On 24 December 2020 the UK and the EU announced it had reached a Trade and Cooperation Agreement (“the Agreement”). The Agreement covers a range of areas concerning the future relationship between the UK and the EU, including energy.
Ofgem will continue to work with the UK Government and energy stakeholders – domestically and in Europe – to implement the Agreement as it relates to energy and continue to ensure our regulatory framework remains fit for purpose and protects consumers.
The measures in the Agreement will take time to implement. The information in the Brexit and the transition period section of our website provides an overview of preparations and measures which were put in place for the end of the Transition Period from 11 pm on December 31, 2020.
We are reviewing some of the content in this section of our website in light of the Agreement.
One of the most important pieces of EU legislation on European gas and electricity markets is referred to as the Third Package. It consists of three Regulations and two Directives and came into force on 3 September 2009.
One of the key aims of the Third Package was to further liberalise European energy markets.
The Third Package designated the Gas and Electricity Markets Authority (GEMA), as the National Regulatory Authority (NRA) responsible for regulating 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.
The NRAs across Europe cooperate through the Agency for Cooperation of Energy Regulators (ACER), which was established under the Third Package to assist NRAs perform their duties at EU level.
One of the core provisions of the Third Package is ensuring that Transmission System Operators (TSOs) are unbundled (or independent) from generation, production and supply interests and are required to be certified as being so.
The Third Package envisages that this unbundling will be effective in removing any conflicts of interests between producers, suppliers and transmission system operations. This will create incentives for necessary investment and guarantee access to new market entrants under a transparent and effective regulatory regime.
We are responsible for certifying TSOs’ compliance with the Third Package unbundling requirements.
Cooperation between TSOs was also established through the European Network of Transmission System Operators for Gas (ENTSO-G). An equivalent body was also created for electricity, (ENTSO-E).
In addition, the Third Package encourages long-term investment by requiring ENTSO-G (and ENTSO-E for electricity) to publish non-binding Ten-year Network Development Plans (TYNDPs) every two years.
The UK contributes to this process through supporting the European TYNDP programme of work.
Central to our work, and a core element of the Third Package, is the requirement to ensure consumers are protected. The Third Package sets out obligations on suppliers relating to:
- customer bills
- the contents of supply contracts
- the length of time for which supply data must be retained
- the length of time it should take a consumer to switch their supplier (no more than three weeks).
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 largely came into force in July 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 European-wide Network Codes.
The Network Codes will form a legally binding set of common technical and commercial rules and obligations that govern access to and use of the European energy networks. On gas, network codes have been and will be developed on Capacity Allocation Mechanisms, Gas Balancing, Transmission Tariff Structures and Interoperability.