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European Union

Full Ownership Unbundling of the Dutch Distribution Network Operators: a European Test Case? Hamilcar Knops Laurens de Vries Stockholm, 20 June 2011. European Union. European Union. Primary Law: Treaties Secondary Law: e.g. Directives.

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European Union

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  1. Full Ownership Unbundling of the Dutch Distribution Network Operators: a European Test Case?Hamilcar KnopsLaurens de VriesStockholm, 20 June 2011

  2. European Union European Union Primary Law: TreatiesSecondary Law: e.g. Directives …which is binding upon Member States (MS); …Directives must be implemented by MS MS MS MS …

  3. Unbundling: the evolution (1) Before liberalisation First package (Dir. 96/92/EC) Second package (Dir. 2003/54/EC) Third package Production Network Supply Production Production Network Network ? Supply Supply Integrated company -Management unb.-Separate accounts…but one company Legal unbundling:separate entities,…but one group

  4. Prod. Prod. Prod. N.Op. Netw.Oper.=Owner Net.Own. Netw.Oper. N.Ow. Sup. Sup. Sup. Indep.TO :(legal unb.)all in one group Full ownership unbundling(preferred option of EC)…not in one group Independent SO:- operator separate,- ownerpart ofgroup Unbundling: the evolution (2) 2nd package (2003/54/EC) 3rd package: Transmission(2009/72/EC) 3 options Prod. Netw. Sup. Legal unb.

  5. Prod. Netw. Sup. Legal unbundling Unbundling: the evolution (3) 2nd package (2003/54/EC) 3rd package: Distribution(2009/72/EC) unchanged Prod. The provisions of the EU Directive are minimum requirements:could a Member State go further? Netw. Sup. Legal unbundling

  6. Challengedin court Unbundling: the Netherlands Old situation (2004):Legal unbundling:all in one group New situation (from 1/1/2011):Full ownership unbundling(network operator-owner not in group with prod. or supply) Production Production NetworkOperator =Owner Netw. Op. Netw. Own. Supply Supply Government-owned Government-owned Can be privatised

  7. …aiming at the creation of a single market in the EU Legal Framework European Union Primary Law: TreatiesSecondary Law: e.g. Directives MS MS MS … Restrictions to freedoms only allowed- if EU legislation provides for it - or if MS measure is necessary and proportionate to secure a public interest (but may not be an economic interest) ‘Four freedoms’: - free movement of goods - free movement of persons - freedom of establishment- free movement of capital

  8. The Dutch Case (1): Is the requirement of full ownership unbundling for distribution system operators allowed under EU law? Dutch arguments for full ownership unbundling:- independence of network operator- prevent cross-subsidies from network to other activities- enhance transparency for regulator- improve focus on the network business How did the courts rule? District Court: yes, it is a justifiable restriction Court of Appeal: no, it is not Supreme Court: case pending European Court of Justice: not involved yet (preliminary ruling?)

  9. The Dutch Case (2): Is the requirement of full ownership unbundling for distribution system operators allowed under EU law? Reasoning of the Court of Appeal: - the measure is a restriction of free movement of capital- the reasons behind it are - either purely economic (functioning of energy market) - or not necessary or proportionate in the case of the non-economic rationales- and therefore the restriction cannot be allowed and hence it is against EU law and must be ruled void

  10. Conclusion ● First experiences with fully unbundled DSOs seem positive ● But it remains unclear whether a single EU Member State may impose full ownership unbundling for DSOs, given the EU Treaty (free movement of capital) and the current energy Directives (which require only legal unbundling) ● We have to wait for the court(s): Dutch Supreme Court and, maybe, the European Court of Justice (=highest EU court) ● It may be better if the Directives would be clear about the possibility of full ownership unbundling for DSOs (like TSOs) ● Finally, the doctrine about the exceptions to free movement of capital should be reconsidered

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