Regulatory Autorities Setting-up and Mission during market opening

1. RegulatoryAutorities Setting-up and Mission during market opening Nina Grall-EDLER3rd MEDREG IMME Seminar – 11/12 September 2013 - Tunis

2. OVERVIEW Market opening – the role of regulators What is needed for effective regulatory work? Market integration / Harmonisation – The Impact of regulatory cross-border cooperation What can be expected from Effective Regulation?

3. THE ROLE OF REGULATORS [1] • Starting assumptions for electricty networks • natural monopolies – investment costs • essential facilities • regulation required to ensure fair competition • Areas of Potential Barriers To Competition Define Role / Responsibilities of Regulators 

4. THE ROLE OF REGULATORS [2] Potential discrimination / Misfunctioning Regulatory Actions / Responsibilities access to network setting TPA and CAM rules connection to network setting connection fees level / equality of network fees setting network fees network use ensure transparency, setting balancing rules and CMP • abuse of dominant market position / anti-competitive behaviour • e.g. capacity / volume release  in cooperation with COMP authorities favorable market conditions facilitating investments ensuring security of supply RES integration customer protection

5. WHAT IS NEEDED [1] • Regulatory Independence • Practical implementation • Compliance and committment of other state bodies • Active Regulators • defining, not administrating the market! • active cooperation with COMP authorities – ref. ex ante / ex post role • Full Set of Regulatory Powers • Implementation by letter and spirit

6. WHAT IS NEEDED [2] • Independence [Third Energy Package] • Legally distinct and functionally independent • Acting indepently • Taking autonomous decisions • Exercising powers impartially and transparently • Annual budget • Human and financial resources • Management • Strong Regulatory Powers [Third Energy Package] • Issue binding decisions • carry out investigations on functioning of the market • Impose proportionate measures to promote competition • Require any information from undertakings • Impose effective, proportionate and dissuasive penalties

7. CROSS BORDER COOPERATION[1] • WhyMarket integration / cross border trade ? • increased liquidity / competition  impact of more suppliers / traders • increased security of supply  more generation sources • supporting network operation (security)  generation reserves, balancing • Some markets cannot function properly on national level only – lack of liquidity, lack of market players • cost of non-integration  economies of scale, competitive structures • market integration requires harmonised market rules across borders • technical / operational rules • market rules – network access, capacity allocation, congestion management, balancing • financial rules – transit compensation

8. CROSS BORDER COOPERATION [2] • Examples • voluntary [1] formally established but non binding: ERGEG, ECRB • voluntary [2]  formally established but non binding: CEER, ERRA • obligatory  binding : ACER • Experience - voluntary vs. Obligatory Cooperation • Impact on committment – by regulators and stakeholders

9. WHAT CAN BE EXPECTED FROM EFFECTIVE REGULATION • Economic Growth / increase of social welfare • Breaking up inefficient national monopolies  cost efficiency positively impacts state budget • Strengthening the economic conditions of national energy network industries – by ensuring cost-reflective tariffs • Increasing service quality and consumer protection • Additional job opportunities • Controlling network security • Coordinated treatment of energy policies that affect each other  RES integration – infrastructure development – energy efficiency – sustainability – security of supply – competition

10. BUT... • „Honest“ Liberalisation Policy Is Key • Regulated energy prices • Regulated chain – generation, single buyer models • No political interventions into regulatory work / strong regulator • Reflect impacts of other policy areas • RES  infrastructure

11. THANK YOU VERY MUCH FOR YOUR ATTENTION! QUESTIONS? DISCUSSION CONTACT Nina Grall-Edler Head of ECRB Section – Regulatory Affairs Energy Community Secretariat E: nina.grall@energy-community.org W: www.energy-community.org

12. Background Slides

13. IN DETAIL – INDEPENDENCE [1] • Legally distinct and functionally independent • Independent from industry (2nd p)+ any public body • Decide on own management  no hierarchy-links, no office / personell sharing • Act indepently • Not seek or take instructions • No other institution to give instructions • Take autonomous decisions • Ex ante •  No external interference in decisions • `  Develop own Work Program without need for consent • b. Ex post • Decisions immediately binding • Decisions cannot be subject to review / approval / veto  exemption juridical review

14. IN DETAIL – INDEPENDENCE [2] • Separate annual budget with autonomy in its implementation • Can be part of the state budget • Approval by parliament possible  but limited to global financial framework, no influence on NRA priorities! • Appointment of NRA baord members possible  but not resulting in instructions! • Human and financial resources • Adequate to execute powers [ref. ITO!] • Benchmark: other NRAs / bodies (e.g. national banks) • Management • Fix term 5-7 years, renewable once • Rotation scheme • Members appointed before the implementation of the 3rd package: max 7 years + • Relief from office only if not compliant with independence criteria

15. IN DETAIL – INDEPENDENCE [3] • Exercising powers impartially and transparently • „Impartially“: neutral, based on objective criteria and methodology • „transparently“ • Adopt and publish procedures / decision making rules • Publish information on organisation and structure, including contact points • Consult stakeholders before taking decisions – at least by publishing drafts, ideally including PCs / hearings / publication of comments and their reflection • Reasoned opinions – appropriate for juridical review • Remarks • Setting of national energy policy by government not affected • Independence does not contradict cooperation