David Halldearn, ERGEG

Conference on Implementing the 3rd Package

Brussels, 11th December 2008

Co-ordination of Decisions at Regional and European level

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• Ultimately to create single European electricity and gas markets• via interim step of regional markets, and building on and fostering

integration of currently largely separate national markets Specifically:• Establish (better) functioning regional markets• Identify and publish priority areas for eliminating barriers to trade• Establish and publish action timetable• Identify who should take action• Monitor and foster progressBottom-up process to mesh with top-down EU inititivesCommon principles, not standard market design or common rules

ERGEG Regional Initiatitive - Objectives

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Regional markets –what progress?

• Mixed picture:• Transparency is improving• Technical issues being addressed• Structures for engaging stakeholders and other parties

established and working• But:

• Progress is slower that many hoped for• Legal and other obstacles inhibit progress: ‘regulatory

gap’• National interests sometimes dominate• Commission review proposed for 2009

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3rd package has regional aspects

• “Regulatory gap” at the borders between national regulatory systems is largely addressed– Essential for cross-border investments; system operation;

market interactions– Codes (probably binding) will set cross-border rules

• National regulators should be given the necessary tools to do the job

• Duties of NRAs broadened to include European interests• Agency created to co-ordinate NRA actions

– Possibility of binding Guidelines

• TSOs will have EU level co-ordination bodies• Member states required to co-operate

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What role will the Agency have in Regional markets?

• Regional Initiatives will probably move from ERGEG to the Agency• Regional Initiative will remain central to achievement of single

market• Legal responsibility to co-ordinate activities of NRAs

• Commission could propose binding Guidelines for co-operation between NRAs

• Requirement to monitor regional co-operation of TSOs• Requirement to promote cooperation between the national

regulatory authorities and between regulatory authorities at regional level.

• Co-ordination of regional and European regulatory policy• Could be made binding through Code modifications• National regulators will have an objective to develop competitive

and properly functioning regional markets

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Transition to aSingle European Market

Now Future

National and regional differences

Convergence Single market

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Co-ordinating Changeto Single Market

•Framework guidelines and first set of Codes will not achieve Single Energy Market

• Task is simply too large, complex and costly•Modifications to Codes will enable progress to Single Energy Market over time•Many interested parties can propose Code changes with risk of divergent approaches•The Agency will need to provide clear criteria for assessing Code modifications against the target of SEM•Regional activities will need to take account of these criteria to achieve convergence

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Managing the Transitionto a Single Market

First set of Codes First steps towards SEM

Modifications to Codes

Convergence towards SEM

Further code modifications

Achievement of SEM

Co-ordinated change

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Progress will be bothbottom up and top down

Single Market

Region

Region

RegionRegion

Region

European level

Regional level

Effective co-ordination at all levels will be essential

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Co-ordinating decisions

ERGEG/Agency European decision

making and consultation

RCCs regional co-ordination of decision

making and consultation

ENTSOs regional decision making and co-

ordination

ENTSOs European decision making

Vertical and horizontal aspects of European and regional decision making

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Practical Arrangements

• Build on Regional initiative arrangements – Stakeholder Groups; Regulatory Co-ordination Committees

• Co-ordination of work plans of Agency; ENTSOs and Regional initiatives

• Active within-year monitoring of regional developments• Disputes referred to the Agency• EU-wide consultation on European issues• Codes – and their modification - will be critical for

regional development towards single market. Separate consultation planned for this.

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Timetable

• The Agency not operational before mid-2010 at the earliest

• First Codes unlikely before 2012

• Regional market development remains important in the interim

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Questions on regions

• A Are the proposed practical arrangements to ensure regional level involvement of stakeholders adequate? If not, how could they be improved?

• B How do you envisage the Regional Initiatives operating after the entry into force of the 3rd package legislation? Will their role become less important, given the development of network codes at EU level?

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Thank you for your attention!More information on the consultation paper and the 3

appendices are available at:www.energy-regulators.eu

David Halldearn