Directive 2003/55 - Common rules for the internal market in natural gas - Main contents

Internal market for natural gas

The full opening-up of national gas markets, arrangements for which are set out in Directive 2003/55/EC, represents the completion of a truly competitive internal gas market within the European Union (EU). In practice, industrial clients and domestic customers have had the freedom to choose their gas supplier since 1 July 2004 and 1 July 2007 respectively. Opening-up of the market is directly linked to service quality, universal service, consumer protection and security of supply objectives.

ACT

Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC.

SUMMARY

Directive 2003/55/EC provides for the complete opening of national gas markets to competition and therefore helps create a true internal gas market within the European Union (EU).

Completion of the internal gas market increases competitiveness and improves service quality, guarantees fair prices for consumers, establishes rules on public service obligations, improves interconnection and bolsters security of supply.

Market access

Directive 2003/55/EC lays down the right of third parties to non-discriminatory access to transmission and distribution systems and to liquefied natural gas (LNG) facilities. Consequently, new suppliers can now enter the market and consumers are free to choose their gas supplier.

For the internal gas market to operate properly, all the companies, even the smallest ones, such as those which invest in renewable energy sources, must be able to enter the market. Fair competition conditions must be put in place to prevent the risk of dominant positions, in particular of the traditional operators, and predatory behaviour.

A gradual approach has been adopted so that companies can adapt whilst guaranteeing the protection of consumers’ interests. Since 1 July 2004, industrial consumers have been able to choose their supplier. Domestic consumers have had had this opportunity since 1 July 2007.

Access to storage facilities is covered by specific provisions by virtue of which access may be either negotiated or regulated.

System operation: system operators

In each Member State, system operators are appointed for the transmission system on the one hand, storage, liquefied natural gas and the distribution system. Their mission is the operation, maintenance and development of transmission and distribution, storage and liquefied natural gas (LNG) facilities. They are obliged to ensure the safety, reliability, efficiency and interconnection of facilities with due regard for the environment.

System operators must guarantee non-discriminatory and transparent access to the system for all users. Access must therefore be based on fair tariffs that are applied objectively.

System operators may not favour certain companies, in particular any with which they are associated. In order to avoid any discrimination relating to network access and enable equal access for new entrants, when companies are vertically integrated, the transmission and distribution activities must be legally and functionally separate from other activities, such as production and supply. This separation does not, however, mean ownership unbundling.

System operators are also obliged to provide other operators with the information necessary for safe and effective running of the interconnected system.

Public service obligations and consumer protection

The internal gas market can only become a reality if consumers play an active role and actually exercise their right to free choice of their gas supplier. It is therefore essential for operation of the internal gas market to inform consumers of their rights and to ensure their effective protection.

Directive 2003/55/EC lays down common minimum standards to ensure a high level of consumer protection (the right to change supplier, transparent contract conditions, general information, dispute settlement mechanisms, etc.) and takes particular care to provide adequate protection of vulnerable consumers (for example, by taking the appropriate steps to avoid disconnection of the gas supply).

Gas supply is considered as a public interest service that citizens have the right to access in return for payment. Therefore, the Directive provides for the possibility for Member States to impose public service obligations to guarantee security of supply, economic and social cohesion objectives, regularity, quality and price of the gas supply and protection of the environment.

Regulatory authorities

As key elements in the smooth operation of the internal gas market, independent regulators, appointed in each Member State, are responsible, in particular, for monitoring respect of the non-discrimination principle, the level of transparency and competition, and the tariffs and methods for calculating them. These regulatory authorities also act as dispute settlement authorities.

A European group bringing together the national regulatory authorities to consolidate the development of the internal gas market and ensure coherent application in all the Member States of the provisions of Directive 2003/55/EC (the European Regulators Group for Electricity and Gas - ERGEG) has been established through Decision 2003/796/EC.

Derogations

The Directive lays down derogations or allows for their laying down according to the terms of the Directive in certain situations:

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  for isolated markets, i.e. when a Member State is not directly connected to the interconnected system of another Member State and has only one main external supplier;
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  for emergent markets, i.e. markets where the first commercial supply of a Member State from their first long-term natural gas supply contract was made not more than ten years earlier;
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  for geographically limited areas in Member States, for example depending on the size and maturity of the gas system in the area concerned, as well as the pay-back prospects of investments required for application of the Directive;
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  in the event of a lack of capacity;
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  during development of the infrastructure capacity or of new infrastructures;
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  if access to the system prevents delivery of public service obligations;
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  due to serious economic difficulties of a gas company, in particular due to its ‘take or pay’ commitments (clauses of a gas purchase contract obliging the supplier, on the one hand, to make defined quantities of gas available and the customer, on the other hand, to pay for the gas, whether he has taken it or not).

