [1991] Volume 14 Boston College International and Comparative

Law Review, 225

http://lawdigitalcommons.bc.edu/cgi/viewcontent.cgi?article=1344&context=iclr

Ehlers, E. M. (2009) ‘Electricity and gas supply network unbundling in Germany, Great Britain

and The Netherlands and the law of the European Union: A comparison’ Antwerp - Oxford -

Portland: Intersentia https://pure.uvt.nl/ws/files/1169724/Ehlers_electricity_23-11-

2009_emb_tot_231111.pdf accessed 9/5/2016 (PhD Thesis)

Diathesopoulos, M. D, ‘Ownership Unbundling in EU & Legal Problems ‘(December 29, 2010)

1, available at

SSRN: http://ssrn.com/abstract=1732212 or http://dx.doi.org/10.2139/ssrn.1732212

Joscow, P. L. “Lessons Learned From Electricity Market Liberalization” [2008]The Energy

Journal, Special Issue. The Future of Electricity: Papers in Honor of David Newbery, 9

http://economics.mit.edu/files/2093

Lowe P., Pucinskaite I., Webster W., and Lindberg P., ‘Effective unbundling of energy

transmission networks: lessons from the Energy Sector Inquiry’ [2007] 1 Competition Policy

Newsletter, Spring 2007, 23 available at

http://ec.europa.eu/competition/publications/cpn/2007_1_23.pdf

Kroes N., ‘Improving Competition in European Energy Markets Through Effective Unbundling’

[2007] Volume 31 Fordham International Law Journal 1387

Pielow J-C. and Ehlers E., ‘Ownership unbundling and constitutional conflict: a typical German

debate?’ [2008] Volume 2, Issue 3 European Review of Energy Markets, 1

Brunekreeft G., Goto G., Meyer M., Maruyama R., Hattori T., ‘Unbundling of Electricity

transmission system operators in Germany-An experience report’ [2014] Bremen Energy

Working Papers No. 16, Jacobs University Bremen, 1

MacCarthaigh M. ‘The Corporate Governance of Commercial State-owned Enterprises in

Ireland’ (2009)Institute of Public Administration CPMR Research Report 9, 1

http://www.ipa.ie/pdf/cpmr/reports/CPMR_RR9_Corporate_Governance_of_Stateowned_E

nterprises_Ireland.pdf

Ioanidis M., ‘EU Financial Assistance Conditionality after 'Two Pack' (20 February 2014)

available at SSRN: http://ssrn.com/abstract=2398914

Venizelos E., ‘State Transformation and the European Integration Project, Lessons from the

financial crisis and the Greek Paradigm (CEPS No. 130/February 2016) 1

Danias N., Swales J.K, McGregor P., ‘The Electricity Market Reforms: Political and Regulatory

Considerations’ [2013] Energy Policy 62, 1040

European Commission Documents

European Commission, ‘The Internal Energy Market’ (Communication) COM (88) 238

European Commission, Proposal for a Council Directive concerning common rules for the

internal market in electricity [1992] Ο.J. C65/04 and in the gas sector [1992] O.J. C65/13

63

European Commission ‘Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the

European gas and electricity sectors’ (Final Report) COM(2006) 851 final

European Commission ‘Prospects for the internal gas and electricity market’ COM(2006) 841

final

European Commission Green Paper of 8 March 2006 ‘A European strategy for sustainable,

competitive and secure energy’ COM(2006) 105 final

European Commission ‘An Energy Policy for Europe’ COM(2007) 1 final

European Commission, ’Proposal for a Directive of the European Parliament and the Council,

amending Directive 2003/54/EC concerning common rules for the internal market in

electricity’ COM(2007) 528 final

European Commission ‘Explanatory Memorandum accompanying the Proposal for a Directive

of the European Parliament and the Council, amending Directive 2003/54/EC concerning

common rules for the internal market in electricity’ COM(2007) 528 final

European Commission, ‘Interpretative Note on Directive 2009/72 /EC concerning common

rules for the internal market in electricity and Directive 2009/73/EC concerning common rules

for the internal market in natural gas: The Unbundling Regime’ (Staff Working Paper)

