The European Union’s plan to establish a fully integrated internal energy market has been hampered by the regulatory tools chosen by the European Commission and weaknesses in the EU’s governance framework, says the European Court of Auditors (ECA) in a report published on Tuesday 31 January covering the period from mid-2015 to the end of 2021.
The integration of the national markets of the EU Member States, which started in 1996, was originally scheduled to be completed in 2014.
Almost 10 years later, the EU electricity market “is in practice still governed by 27 national regulatory frameworks”, the ECA notes, citing as examples the significant differences in wholesale prices between Member States and the influence of national tax rates on retail prices.
The auditors attribute this delay in particular to the chosen regulatory approach whereby network codes and guidelines - common European rules on cross-border issues of power system management and interconnections between Member States - have to be implemented inter alia through methodologies developed at national level by the Transmission Systems Operators (TSOs) and approved by the national regulatory authorities (NRAs) or the European Agency for the Cooperation of Energy Regulators (ACER).
In their view, this has led to a complex and delayed harmonisation of rules on cross-border trade.
“By the end of 2021 (...) none of the guidelines had been fully implemented”, the Court of Auditors points out.
Weaknesses in governance and monitoring
The report also criticises the Commission’s heavy reliance on ACER to monitor the consistent implementation of network codes and guidelines, while it lacks “an appropriate governance structure and the necessary competences to effectively coordinate national authorities’ actions in completing ambitious integration projects”.
In the ECA’s view, ACER’s monitoring aimed at detecting and deterring abuse and market manipulation has also failed to sufficiently improve the functioning of the European electricity market. The auditors describe this surveillance as “incomplete” for a number of reasons, including too little data being collected, a lack of resources allocated to analyse the data collected and limited tools to ensure the application of market surveillance rules at national level.
Furthermore, the Court of Auditors considers that the impact assessment carried out by the Commission did not sufficiently analyse the impact of the institution’s decisions on the design and governance of the market.
See the report: https://aeur.eu/f/559 (Original version in French by Damien Genicot)