European Union: Energy e-Newsletter 2nd Quarter 2013

Last Updated: 25 September 2013
Article by Harm Kerstholt, Marinke Israëls, Patrick Peeters and François Tulkens

This is the quarterly Energy & Utilities Newsletter which highlights the main developments in the energy field in both the Netherlands and Belgium. The highlights have been collected by the Energy & Utilities teams of NautaDutilh's offices in Rotterdam and Brussels.

Implementation of the Third European Package of energy regulations (BE)

Belgium's federal energy regulator, CREG, filed a petition before the Constitutional Court seeking partial setting-aside of the Act of 8 January 2012 amending the Electricity Act and Gas Act in implementation of the Third European Package of energy regulations (Directive 2009/72/EC and Directive 2009/73/EC). In its judgment 117/2013 of 7 August 2013, the Constitutional Court set aside a limited number of sections of the transposing statute but threw out the lion's share of the regulator's pleas.

The regulator's petition to set aside the transposing statute was very extensive. It struck at tens of sections and subsections of the amended Electricity and Gas Acts. CREG's petition was the final offensive in a tussle between the regulator and the executive and legislature, which had already been brewing in the wings for some time regarding the scope of the independent regulator's powers as laid down in EU law. 

In short, the petition was structured on five big themes: (i) organisation and rules of good governance of the regulator; (ii) grid tariffs ; (iii) appeals available against decisions by the regulator; (iv) unbundling rules and certification procedure and (v) closed industrial networks.  

As regards organisation, the Constitutional Court found in favour of the CREG on the argument that the "General Board", a consultative body with representatives from the sector, employers, employees, environmental bodies, etc., cannot form part of the CREG without affecting its independence. In addition, the Court confirmed that the principles of good governance are applicable to the CREG. Inter alia, it held that the duty on the CREG to state its grounds in the case of requests for information and the ability of businesses to make remarks before the CREG took decisions, did not constitute impermissible incursions into the regulator's independence, contrary to what CREG had argued.

As regards the powers of the regulator in approving grid tariffs, the Court upheld the transposing statute, which provided for (sometimes very detailed) "general policy guidance" for exercise by the regulator of its powers. The CREG's argument that a large part of this guidance and its detailed nature constituted an incursion into its powers was therefore held to be fallacious. 

The Court also entirely upheld the rules concerning judicial review of CREG decisions. It emphasised that the European guidelines regarding regulator independence point to the fact that independent judicial review is correlative to the regulator's independence.

In the matter of unbundling requirements of TSO's, the Court found in favour of the CREG in holding that the prohibition against multiple directorships concerned not only natural persons, but all persons, i.e. including legal persons. A number of the regulator's pleas regarding the certification procedure of TSO's, including the fact that the designated TSO "is automatically deemed certified", were nonetheless rejected by the Court.

Finally, the Constitutional Court dealt with the regulator's pleas concerning the definition and impact of closed industrial networks. It found for the CREG on the plea that domestic consumers cannot be excluded from the consumers that can be served by a closed industrial network on the basis of article 28(4) of Directive 2009/72/EC. The Court also set aside the provision allowing supplies to consumers not established in the location. However, the Court did retain the possibility of regarding the traction network of the railway infrastructure as a closed industrial network. 

Temporary provisions of Crisis and Recovery Act made permanent (NL)

Under a law that entered into force on 25 April 2013, the Crisis and Recovery Act (Crisis- en herstelwet) – which, as enacted, was to remain in force until 2014 – has now been made permanent in its entirety. The purpose of the Crisis and Recovery Act is to expedite projects relating to spatial planning. Besides amending certain other laws, it provided for temporary measures relating to e.g. appeal procedures and environmental impact reports. These measures have now been made permanent and can also be applied to new projects. Some of the provisions of the 25 April law will only enter into force after the underlying secondary legislation, such as the Environmental Permitting Decree (Besluit Omgevingsrecht) and the Spatial Planning Decree (Besluit ruimtelijke ordening), has been amended.

Plan for certainty of electricity supply approved (BE)

The plan contains various measures to cater for the loss in capacity due to the run-down of nuclear energy and to increase import capacity by extending connections with other countries.

The profitability of existing power stations should be improved, including by means of competitive injection tariffs, market reform of support services and an exemption from the federal levy on natural gas used for the production of electricity. 

