Joint ECRB and Energy Community Competition Authorities Network Meeting ENERGY REGULATION IN CROATIA COOPERATION WITH COMPETITION AUTHORITIES - Tomislav Jureković President of the Board of Commissioners Croatian Energy Regulatory Agency Athens, 5-June-2013 Croatian Energy Regulatory Agency, Ul. grada Vukovara 14, 10000 Zagreb, Croatia 01/6323-777 www.hera.hr Cooperation btw. Energy Regulatory and Competition Authorities 1
Contents Croatia National Regulatory Agency HERA Independent regulatory agencies in Croatia NRA (HERA) and NCA (AZTN) New 2012/13 legal frame of Croatian energy sector Energy regulatory development Simultaneous regulatory targets Parallels with NCA market maturity Future cooperation 2
Croatian Energy Regulatory Agency Est d in 2001/2 by Croatian Parliament element of the National Energy Sector Reform Reg. Council Reg. Agency 3 major development stages: evolving organisational form sequence of regulatory priorities (licensing tariffs markets) relevance roughly in parallel with EU energy packages growing scope and responsibilities 2012 New Law on Energy Activities (HERA law) frame for independent energy regulation major tool for liberalisation/market opening 3
Regulatory agencies in Croatia 6 independant regulatory agencies (since mid-90 s) instruments of a regulatory state market competition, financial services, energy, post and electronic communication, electronic media, railroad services market regulating specific sectors by setting the obligatory rules and monitoring implementation/adherence NRA (HERA) and NCA (AZTN) specific expertise autonomy / independence 4
NRA NCA: Priorities Empirical sequence of stages: (on the road to a fully open market) 1. formal (legal) market opening 2. creating conditions for effective market functioning (e.g. removing price caps in segments of gas supply) 3. enter new players 4. incumbent provides (some) resistance 5. monitoring and fine-tuning operational rules 6. market research/review measures to improve efficiency and/or remove barriers Priority usually given to effective market opening Market (position) abuse in the narrow sense - recognized only at a later stage 5
Example: Croatian gas sector Empirical sequence of stages in the market opening of Croatian natural gas sector: 1. formal (legal) market opening 2007 / 2008 (full) 2. creating conditions for effective market functioning 2011/12 (e.g. removing price caps in segments of gas supply) 2012 3. enter new players 2011/12 4. incumbent provides (some) resistance 2012/13 5. monitoring and fine-tuning operational rules 2013 6. market research/review 2013 measures to improve efficiency and/or remove barriers 6
Time congestion problem of NRA NRA balancing between several objectives Legal harmonization with 3rd Package Reviewing and adopting updated secondary legislation Fine-tuning the (open) market operation market model Often heated sometimes conflicting NRA activities moving in parallel: Advancing the regulatory frame Removing remaining obstacles towards effective full market opening while Providing for the continuity of (PSO) energy services Securing regulatory principles (e.g. cost coverage) 7
NRA Change management NRA internal adoption to expanding responsibilities Tendency to cram tasks over to NRA Newly acquired international responsibilities (EU context) Routes to asserting independence Prioritizing between parallel tasks International (NRA) and domestic (NCA) cooperation 8
Current status of NRA-NCA cooperation Implicitly presumed cooperation in individual cases Small number of formal complaints by energy companies to competition agency typical case: a gas supply co. against market position abuse of the incumbent ( access to flexibility) difficult when specific (dominant) position legally established Question of energy market specifics and overall market maturity Both the Gvmt and the NRA (in their respective fields) focused on advancing the cause of liberalized/open energy market while providing/maintaining balanced energy services Graduality of changes 9
3rd Gas (Electricity) Directive (2009/73-72/EC) rec. (59) The regulatory authorities should also provide information on the market to permit the Commission to exercise its role of observing and monitoring the internal market... National regulatory authorities should report to the competition authorities and the Commission those Member States in which prices impair competition and proper functioning of the market. Art 14 in case of ISO In close cooperation with the regulatory authority, the relevant national competition authority shall be granted all relevant powers to effectively monitor compliance of the transmission system owner with its obligations... Art. 40 General objectives of the regulatory authority In carrying out the regulatory tasks specified in this Directive, the regulatory authority shall take all reasonable measures in pursuit of the following objectives within the framework of their duties and powers as laid down in Article 41, in close consultation with other relevant national authorities, including competition authorities, AS APPROPRIATE, and without prejudice to their competencies 10
