Managing Regulatory Forces

The Path to a Pan-European Power Regulator

Publication Date	June 2007
Publisher	Datamonitor
Product Type	Brief
Pages	13
ISBN Number	not applicable
Product Code	DAT05907

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Summary

National regulators are currently recommending new energy bodies at an EU-level to guide policy making at the European Commission and help regulate pan-European energy issues. Together with the increasing complexity of interconnected markets and new market coupling arrangements, momentum is building for the creation of an EU-wide energy regulator.

A review of proposals for new energy regulatory powers at an EU level.
A comparison of market coupling arrangements and their effect on the development of an EU regulator.
Insight into how and when an EU energy regulator might take shape.

Because of the expanding web of market coupling arrangements, the competency of certain national regulators expands well beyond national boundaries. This creates a natural limit to Europe's ability to solve the 'regulation gap' through an organic growth of market coupling based purely on voluntary co-operation and guidelines.

The enforcement of the EU's 2003 regulation on the cross-border exchange of electricity, its subsequent guidelines, and the application of appropriate penalties are all left entirely to national regulatory authorities. Consequently, rules and regulatory actions will vary between member states, even with agreed guidelines in place.

Understand how and when the EU might develop an energy regulatory agency.
Understand the forces that create pressure for regulatory intervention at a pan-European level.
Compare emerging market coupling arrangements in Western European markets.

Content

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Catalyst
Summary
Analysis
- There is currently no EU-wide energy regulator
- The EU does not have administrative agencies to impose sanctions in most policy areas
- EU member states have been mandated to create national energy regulators
- European national regulators are recommending the creation of an EU-wide regulator
- Harmonized regulation of transmission activities across the EU is urgently needed
- National regulators voluntarily collaborate on detailed rules to implement the broad principles of EU law
- Cross-border power exchanges and the drive for an integrated EU-wide market create pressure for supra-national regulation
- The EC has tasked the ERGEG with creating guidelines to facilitate an efficient and fair EU-wide transmission system
- The ERGEG has called for a significant strengthening of national regulators' independence, authority and resources
- The ERGEG has called for permanent regulatory arrangements at an EU level
- Current transmission interconnection mechanisms are hindering energy market integration
- Disparities in trade requirements illustrate the importance of interconnection to achieve an efficient European power system
- The existing system of cross-border capacity allocation is hindering EU-wide market integration
- Extensive market coupling, while improving capacity allocation regionally, creates pressure for EU-level regulation
- Regional exchanges and market coupling efforts are helping to solve some of Europe's capacity allocation problems
- The leading example of market coupling is the Nord Pool
- Danish-German market coupling will come online at the end of 2007
- Dutch-Belgian-French market coupling is set to expand to include other markets
- Through market coupling, participants rely on one country's domestic agencies in the absence of an EU-wide regulator
- An EU-wide regulatory agency may be established in next year's Third Electricity Directive
- An EU-wide regulatory agency may be established in next year's Third Electricity Directive
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