The International Network
for Sustainable Energy

Updated: June 2010

Third Energy Market Package

Content of the Package: EU Internal Energy Market Regulation
EU's main internal markets in energy, the internal markets for electricity and gas, are regulated by the directives for respectively the gas and electricity markets as well as by EU regulations for gas and electricity flows across borders/transmission. The legislation was revised in 2009 and consists of:

• Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas
• Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity
• Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks
• Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity

Gas Regulation

In July 2009,the European Parliament and Council proposed a new Directive, Directive 2009/73/EC, which aims at introducing common rules for the transmission, distribution, supply and storage of natural gas. It concerns mainly natural gas, liquefied natural gas (LNG), biogas and gas from biomass.
The Directive replaced (the Directive 2003/55/EC) opened-up the opportunity for the consumers to get a wide-range information about the gas suppliers to freely choose the best for them from July, 2004 and July, 2007 respectively. After that the consumers could know more about the different service qualities, protection of the consumers, and the security of the supplies. Although the experiences showed that transparency of the system didn't improve, therefore the European Commission considered it necessary to redefine the rules and measures applying to that market in order to guarantee fair competition and appropriate consumer protection.

Read more about the Directive 2009/73/EC. pdf file (1,22 MB)

Electricity Regulation

In July 2009, the European Parliament and Council proposed a new Electricity Directive, Directive 2009/72/EC, which aims at introducing common rules for the generation, transmission, distribution and supply of electricity. It also lays down universal service obligations and consumer rights, and clarifies competition requirements.
The Electricity Directive replaced (the Directive 2003/54/EC) gave an opportunity for the consumers to get clear informations about the electricity market. It obligated the Member States to define the measures about the protection of the consumers, and promote the economic and social cohesion. The dysfunction in the internal market in electricity, the European Commission considered it necessary to redefine the rules and measures applying to that market in order to guarantee fair competition and appropriate consumer protection. Therefore
Read more about the Directive 2009/72/EC. pdf file (1,18 kB)

The legislation replaces earlier legislation from 2003 and 1996.

The legislation requires that all consumers have a choice to buy electricity and gas from different suppliers, via the existing networks as well as via direct lines. It sets a large number of requirements for power and gas companies, with different rules for supply, transmission, and distribution companies. The main changes with the 2009 revision are:

• More seperation between production/supply activities and network (transmission & distribution) activities, either with full unbundling or with transmission activities carried out by an independent operator of the transmission system. The transmission system operator shall be responsible for the long-term ability of the system to meet reasonable demands for the transmission with due regard to the environment,

• All countries must have independent electricity regulators for electricity and gas. They shall ensure competitive, secure and environmentally sustainable internal markets in electricity and gas and shall not take instructions from the government. Among others they shall helper to achieve the development of systems that are in line with general energy policy objectives, energy efficiency as well as the integration of large and small-scale production of electricity from renewable energy sources and distributed generation. The regulator shall also facilitate access to the network for new generation capacity and remove barriers of electricity from renewable energy sources,

• More harmonisation of technical standards, access to networks and others. This will be developed in the coming years,

• Increased cooperation among transmission operators with the creation of organisations (called "networks" in the directive text) for electricity and gas transmission operators

• A new European "Agency for the Cooperation of Energy Regulators" is established, with competence to oversee many parts of the legislation

• EU countries can impose on electricity (and gas) companies public service obligations (PSO) relating to security of supply, quality and price of supplies and environmental protection, including energy efficiency, energy from renewable sources and climate protection. In this way countries can use a levy on electricity to support activities to promote energy efficiency and renewable energy.

• The EU Commission shall establish, in consultation with relevant stakeholders, an energy consumer checklist of practical information relating to energy consumer rights that shall be made publicly available.

• Consumer protection for vulnerable consumers. Each country shall ensure that there are adequate safeguards to protect vulnerable customers, including the non-disconnection of electricity in "critical times". It shall also provide benefits in social security systems to ensure the necessary electricity and gas supply to vulnerable customers, or provide for support for energy efficiency improvements, to address energy poverty where identified, including in the broader context of poverty.

• Countries shall ensure the implementation of intelligent electricity and gas metering systems for consumers, but the implementation is subject to an assessment of which form(s) of intelligent metering is economically reasonable and cost-effective and which timeframe is feasible for their distribution. The assessment shall take place by 3 September 2012 (or earlier).

The regulations of access to gas transmission networks and to networks for cross-border exchange of electricity have been in force since 3. September 2009.

The countries shall apply the new legislation in the directives at the latest 3. March 2011, except for unbundling (independence) of transmission system operators and for regulation of owners and operators of the transmission system from countries outside the EU. The unbundling must be applied by 3. March 2011 and the regulation of third country owners by 3. March 2013. The countries can also by derogation extend the full independence of transmission operators that are not part of vertically integrated companies until 3. March 2013.
By 3. March 2013 the EU Commission shall submit a report on the implementation of the directives' chapters on unbundling. Where appropriate, the EU Commission shall submit new proposals to ensure fully effective independence of transmission system operators by 3 March 2014.