3rd Gas (Electricity) Directive (2009/73-72/EC) Art 41 Duties and powers of the regulatory authority (1j) monitoring the level and effectiveness of market opening and competition at wholesale and retail levels, including on natural gas exchanges, prices for household customers... as well as any distortion or restriction of competition, including providing any relevant information, and bringing any relevant cases to the relevant competition authorities; (1k) monitoring the occurrence of restrictive contractual practices, including exclusivity clauses... and, where appropriate, informing the national competition authorities of such practices; (4b) power to carry out investigations into the functioning of the gas markets, and to decide upon and impose any necessary and proportionate measures to promote effective competition and ensure the proper functioning of the market. Where appropriate, the regulatory authority shall also have the power to cooperate with the national competition authority and the financial market regulators or the Commission in conducting an investigation relating to competition law; 11
Access Regulations (714-715/2009) Art. 20 Record keeping by system operators Transmission system operators, storage system operators and LNG system operators shall keep at the disposal of the national authorities, including the national regulatory authority, the national competition authority and the Commission, all information referred to in Articles 18 and 19, and in Part 3 of Annex I fora period of five years. 12
ACER Regulation (713/2009) Rec (8) The Agency should monitor,... the internal markets in electricity and natural gas... Those monitoring tasks of the Agency should not duplicate or hamper monitoring by the Commission or national authorities, in particular national competition authorities. Art. 10 Consultation and transparency 1. In carrying out its tasks... the Agency shall consult extensively and at an early stage with market participants, transmission system operators, consumers, end-users and, where relevant, competition authorities, without prejudice to their respective competence... Art. 11 Monitoring and reporting on the electricity and natural gas sectors The Agency, in close cooperation with the Commission, the Member States and the relevant national authorities including the national regulatory authorities and without prejudice to the competences of competition authorities, shall monitor the internal markets in electricity and natural gas, in particular the retail prices of electricity and natural gas, access to the network including access of electricity produced from renewable energy sources, and compliance with the consumer rights laid down in Directive 2009/72/EC and Directive 2009/73/EC. 13
Croatia - References to NCA in the 2012/13 energy sector legal frame Regulation Act (Law on Regulation of Energy Activities) Establishing efficient energy market and market competition defined as one of fundamental objectives of the regulation of energy activities Art. 11 - Basic activities of the Regulatory Agency... Monitoring restrictive contracts, and... where appropriate, informing the national competition authority.... The Competition Law (Law on the Protection of Market Competition) shall be applied for questions related to market energy activities not covered by this law, which refer to obstruction, limitation or distortion of market competition, and the Regulatory Agency is required to cooperate and provide expert assistance to Competition Agency and the agency for monitoring financial services Art. 14 - Regulatory Agency is authorized to...... undertake monitoring related to market functioning... and to make decisions, as well as to set appropriate and proportional measures for promoting efficient market competition and securing proper market functioning. 14
Croatia - References to NCA in the 2012/13 energy sector legal frame (II) Natural Gas and Electricity Market Acts NRA requires the opinion of NCA when providing exceptions to PSO rules (with implied consequences for market competition General obligation of NRA to report PSO scene measures to EuComm and NatMin regarding the impact to market competition Development of market competition... Obligation of NRA to perform a triennial Research/Study on the functioning of the national gas/electricity market...... can/shall cooperate with NCA (as well as with EuComm and NatMin)... based on the research results, NRA is authorized to prescribe required and proportional measures to promote efficient market competition and secure optimal market functioning Supply issues... Suppliers and traders obliged to keep record and make available to NRA, NCA and other authorized bodies of EnerComm and EU all relevant data regarding contracted transactions on wholesale market(s) 15
Early concept of NRA-NCA cooperation 2006 Cooperation Agreement btw. HERA (NRA) and AZTN (NCA) Targeting protection of market competition in the energy sector improving effectiveness and efficiency Scope of cooperation ( protection of market competition) Forms/methods of cooperation Data and documentation exchange Expert opinions on request Coordination committee Confidentiality Remaining mostly formal HERA is focused on core regulatory activities and fostering effective energy market opening AZTN focused on a very wide range of business sectors (both casebased and through market research/reviews) 16
Conclusions New Croatian energy sector legal frame postulates cooperation between NRA and NCA Joint focus on market monitoring/review ensuing recommendations in hands of NRA Systemic market abuse difficult to isolate in developing market environment mostly the outcome of developing frame Specific expertise of resp. NRA and NCA Customer protection as the next phase in cooperation between NRA and NCA 17
Joint ECRB and Energy Community Competition Authorities Network Meeting Thank you for your attention! Tomislav Jureković tjurekovic@hera.hr Croatian Energy Regulatory Agency, Ul. grada Vukovara 14, 10000 Zagreb, Croatia 01/6323-777 www.hera.hr Cooperation btw. Energy Regulatory and Competition Authorities 18