Managing Regulatory Forces - The Path to a Pan-European Power Regulator

National regulators are currently recommending new energy bodies at an EU-level to guide policy making at the European Commission and help regulate pan-European energy issues. Together with the increasing complexity of interconnected markets and new market coupling arrangements, momentum is building for the creation of an EU-wide energy regulator.



Report Highlights
Because of the expanding web of market coupling arrangements, the competency of certain national regulators expands well beyond national boundaries. This creates a natural limit to Europe's ability to solve the 'regulation gap' through an organic growth of market coupling based purely on voluntary co-operation and guidelines.

The enforcement of the EU's 2003 regulation on the cross-border exchange of electricity, its subsequent guidelines, and the application of appropriate penalties are all left entirely to national regulatory authorities. Consequently, rules and regulatory actions will vary between member states, even with agreed guidelines in place.


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DATAMONITOR VIEW 2
CATALYST 2
SUMMARY 2
ANALYSIS 4
There is currently no EU-wide energy regulator 4
The EU does not have administrative agencies to impose sanctions in most policy areas 4
EU member states have been mandated to create national energy regulators 4
European national regulators are recommending the creation of an EU-wide regulator 5
Harmonized regulation of transmission activities across the EU is urgently needed 5
National regulators voluntarily collaborate on detailed rules to implement the broad principles of EU law 5
Cross-border power exchanges and the drive for an integrated EU-wide market create pressure for supra-national regulation 5
The EC has tasked the ERGEG with creating guidelines to facilitate an efficient and fair EU-wide transmission system 6
The ERGEG has called for a significant strengthening of national regulators' independence, authority and resources 7
The ERGEG has called for permanent regulatory arrangements at an EU level 7
Current transmission interconnection mechanisms are hindering energy market integration 8
Disparities in trade requirements illustrate the importance of interconnection to achieve an efficient European power system 8
The existing system of cross-border capacity allocation is hindering EU-wide market integration 9
Extensive market coupling, while improving capacity allocation regionally, creates pressure for EU-level regulation 10
Regional exchanges and market coupling efforts are helping to solve some of Europe's capacity allocation problems 10
The leading example of market coupling is the Nord Pool 10
Danish-German market coupling will come online at the end of 2007 11
Dutch-Belgian-French market coupling is set to expand to include other markets 11
Through market coupling, participants rely on one country’s domestic agencies in the absence of an EU-wide regulator 11
An EU-wide regulatory agency may be established in next year’s Third Electricity Directive 12
An EU-wide regulatory agency may be established in next year’s Third Electricity Directive 12
APPENDIX 13
Definitions 13
Further Reading 13
Datamonitor Consultancy 13
Ask the Analyst 13
Disclaimer 13

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