A public tender procedure will also be launched to attract the requisite new investments for gas-fired power stations with a capacity of 800 MW. In this regard, flexible support will be granted for a period of six years as from the date of industrial commissioning, in line with rules yet to be laid down in detail. The assessment criteria will be: the level of requested financial support, technical performance, capacity to resolve intermittence and peak demand problems, the date of commissioning, and increasing competition on the production market. The royal decree and the bill of conditions governing this public call for tenders should have been tabled for approval by the government on 19 July 2013.

The decision to extend Tihange 1 nuclear power station by ten years is confirmed, with the transition to more renewable energy being made easier and the cost to the consumer being reduced. The precise economic and financial terms of extending Tihange 1 (audit of production costs by the CREG, reasonable compensation for the owners and distribution of the receipts) should have been tabled with the government for approval on 19 July 2013. A maximum of one-third of the receipts held back by the State in return for the extension will be used to support the aforementioned new investments needed for gas-fired power stations and to offset the exemption from the federal levy on natural gas used for electricity production; two-thirds will be put towards reducing the contribution by families and businesses to the development of offshore wind parks. 

In addition, a strategic reserve is being created that can be activated at times when the risks of supply certainty cannot be covered by the market. This will be done by means of creating competition with temporarily closed production sites that are situated "outside the market" and with planned temporary uncoupling of major industry. 

Finally, new connections to foreign countries (the UK, Germany) and with offshore wind parks should ensure an increase in the physical and commercial electricity import capacity.

The plan was approved at the core cabinet meeting held on 5 July this year and now requires to be further developed.

STROOM legislative programme: bill passed by lower house (NL)

On 11 June 2013, the lower house of the Dutch Parliament passed a bill introducing amendments to the Electricity Act 1998, the Gas Act and the Heating Supply Act (in line with the changes initially announced in the Energy Report 2011). The bill is now before the upper house. For a discussion of the bill, see our E&U newsletter dated 12 February 2013.

The parliamentary debates about the bill included a discussion of the term "direct line". This term has been a point of concern in The Hague for some time. The Minister of Economic Affairs intends to issue a policy letter in September regarding the introduction of a bill merging the Electricity Act 1998 and the Gas Act. In that bill the definition of "direct line" will be amended to provide that a direct line can no longer be directly connected with a grid/network or another direct line. Additionally, the bill will make explicit that a direct line must always be connected with a production installation. According to the minister, this will clarify the distinction between a grid/network and a direct line.

REMIT Regulation: entry into force of related legislation (NL)

On 26 July 2013, an Act implementing certain provisions of EU Regulation 1227/2011 on wholesale energy market integrity and transparency (the "REMIT Regulation") entered into force. Like other EU regulations, the REMIT Regulation has direct effect, but some of its provisions made it necessary to amend a number of existing Dutch laws. As a result of the new Act, the ACM now has the powers necessary to effectively carry out and enforce the provisions of the Regulation, and conduct in violation of the Regulation has been made a criminal offence. The relevant bill was discussed in our E&U e-newsletter dated 16 May 2013. 

Heating Supply Act, as amended, expected to enter into force on 1 January 2014 (NL)

On 11 June 2013, the upper house of the Dutch Parliament passed amendments to the Heating Supply Act. This Act was passed by both houses of Parliament during the period July 2008 - February 2009, but never entered into force because the Minister of Economic Affairs, in consultation with the lower house, decided that amendments were necessary. These amendments have now been passed by both the lower and upper houses. The amendments were discussed in our E&U newsletter dated 28 May 2013. The Heating Supply Act and the amendments have been published in the Bulletin of Acts and Decrees and will enter into force on a date to be set by royal decree. According to the Minister, it is intended that the Act, as amended, enters into force on 1 January 2014.

Brussels ordinance on information on underground cables, pipes and conduits (BE)

Some time ago, we saw the creation of the "KLIM" ("Kabels en Leidingen Informatie Meldpunt" or Cable and Pipe Information Notification Office) at federal level and the KLIP ("Kabel en Leidingen Informatie Portaal" or Cable and Pipe Information Portal) at Flemish level; now the Brussels-Capital Region has introduced its own rules in the form of its ordinance of 26 July 2013 on access to and exchange of information on underground cables, pipes and conduits.

