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The Third Energy Package will it solve the
industrys problems?
Asociace Energetických Manaeru, Prague, 12
September 2007 by Hans Grünfeld President -
IFIEC Europe
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Agenda

• Introduction IFIEC Europe
• Challenges facing industrial energy consumers
• EC policy agenda
• Third Package
• Conclusions

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What is IFIEC Europe?

• Federation of national industrial energy consumer
  associations in the EU
• Representing a.o. chemicals, steel, non ferrous
  metals, pulp paper, glass, ceramics, cement and
  industrial gases
• Covering 15 EU countries with others waiting to
  join when they conform
• Member of IFIEC World - a UN-recognised
  international NGO

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Mission

• Actively engage in dialogue with EU-decision
  makers, with the aims of
• contributing to the creation of an integrated
  competitive EU energy market
• ensuring access to secure and fairly priced
  electricity and natural gas infrastructures
• promoting cost-effective energy efficiency
  improvement and CO2-emission reduction
• securing an effective position for IFIEC in the
  EU decision-making process

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IFIEC activities

• Disseminating information on EU policy
  developments
• Providing opportunities for European industrial
  energy specialists to discuss issues and develop
  common positions
• Maintaining direct contacts with EU Commissioners
  and officials
• Participating actively in policy and regulatory
  discussions
• Providing substantive input to consultation
  papers
• Keeping close contacts with other stakeholders
  and attuning positions
• Issuing press releases and maintaining press
  contacts

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Experiences of industrial energy consumers (1)

• Electricity, gas and CO2 price increase
• Non transparent price formation
• No level playing field
• High transportation and connection fees
• Grid and storage capacity access problems
• ETS with perverse price effects
• Lack of choice of suppliers

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Experiences of industrial energy consumers (2)

• Insufficient cross-border capacity
• Concerns about security of supply
• Ineffective regulation and enforcement
• Position in decision making limited to
  consultation

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IFIEC Europes solution

• Creating competitive conditions
• electricity, gas and CO2-prices
• transportation and connection costs
• fees, levies and taxes
• Enhancing market functioning
• market power
• market concentration
• Achieving market integration
• regional integration
• EU internal market
• Securing active role in decision making

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Developments in 2007

• DG Competition Energy Markets Study Report
• Communication from the Commission to the Council
  and the European Parliament - An Energy Policy
  for Europe
• EU ETS Review
• Gas Regional Initiative
• Electricity mini fora
• Gas Coordination Group
• Green Paper on Market Based Instruments
• Gas Capacity Allocation Modelling
• Commission review of Energy Directives
  proposals - 3rd package (expected 19 September)

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Sector inquiry results

• Numerous general deficiencies in the regulatory
  framework for electricity and gas markets
• Market concentration of incumbants in control
  markets and profits
• Vertical integration between supply and
  generation and infrastructure businesses
• Lack of access to infrastructure such as
  transmission and distribution networks and/or
  storage facilities (particularly cross-border
  access)
• Lack of, or delayed, investment by transmission
  companies, preventing market integration
• Lack of reliable and timely information on the
  markets.

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Expectations for 3rd package

• Effective separation of supply and production
  activities from network operations
• Strengthening powers and independence of
  regulators and enhancing their cooperation
• Effective cooperation between TSOs directed
  towards facilitating market integration
• Facilitating access to LNG and UGS
• Increasing transparency

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IFIECs focus (1)

• Removing barriers for effective cross-border
  cooperation
• ownership unbundling
• market facilitation incentives for TSOs
• Providing legislative structure for management of
  cross-border flows
• TSO cooperation
• Grid code
• Regulators control
• Legal security

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IFIECs focus (2)

• Increasing transparancy and access conditions
• electricity, gas and storage capacity utilisation
  data
• system reliability criteria defined
• effective congestion management
• Securing position for consumers representatives
• mandatory consultation
• legal protection

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Remaining issues

• Market power
• management of incumbants with dominant position
• consolidation
• horizontal integration
• market liquidity
• strengthening position of consumers
• Security of supply
• incumbants positions
• long term contracts
• essential infrastructure
• exemptions
• risk of government intervention

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Conclusion

• 3rd package important
• outcome strongly affected by politically
  sensitive issue of unbundling
• not all concerns addressed
• intensive lobby directed at
• removing barriers to market integration
• strengthening position IE in interconnection
  legislative process
• keeping other issues on the agenda!