Harmonized rules and network codes –

The division of competences between European

and national regulation

Benedikt Ennser, E-Control

3

Overview

• Rules

Network code development

Legal issues

• Institutions

ACER & national regulatory authorities

Infrastructure and regulatory cooperation

• Conclusions

4

Rules: Network codes

• Development ACER – ENTSOs – Commission

• Implementation Market participants, national regulatory authorities (Member States?)

• Monitoring ACER, NRAs

ENTSOs (TSOs as amici curiae?)

• Enforcement NRAs, Member States

5

Network code development:

Institutions & procedure

National

Regulatory

Authorities

Member

States

Framework

guidelines

Network

code

Commission

Regulation

+

TSOs

6

Network code development:

Timeline

EC defines

priorities for

network codes

EC requests

ACER to

submit

framework

guidelines

EC requests

ENTSO to

submit

network code

ENTSO

submits

network code

to ACER

ACER submits

network code

to EC if

satisfied,

recommending

adoption

6 months

ACER prepares

framework

guidelines

ENTSO prepares

network codes

12 months 3 months

ACER

provides

opinion

CO

MIT

OL

OG

Y

The legacy of

the “Meroni” doctrine

7

Network code development:

State of play

6 months

ACER prepares

framework

guidelines

ENTSO prepares

network codes

12 months 3 months

ACER

provides

opinion

CO

MIT

OL

OG

Y

Electricity

Gas

Tariffs Interoperability CAM

CACM*, FCA

RfG*, BAL

OPS, LFCR

* draft NCs to be amended

OS

DCC

Balancing*

8

What does a network code look like?

• Structure – example of Gas CAM: Subject matter – scope – definitions

Cooperation between TSOs

Capacity allocation: methods, products

Bundling

Interruptible capacity

Tariffs and booking platforms

Adaption of terms and conditions, entry into force

• Are NCs part of Regulations 714/2009, 715/2009? “This Regulation has been adopted on the basis of Regulation (EC) No

715/2009 which it supplements and of which it forms an integral part.

References to Regulation (EC) No 715/2009 in other legal acts shall be

understood as also referring to this Regulation.”

(Recital 6 draft CAM NC)

9

Network codes: Legal issues (I)

• Scope of a network code What is non-essential?

Policy impact vs fundamental rights & freedoms

• Impact on existing contracts What is proportionate?

Adaptation requirements

• Derogations & transitional periods How much and how long?

Harmonisation vs special circumstances

10

Network codes: Legal issues (II)

• Handbooks & committees A matter of sub-sub-sub-delegation?

Sufficient level of detail vs changing circumstances

• Amendment of draft network codes How to break a procedural deadlock?

“Qualified recommendations” by ACER

• NRA competences How much regulatory oversight?

Notification – approval – setting of standards/methodologies

11

Network codes: Legal issues (III)

• European vs national network codes “The network codes shall be developed for cross-border network issues and

market integration issues and shall be without prejudice to the Member

States’ right to establish national network codes which do not affect cross-

border trade.”

(Article 8 (7) Gas & Electricity Regulation)

• Implementation of NCs: Regulatory approvals Example CAM: “Where two transmission system operators wish to shorten

the lead time for interruptions, any related agreement entered into between

the transmission system operators shall be subject to competent national

regulatory authority approval.”

(Article 22 (2) draft CAM NC)

Legal form? Procedure? Conditions/time limit? Criteria for assessment?

12

Institutions: ACER & NRAs

• NRA referral to ACER “For cross-border infrastructure, the Agency shall decide upon those

regulatory issues that fall within the competence of national regulatory

authorities […] only:

a) where the competent national regulatory authorities have not been able

to reach an agreement within a period of six months from when the case

was referred to the last of those regulatory authorities; or

b) upon a joint request from the competent national regulatory authorities.”

(Article 8 ACER Regulation)

• Review of NRAs’ decisions “The Agency shall provide an opinion, based on matters of fact, at the

request of a regulatory authority or of the Commission, on whether a

decision taken by a regulatory authority complies with the Guidelines

referred to in [the 3rd package] or with other relevant provisions of those

Directives or Regulations.”

(Article 7 ACER Regulation)

13

Infrastructure & regulatory cooperation (I)

National Network Development Plans

10-Year Network Development Plan

Projects of Common Interest

Regional

Investment Plans

Approval by national regulatory authorities

ACER, EC (MS) Opinion

Selection: Regional groups

European

Commission

ENTSOG

ENTSO-E

TSOs

Electricity Gas

Gas Electricity

Electricity Oil CO2 Gas

14

Infrastructure & regulatory cooperation (II)

• Selection of Projects of Common Interest

“For proposed projects falling under the categories set out in points 1 and 2

of Annex II.1 and 2, national regulatory authorities, and if necessary the

Agency, shall, where possible in the context of regional cooperation (Article

6 of Directive 2009/72/EC, Article 7 of Directive 2009/73/EC), check the

consistent application of the criteria/ cost-benefit analysis methodology and

evaluate their cross-border relevance.”

(Annex III (2) of the draft Infrastructure Regulation)

• Cross-border allocation of costs “Within six months of the date on which the last investment request was

received by the national regulatory authorities concerned, the national

regulatory authorities shall, after consulting of the project promoter(s)

concerned, take coordinated decisions on the allocation of investment costs

to be borne by each system operator for the project, as well as their

inclusion in tariffs.”

(Article 13 (5) of the draft Infrastructure Regulation)

15

Conclusions

• Network codes will help operationalize the legal framework

by harmonizing market rules, but the process of code

development is lengthy, sometimes troublesome and

provides a number of legal challenges.

• Experience so far shows attempts to “pass on” unresolved

issues to Comitology, to handbooks, to NRAs, to future

amendments.

• ACER institutionalizes regulatory cooperation on cross-

border issues; nonetheless, NRAs will also need to

reinforce bilateral/multilateral coordination.

• The EU Infrastructure Regulation enables cross-border

cost allocation; yet it remains to be seen to what extent

TSOs and NRAs are willing to shift infrastructure costs.

16

Benedikt Ennser

E-Control

Legal Department

+43 1 24724 421

benedikt.ennser@e-control.at

www.e-control.at

Contact details