Brussels,22 January 2010

European Commission, ‘Single market progress report 2014 country report: the UK’

https://ec.europa.eu/energy/sites/ener/files/documents/2014_countryreports_unitedkingd

om.pdf>

European Commission, ‘Single market progress report 2014 country report: the Netherlands’

http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52015SC0241&from=EN >

European Commission, ‘Single market progress report 2014 country report: France’

https://ec.europa.eu/energy/sites/ener/files/documents/2014_countryreports_france..pdf

European Commission, ’Single market progress report 2014 country report: Germany’

https://ec.europa.eu/energy/sites/ener/files/documents/2014_countryreports_germany.pd

f

European Commission, ‘Single market progress report 2014 country report: Ireland’

https://ec.europa.eu/energy/sites/ener/files/documents/2014_countryreports_ireland.pdf

European Commission, ‘Country Fact Sheet United Kingdom’ (Staff Working Paper)

accompanying Communication od the Commission to the European Parliament, the Council,

the Economic and Social Committee, the Committee of Regions and the European Investment

Bank ‘State of the Energy Union’ SWD(2015) 242 final

European Commission, ‘Country Fact Sheet the Netherlands’ (Staff Working Paper)

accompanying Communication of the Commission to the European Parliament, the Council,

the Economic and Social Committee, the Committee of Regions and the European Investment

Bank ‘State of the Energy Union’ SWD(2015) 241 final

European Commission, ‘Country Fact Sheet France’ (Staff Working Paper) accompanying

Communication of the Commission to the European Parliament, the Council, the Economic

and Social Committee, the Committee of Regions and the European Investment Bank ‘State

of the Energy Union’ SWD(2015) 224 final

European Commission, ‘Country Fact Sheet Germany’ (Staff Working Paper) accompanying

Communication of the Commission to the European Parliament, the Council, the Economic

and Social Committee, the Committee of Regions and the European Investment Bank ‘State

of the Energy Union’ SWD(2015) 225 final

64

European Commission, ‘Country Fact Sheet Ireland’ (Staff Working Paper) accompanying

Communication od the Commission to the European Parliament, the Council, the Economic

and Social Committee, the Committee of Regions and the European Investment Bank ‘State

of the Energy Union’ SWD(2015) 228 final

European Commission, ‘Report on the ITO model’ (Staff Working Document) SWD (2014) 312

European Commission ‘Report on Greece's compliance with the second set of milestones of

December 2015’ (21 December 2015)

European Commission, Communication from the Commission, State of Energy Union, COM

(2015)572 final ,available at http://ec.europa.eu/priorities/energy-union/state-energy-

union/docs/communication-state-energy-union_en.pdf

European Commission Decisions and Opinions

European Commission, Decision of 12.4.2013 pursuant to Article 3(1) of Regulation (EC) No

714/2009 and Article 10(6) of Directive 2009/72/EC – Ireland – Eirgrid / ESB C(2013) 2169 final

European Commission, Opinion of 23.5.2013 pursuant to Article 3(1) of Regulation (EC) No

715/2009 and Article 10(6) of Directive 2009/73/EC – Ireland – Certification of BGÉ ITO

C(2013) 3117 final

European Commission, Opinion of 2012 pursuant to Article 3(1) of Regulation (EC) No

714/2009 and Article 10 of Directive 2009/72/EC - Greece - Certification of ADMIE S.A.

European Commission, Opinion of 17/10/2014 correcting Opinion C(2014) 5483 final of July

2014 pursuant to Article 3(1) of Regulation (EC) No 715/2009 and Article 10(6) and 11(6) of

Directive 2009/73/EC-Greece-Certification of DESFA

European Commission Press Releases

European Commission Press Release ‘Internal energy market: Commission refers Ireland to

Court for failing to transpose EU rules’ (Brussels 20 February 2014)

European Commission ‘Press Release: Mergers: Commission opens in-depth investigation into

proposed acquisition of Greek gas transmission system operator DESFA by SOCAR’ (5

November 2014)