One of the most important pieces of EU legislation on European gas and electricity markets is called the Third Package. It came into force on 3 September, 2009.
The aim of the Third Package is to further liberalise European energy markets.
The Third Package designated our governing body, the Authority, as the National Regulatory Authority (NRA) responsible for regulating Great Britain’s energy market. NRAs are required to have regulatory independence and act independently of any market interests. They should not seek or take instructions from any organisation, whether a government or other public or private entity, when carrying out the regulatory tasks. This requirement does not affect the close cooperation NRAs may enjoy with other relevant national authorities or to general policy guidelines issued by the government that are not related to the regulatory powers and duties.
Ofgem is the NRA for Great Britain. The provisions of the Third Package have added to our principal objective of protecting consumer interests, through the promotion of an internal energy market and the removal of restrictions to trade between European Union Member States.
The NRAs across Europe cooperate through the Agency for Cooperation of Energy Regulators (ACER), which was established under the Third Package to assist NRAs in performing their duties at EU level.
One of the core provisions of the Third Package is ensuring that Transmission System Operators (TSOs) are unbundled from generation, production and supply interests and are certified as being so. This is to minimise the inherent risk of discrimination, not only in the operation of the network but also in the incentives for organisations to invest adequately in their networks. We are responsible for certifying TSOs’ compliance with the Third Package unbundling requirements. The relevant requirements are set out and in the Electricity Act 1989 (and the equivalent requirements for gas in the Gas Act 1986).
Cooperation between TSOs has also been established through the European Network of Transmission System Operators for Electricity (ENTSO-E) - an equivalent body, ENTSOG, was created for gas.
In addition, the Third Package encourages long-term investment by requiring ENTSO-E (and ENTSOG for gas) to publish non-binding Ten-Year Network Development Plans (TYNDPs) every two years. GB contributes to this process through supporting the European TYNDP programme of work.
Energy Infrastructure Package
The European Commission published its proposal for a Regulation on guidelines for Energy Infrastructure in Europe on 19 October 2011. The Regulation, which comes into force in 2013, covers both the gas and electricity markets and aims to ensure that strategic energy networks and storage facilities are in place by 2020.
The Energy Infrastructure Package (EIP) came about in response to the Commission’s 2nd Strategic Energy Review published in November 2008. The review identified a need to enhance the existing Trans-European Energy Networks (TEN-E), highlighting that there was insufficient investment, lack of European coordination, no inclusion of innovative technological projects and lengthy procedures.
Under the EIP, projects of common European interest will be selected by European Member States and the European Commission to fulfil particularly important gaps in European energy infrastructure.
European Framework Guidelines and Network Codes
The Third Package created a regulatory framework to support a single European Energy Market by developing Network Codes.
The Network Codes are a legally binding set of common technical and commercial rules and obligations that govern access to and use of the European energy networks. There are two groups of ‘technical’ codes covering ‘Grid Connection’ and ‘System Operation’.
The European Network Codes on Grid Connection include the Requirements for Generators, Demand Connection and High Voltage Direct Current codes. These codes set out the requirements that all parties must have met to connect to electricity networks.
The European Network Codes on System Operation include the Operational Security, Operational Planning & Scheduling and Load Frequency Control and Reserves codes. These codes aim to set out the operational criteria and procedures for system operation.
These groups of technical rules aim to create harmonised rules for European electricity networks.