Rules and proposed members for the EU organisations (networks) of electricity and gas regulators shall be submitted to the EU Commission by 3. March 2013.

By 3 September 2011 the countries shall ensure that network charges shall be non-discriminatory and not set on according to (historic) contract paths.

Links to Directive Texts:
• Directive 2009/72/EC concerning common rules for the internal market in electricity
• Directive 2009/73/EC concerning common rules for the internal market in natural gas
• Regulation (EC) No 714/2009 on conditions for access to the network for cross-border exchanges in electricity
• Regulation (EC) No 715/2009 on conditions for access to the natural gas transmission networks

INFORSE-Europe Proposals for the National Implementation of the Amended Electricity and Gas Market Directives 2009:

It is important that renewable energy is given priority in the electricity and gas networks, following the previsions in the directive for this. This is both important when the energy is sold from local producers to the network and when the network is used for transport of energy from a
renewable energy production unit to its owners. It must apply to both electricity and gas networks.

It is important that there is a democratic control of the regulation of the energy markets, so the regulates are not acting in isolation; but in dialogue with the democratic system and concerned citizens. This must be part of the governing structure of the new regulators or of the transmission system operators, or of both. This can be with Citizen's Utilities Boards, consisting of citizens that are elected to advice the regulators, which has been practiced with success in many states in the USA for more than two decades.

It is important that promotion of renewable energy is limited to sustainable forms and uses of renewable energy sources. Thus support should not be given to use of unsorted waste for energy, or to hydropower above 10 MW. It will be counterproductive to the development of the electricity market, if large hydropower is given favorable treatment by the regulators.

The complete separation of electricity production, transmission and distribution will be a benefit for independent producers, and thereby for the development of renewable energy. Among the different models for this separation, the best is the one with division in seperate companies for production, transmission, and distribution of electricity.

It is important to stress that the choice of sources for electricity production as well as for gas supply is a competence for the individual countries that decides this via their national energy policies. This is not a competence of the market actors or others.

Countries should use the public service obligations (PSO) in electricity and gas supply to promote energy efficiency and renewable energy, including consumer information and development support, in a transparent system, favouring solutions with potentials for fast market uptake.

Finally, it is important that the protection of vulnerable consumers living in energy poverty goes beyond not to disconnect them during difficult times. The opportunities to bring consumers out of energy poverty with energy efficiency must be used, and tariffs must not penalize small consumers with high fixed charges or similar. See Energy Poverty Recommendations from INFORSE-Europe.

Procedure for the Adoption of the 3rd Energy Market Package
The package was finally agreed 13. July 2009 with adoption of the revised electricity and gas market directives.

In the fall of 2008, the EU energy ministers have refined their agreement on the electricity and gas market regulations. With this agreement unbundling of transmission and distribution from production of energy can be done in three ways: separation of ownership, appointment by the state of an In dependant Transmission Operator, and a third solution whereby independent transmission network operators would use the network belonging to a power- producing company. The energy market directives are expected to be agreed with the EU Parliament in the first half of 2009.

On June 6, 2008, the Energy Council entered into a broad agreement on legislative acts regarding the Internal Energy Market. The agreement was reached on the basis of the Slovenian Presidency proposal ( pdf file 135kB). The two main points are:
• Effective separation of supply and production activities from network operation. As some countries were reluctant to adopt full unbundling, a compromise was reached: in countries with vertically integrated undertaking, Member States can create an independent transmission operator. Consequently, supply companies can own transmission systems on conditions that these systems are managed by an independent transmission operator.
• New agency for the cooperation of energy regulators
The EU Commission welcomed this agreement but most of the Members of the European Parliament remains skeptical. These acts are submitted to co decision.

However, regarding the electricity market, the EU Parliament rejected this deal by a 1st reading vote in a plenary meeting on June 18, 2009. A vote on the unbundling of the gas market was planed in mid July.

Read the press release of the Council on the EU Council's web site ( pdf file 239kB)

Third Energy Liberalisation Package
In September 2007, the EU Commission proposed a revision of the electricity and gas market directives with amendments of the directives on electricity and gas markets and the directives on cross-border trade of electricity and gas. The main changes are that all countries must have in dependant regulators of the electricity and gas markets, that these regulators should cooperate, and that production, transmission, and distribution should be more separated than with the current directives. The amendments include some other important aspects, e.g. support for low-carbon technologies (that are not included in the final version), establishing European networks of transmission system operators, opening of gas storages to market actors, transparent tariffs for use of transmission networks and gas storages, quality standards, cross-border retails markets and others.

Read more about the proposed directives 641/07 (electricity market) and 642/07 (gas market), as well as the EU regulations 643/07 (access to the network for cross-border exchanges in electricity) and 643/07 (for access to the natural gas transmission networks) on the EU Parliament's web site.(link to electricity directive 2009/72 with further links to other legislative procedures mentioned on this page)

The proposal was planed to be discussed among EU's energy ministers' December 3, 2007 and in the EU Parliament in 2008.