Furthermore, safeguard measures may be temporarily taken by a Member State in the event of a sudden crisis in the market, or the physical safety or security of persons, apparatus or installations or system integrity being threatened.

Monitoring and security of supply

The European Commission draws up an annual benchmarking report that evaluates the progress in the implementation of competitive electricity and gas markets, on the basis of information supplied by national governments and regulatory authorities.

It is also essential to improve security of supply by guaranteeing sufficient investment in the transmission systems, thus avoiding interruptions to the gas supply, by monitoring the supply and demand balance in the different Member States, the interconnection capacity and the quality and maintenance level of the systems. Such monitoring will enable appropriate measures to be prepared ahead of any supply problems.

Scope

Directive 2003/55/EC applies to the gas market, which must be taken to mean natural gas, as well as liquefied natural gas (LNG), biogas, gas from biomass and other types of gas that can technically be transported in the natural gas system.

As a consequence, and while taking into account quality requirements and technical and safety standards, Member States must make sure to guarantee non-discriminatory access to the gas system of biogas and gas from biomass, as well as other types of gas.

Background

The existence of an internal gas market, parallel to an internal market in electricity, is essential for completion of a true internal energy market within the EU. The internal gas market was put in place, firstly, by Directive 98/30/EC, which was then repealed and replaced by Directive 2003/55/EC.

References

RELATED ACTS

Communication from the Commission of 11 March 2009 to the Council and the European Parliament – Report on progress in creating the internal gas and electricity market [COM(2009) 115 final – Not published in the Official Journal]. The Report examines the transposition of the second package of measures on the internal energy market. Many efforts have been made to introduce true competition, particularly as part of regional initiatives.

However, gas prices increased considerably during the first half of 2008, and the functional unbundling of distribution system operators (compulsory since 1 July 2007) has not been applied systematically. Member States still make extensive use of derogations in this area.

Moreover, the Commission has few figures available concerning users changing gas suppliers, which makes the evaluation of competition on the market rather difficult.

The internal gas market is still too segmented. In order to remedy this segmentation priority should be given to action on the integration of markets, as well as the development of infrastructures and cross-border trade. Finally, it is highly recommended that price regulation be abandoned which hampers competition and dissuades other potential suppliers from entering the market.

Proposal for a Directive of the European Parliament and of the Council of 19 September 2007 amending Directive 2003/55/EC concerning common rules for the internal market in natural gas [COM(2007) 529 final - Not published in the Official Journal]. A third and final legislative package is proposed to complete opening of the European energy markets to competition and creation of the internal energy market.

The internal energy market demonstrates malfunctioning that cannot be corrected effectively by current rules, as stated by the Commission in its sector inquiry. The proposals of the third legislative package go in the same direction as the communication on the prospects for the internal gas and electricity market, and relate to:

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  the separation of production and supply activities from transmission system operation, either based on ownership unbundling (a single company could no longer own the transmission system at the same time as carrying out energy production or supply activities) or on an independent system operator (vertically integrated companies could retain ownership of the network on the condition that it is actually managed by a completely independent company or body), and provisions specify that non-European operators should meet these separation requirements if they wish to acquire a significant share in a European system;
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  the increased powers and the independence of national regulators as well as their cooperation through the setting up of a cooperation agency of the energy regulators authorised to make binding decisions and impose penalties;
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  formalisation of the European groups of transmission system operators for better coordination and, in particular, the drawing-up of joint market and technical codes;
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  improved market operation, notably greater transparency, effective access to storage facilities and LNG terminals.

The Commission proposes five drafts to amend Directives 2003/54/EC and 2003/55/EC relating to the electricity market and the gas market respectively, as well as Regulations (EC) No 1228/2003 and No 1775/2005 on access to the electricity networks and access to the gas networks respectively, and to set up an energy regulators cooperation agency.

Codecision procedure (COD/2007/0196)

Communication from the Commission to the Council and the European Parliament of 10 January 2007 entitled “Prospects for the internal gas and electricity market ” [COM(2006) 841 final - Not published in the Official Journal].

Communication from the Commission of 10 January 2007 entitled “Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the European gas and electricity sectors (final report)” [COM(2006) 851 final - Not published in the Official Journal].

Regulation (EC) No 1775/2005of the European Parliament and of the Council of 28 September 2005 on conditions for access to the natural gas transmission networks conditions for access to the natural gas transmission networks [Official Journal L 289, 3.11.2007].

Commission Decision 2003/796/EC of 11 November 2003 on establishing the European Regulators Group for Electricity and Gas [Official Journal L 296, 14.11.2003].

See also

For further information, please visit the ‘gas’ pages on the DG for Energy and Transport website.

Last updated: 28.05.2009

This summary has been adopted from EUR-Lex.