Liberalisation of the electricity markets and the public service obligation in the energy community

Abstract

The focus of the thesis is the liberalisation of the electricity markets in South East Europe (SEE) and the establishment of the Energy Community in 2005 between the European Union and the countries from the SEE. It analyses the export of the EU electricity acquis within the enlargement process, and the establishment of a regional electricity market in SEE. Following a deductive approach, the starting point is the suitability of the European model of electricity markets’ liberalisation for the SEE countries. These are economies in transition, characterized by different economic needs in comparison to the EU Member States which negotiated the electricity acquis currently in place. Particular emphasis is placed on the use of the Public Services Obligations (PSO) by the SEE countries in order to address the impact of this liberalisation. The existing literature on the Energy Community Treaty and on the implementation of specific PSOs in the electricity industry is quite scarce. The findings of this thesis confirm the working hypothesis that the EU progressively recognizes that the liberalisation of the former public services cannot be achieved without two basic elements which so far have been largely neglected: a) a strong social policy enshrined in the universal services doctrine and b) safeguard measures to guarantee security of supply. This is reflected even more strongly in the liberalisation of the Contracting Parties' electricity markets. The policy lessons elaborated in the conclusions aim at providing a contribution to the broader discussion on the export of the EU electricity acquis to the SEE and ENP countries. This thesis proposes a re-thinking of the PSO notification system currently in place for Member States by granting a veto power to the Commission in case the PSO notified is not in line with the electricity acquis. It also proposes the introduction of a notification requirement for the Contracting Parties. By analysing the regulated prices and the measures for granting priority rights for cross-border capacity allocation as PSO, it has been found that the electricity acquis does not prohibit per se their implementation. It identified the conditions under which these measures could be used only as a temporary regulatory tool. The thesis proposed alternative measures for the protection of vulnerable customers, such as energy efficiency and demand-management solutions and an increase in transparency as to the allocation of interconnectors’ capacity.