Third Energy Package
The European Union's Third Energy Package is a legislative package for an internal gas and electricity market in the European Union. Its purpose is to further open up the gas and electricity markets in the European Union. The package was proposed by the European Commission in September 2007, and adopted by the European Parliament and the Council of the European Union in July 2009. It entered into force on 3 September 2009.
Core elements of the third package include ownership unbundling, which stipulates the separation of companies' generation and sale operations from their transmission networks, and the establishment of a National regulatory authority for each Member State, and the Agency for the Cooperation of Energy Regulators which provides a forum for NRAs to work together.
The EU energy market
The European Commission and the Parliament wants to reach the goals of "Europe 2020 Strategy" through a secure, competitive and sustainable supply of energy to the economy and the society. The correct transposition of the European electricity and gas legislation in all Member States is still not complete. Because of this, the Third Internal Energy Market Package was adopted in 2009 to accelerate investments in energy infrastructure to enhance cross border trade and access to diversified sources of energy. There is still a market concentration on the energy market in the European Union, where a small number of companies control a large part of the market. Together, the three biggest generators of each country hold more than two thirds of the total generating capacity of 840,000 MW. The EU advises three options to weaken the market power of the biggest electricity firms: ownership unbundling, independent system operator and independent transmission operators.Legislation
The Third Energy Package consists of two Directives and three Regulations:- Directive 2009/72/EC
- Directive 2009/73/EC
- Regulation No 713/2009
- Regulation No 714/2009
- Regulation No 715/2009
Potential options for member states
Ownership unbundling
Ownership unbundling is advocated by the European Commission and the European Parliament. This option is intended to split generation from transmission. The purpose of this system is to ensure that the European energy market can't be vertically integrated. The proposal is controversial, with questions as to who can buy the transmission networks, whether such a system will regulate the market-place and who will pay possible compensation to the energy firms. Moreover, some economists also argue that the benefits will not exceed the costs. Some further problems have to do with possible inequalities that may arise during the implementation ofthe framework between undertakings from Member States with a different organisation of the market structure. A suggested solution refers to the better development of the level playing field clause.
Independent system operator (ISO)
The Art. 13 – 16 of directive 2009/72/EC give the member states also the opportunity to let the transmission networks remain under the ownership of energy groups, but transferring operation and control of their day-to-day business to an independent system operator. Investments on the network will be accomplished, not only by the owner's funding but also by the ISO's management. It is also a form of ownership unbundling, but with a trustee. In theory, this would allow transmission and generation to remain under the same owner, but would remove conflicts of interest.Independent transmission operator (ITO)
Austria, Bulgaria, France, Germany, Greece, Luxembourg, Latvia and the Slovak Republic presented at the end of January 2008 a proposal for a third option. This model, the ITO, envisages energy companies retaining ownership of their transmission networks, but the transmission subsidiaries would be legally independent joint stock companies operating under their own brand name, under a strictly autonomous management and under stringent regulatory control. However, investment decisions would be made jointly by the parent company and the regulatory authority. In order to excludediscrimination against competitors, one prerequisite is the existence of a compliance officer, who is assigned to monitor a specific programme of relevant measures against market abuse. It is also named a legal unbundling.