COMMISSION ANNOUNCES PROPOSALS FOR NEW ENERGY PACKAGE

On September 19, 2007, the European Commission (the “Commission”) adopted a package of proposals in order to reform the EU electricity and gas regulatory frameworks. The main proposals concerned unbundling, third country ownership and enhancing the power and independence of national regulators.

The Commission considers that existing legislation allowed companies to maintain network operations and supply and generation activities within a single vertically integrated legal entity and that this legislation damages the EU’s competitiveness. The Commission is therefore proposing new directives concerning the electricity and gas internal markets.

Apparently, the Commission’s preferred option is complete ownership unbundling between network operations and supply and generation activities for both electricity and gas. However, under the proposals, Member States will have the option of designating an independent system operator to which the transmission network is transferred while allowing the vertically integrated undertaking to retain ownership of the network assets.

The Commission understands that a minority of recently established regulators lack sufficient powers, independence and resources and they proposed measures to ensure that all regulators are fully independent. The proposals are also intended to ensure that regulators have the requisite monitoring systems in place and have the power to issue binding decisions.

The Commission also made detailed proposals on the establishment of an Agency for the Cooperation of Energy Regulators, and a new European Network for Transmission System Operators. The latter allows co-operation between transmission system operators, assists the better functioning of cross border trade and investment and also increases co-operation to reinforce security of supply.

Camelia C. Mazard
202-589-1837
cmazard@dbmlawgroup.com