INFORSE-Europe Comments (2007)
In its comments to the package, INFORSE-Europe stresses that the directives must more clearly support renewable energy, energy efficiency, and Combined Heat and Power (CHP), the three main solutions that the EU countries have agreed upon to implement climate policy objectives in the electricity sector. They must also support a democratic control of the energy market to counter the increasing monopolization of the electricity and gas markets, and to give voices for citizens and all stakeholders in the regulation of the markets. Further they should reaffirm the rights of the EU countries to set their own energy policies, within the agreed EU targets for climate and energy.

Therefore, INFORSE-Europe proposes a number of amendments and call upon the EU countries to include them in the drafts when their energy ministers meet to discuss the issue on December 3, 2007. The main amendments proposed are:

• To clearly define "low carbon technologies" (that are to be supported if the draft directives are adopted), to be only efficient CHP plants. It will be counterproductive to the agreed climate policies as well as to the objective of creating a level playing field in the electricity market, if the coming directives will support nuclear power, large hydropower, waste incineration and other mature technologies that are sometimes labeled"low carbon technologies". These technologies must compete on equal level with other power generation technologies

• To ensure that Public Service Obligations (PSOs) can continue to support renewable energy support schemes, such as feed-in tariff schemes.

• That there is a democratic control of the regulation of the energy markets, so the regulators are not acting in isolation; but in dialogue with the democratic system and concerned citizens. This can be with Citizen's Utilities Boards, consisting of citizens that are elected to advice the regulators, which has been practiced with success in many states in the USA for more than two decades.

INFORSE-Europe supports the further separation of the production, transmission, and distribution, proposed by the EU Commission in its draft directives, published in September. Among the different models for this separation, we prefer the one with division in separate companies for production, transmission, and distribution of electricity.

Read INFORSE-Europe's proposed amendments November. 12, 2007(pdf 96 kB).
Press Release Nov. 12, 2007 (pdf file 50 kB)

Second Energy Market Package (Adopted: August 2003)

Content of the Package
With the amendment of the EU electricity and gas directive in 2003, it was decided that the markets should be open for all electricity consumers on 1. July 2007, while it should be open for non-household consumers on 1. July 2004. A large part of the amendment had the purpose to guarantee that power companies are treated equally in the electricity market.

A positive part of the proposal was that electricity has to be labeled so the costumers can see the contribution of each energy source to the electricity they are purchasing. Electricity suppliers should specify:

(a) the percentage contribution of each energy source to the fuel mix for the supplied electricity (b) the contribution to CO2 and nuclear waste of their electricity consumption

For electricity obtained via an electricity exchange, the aggregate figures provided by the exchange over the preceding year may be used.

Another improvement in the proposal is that authorization procedures for small and/or distributed generation shall take into account their limited size and impact on the power system. These measures shall apply to all production connected to the electricity distribution system.

The view of the directives is to achieve a competitive market, but in the new directives this is expanded to "competitive, secure and environmentally sustainable market", which is of course a good idea, but the implication of this change is not clear.

The directives allow the countries to require power companies to take upon them "public service obligations" which may relate to security, including security of supply, regularity, quality and price of supplies and environmental protection, including energy efficiency and climate protection. The words about energy efficiency are new, but this paragraph is used by some countries to demand the power companies to finance information on energy efficiency, as well as develop of and research in renewable energy.

The directives require (management) independence of system operators from other power companies, to ensure a more fair competition.

The amendment does not solve the problem that power companies with nuclear power plants and large decommissioning funds can invest them in the purchase of other power companies. This is a clear distortion of the market and it is important to find other ways to solve it. One way could be the proposed EURATOM directive on safety principles, but that proposal has in itself other problems, and is not supported by the countries.

Regarding the electricity internal market, read the Directive 2003/54/EC, (repealing Directive 96/92/EC) and regulation 1228/2003 on the EU Commission's website.
Regarding gas internal market, read the Directive 2003/55/EC (repealing Directive 98/30/EC) and Regulation 1775/2005 on the EU Commission's website.

Procedure for the Adoption of the 2nd Electricity and Gas Market Package
The amendment proposal was released by the Commission in March 2001.
In March 2002 the Parliament proposed a number of amendments to the proposal and the European Council of Prime Ministers adopted the Barcelona Conclusions that supported wider harmonization of electricity and gas markets.

The Commission released an amended version of its original proposal in June 2002.
On November 25, 2002, the EU energy ministers reached a political agreement with above content.

The amendments of the electricity and gas market directives came a step further with the energy ministers' common position in February, supporting the proposal, but with a full market opening only in 2007 for household consumers and in 2004 for other consumers. The requirement for substantial disclosure to consumers of the environmental impact of the power consumed remained in the proposal.

The next step was the EU Parliament's second reading, leading to a Final Decision from the Parliament June 26.

In July the Commission and the Council of EU energy ministers agreed to the last amendments of the Parliament.

The new legislation entered into force August 4, 2003

The regulation of cross-border trade of gas was proposed later as part of the "dark" security of energy supply package, December 2003 and adopted in 2005.

Read more about status at the EU Parliament's Legislative Observatory (search for "Internal electricity market").

Return to EU Energy Policy