Inspiration has been sought in part in the Flemish Order of 14 March 2008 on the disclosure and exchange of information on underground cables and pipes. The rules' aim is to set up a web application and depositary of geographical information on cables, pipes and conduits in order to prevent excavation damage and also to avoid direct and indirect environmental harm caused by damage to cables, pipes and conduits. Cables, pipes and conduits means any underground infrastructure for the transit, transport, transmission or distribution of substances in solid, fluid or gaseous form, energy or information.

Operators of underground infrastructure are obliged to notify information on their cables, pipes and conduits (the zones where their installations are located) and amend the information via a system yet to be designated, which will be administered by a body that is yet to be identified. Whenever construction activity is planned on a site, the zone of the building site should in principle be entered into the system. The request for information on the location of cables, pipes and conduits must be made no earlier than 40 working days before work starts on site. Exceptions are provided for in the case of acts of God, urgent necessity on grounds of public safety or continuity in public services, exclusively manual works, or building sites on land used for agricultural purposes or private land for domestic works, provided the depth of the site does not exceed 50 cm.

The system then automatically sends just the relevant operators an electronic warning about the request for information. They provide the applicant with the information needed to locate all the installations present in the zone in question. The applicant has to wait until he has received the requested information before embarking on the works on site. Breach of these obligations carries fines. The advantage of the system is that the applicant only has to refer to the system and only cable, pipe and conduit operators that have installations in the relevant zone require to answer.The date when the ordinance comes into force still has to be set.

New rules relating to gas composition (NL)

On 31 May 2013, a Ministerial Regulation amending the Gas Rate Structures and Conditions Regulation (Regeling tariefstructuren en voorwaarden gas) entered into force. The Regulation lays down rules on the way in which gas safety aspects must be incorporated in the conditions referred to in section 12b of the Gas Act (in brief, the conditions used by grid/network operators, that are defined by the AMC). In future, gas will increasingly be imported and for longer periods of time; consequently the "new" gas may vary more greatly in composition than the gas distributed up to now. This could mean that gas appliances will no longer function in a manner that is efficient, safe and effective. Ultimately, Dutch gas appliances must be able to accommodate a larger variety of gases. To this end, a transition has been set in motion during and after which the main condition is that there must not be a deterioration in safety for individuals as a result of the change in gas composition. GTS, the national gas transmission system operator, has indicated that it will be able to transport gas to consumers for at least 10 years under the same safety conditions.

Outline agreement on national energy policy (NL)

On 12 July 2013, representatives of employers' organisations, employees' organisations, environmental organisations and the government, led by the chairman of the Social and Economic Council (the "SER"), entered into an outline agreement for a national energy policy providing for sustainable growth (the "National Energy Agreement for Sustainable Growth"). The outline agreement was discussed in our E&U newsletter dated 31 July 2013. The final agreement was reached on 6 September 2013.

Dutch Competition Authority absorbed by Consumer & Market Authority (NL)

Effective 1 April 2013 the Dutch Competition Authority (Nederlandse mededingingsautoriteit) – together with the Consumer Authority (Consumentenautoriteit) and the Independent Post and Telecommunications Authority (Onafhankelijke Post en Telecommunicatie Autoriteit) – was absorbed by and has become part of a new supervisory body: the Consumer & Market Authority, the "ACM").

European Commission document on ownership unbundling and investor conflicts of interest (EU)

The European Commission recently released a working document summarising its views on the assessment of possible conflicts of interest for financial investors in connection with the unbundling of the ownership of energy companies. This document was discussed in our E&U newsletter dated 30 May 2013.

European Parliament consents to "backloading"(EU)

On 3 July 2013 the European Parliament agreed to the European Commission's proposal to intervene in the EU trading system for CO emissions (ETS). The proposal entails the "backloading" of 900 million emission allowances, which means that they will be auctioned years later than originally planned. This will create market scarcity. The European Council must still state its views on the proposal.

Directive 2013/30/EU of 12 June 2013 on safety of offshore oil and gas operations (EU)

This directive makes offshore oil and gas companies financially liable for environmental damage, in some cases even if the company is not itself at fault. The directive was discussed in our E&U newsletter dated 5 August 2013. It was published on 28 June 2013 and entered into force on the twentieth day following its publication. EU Member States must implement its provisions in national legislation by 19 July 2015. The directive contains transitional provisions for two categories: owners, operators of planned production installations and operators planning or executing well operations (19 July 2016), and existing installations (19 July 2018).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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