Europaudvalget 2016
KOM (2016) 0864
Offentligt
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EUROPEAN
COMMISSION
Brussels, 30.11.2016
SWD(2016) 410 final
PART 5/5
COMMISSION STAFF WORKING DOCUMENT
IMPACT ASSESSMENT
Accompanying the document
Proposal for a Directive of the European Parliament and of the Council on common
rules for the internal market in electricity (recast)
Proposal for a Regulation of the European Parliament and of the Council on the
electricity market (recast)
Proposal for a Regulation of the European Parliament and of the Council establishing
a European Union Agency for the Cooperation of Energy Regulators (recast)
Proposal for a Regulation of the European Parliament and of the Council on risk
preparedness in the electricity sector
{COM(2016) 861 final}
{SWD(2016) 411 final}
{SWD(2016) 412 final}
{SWD(2016) 413 final}
EN
EN
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TABLE OF CONTENTS
6. DETAILED MEASURES ASSESSED UNDER PROBLEM AREA III: A NEW LEGAL
FRAMEWORK FOR PREVENTING AND MANAGING CRISES SITUATIONS ......... 305
Summary table ............................................................................................................................. 305
Description of the baseline .......................................................................................................... 308
Deficiencies of the current legislation ......................................................................................... 309
Presentation of the options ......................................................................................................... 313
Comparison of the options .......................................................................................................... 325
Subsidiarity ................................................................................................................................... 334
Stakeholders' Opinions ................................................................................................................ 334
7. DETAILED MEASURES ASSESSED UNDER PROBLEM AREA 4: THE SLOW
DEPLOYMENT OF NEW SERVICES, LOW LEVELS OF SERVICE AND POOR RETAIL
MARKET PERFORMANCE ................................................................................................. 338
7.1. Addressing energy poverty ............................................................................................................ 340
Summary table ............................................................................................................................. 341
Description of the baseline .......................................................................................................... 343
Deficiencies of the current legislation ......................................................................................... 355
Presentation of the options. ........................................................................................................ 357
Comparison of the options .......................................................................................................... 369
Subsidiarity ................................................................................................................................... 394
Stakeholders' Opinions ................................................................................................................ 395
7.2. Phasing out regulated prices ......................................................................................................... 400
Summary table ............................................................................................................................. 401
Description of the baseline .......................................................................................................... 402
Deficiencies of the current legislation ......................................................................................... 403
Presentation of the options ......................................................................................................... 407
Comparison of the options .......................................................................................................... 409
Subsidiarity ................................................................................................................................... 445
Stakeholders' opinions ................................................................................................................. 446
7.3. Creating a level playing field for access to data ............................................................................. 450
Summary table ............................................................................................................................. 451
Description of the baseline .......................................................................................................... 452
Deficiencies of the current legislation ......................................................................................... 454
Presentation of the options ......................................................................................................... 454
Comparison of the options .......................................................................................................... 455
Subsidiarity ................................................................................................................................... 458
Stakeholders' opinions ................................................................................................................. 458
7.4. Facilitating supplier switching ....................................................................................................... 464
Summary table ............................................................................................................................. 465
Description of the baseline .......................................................................................................... 466
Deficiencies of the current legislation ......................................................................................... 475
Presentation of the options ......................................................................................................... 475
Comparison of the options .......................................................................................................... 476
Subsidiarity ................................................................................................................................... 481
Stakeholders' opinions ................................................................................................................. 482
7.5. Comparison tools .......................................................................................................................... 485
Summary table ............................................................................................................................. 486
303
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Description of the baseline .......................................................................................................... 487
Deficiencies of the current legislation ......................................................................................... 492
Presentation of the options ......................................................................................................... 493
Comparison of the options .......................................................................................................... 496
Subsidiarity ................................................................................................................................... 505
Stakeholders' opinions ................................................................................................................. 506
7.6. Improving billing information ........................................................................................................ 511
Summary table ............................................................................................................................. 512
Description of the baseline .......................................................................................................... 513
Deficiencies of the current legislation ......................................................................................... 526
Presentation of the options ......................................................................................................... 530
Comparison of the options .......................................................................................................... 531
Subsidiarity ................................................................................................................................... 541
Stakeholder's opinions ................................................................................................................. 543
8. DESCRIPTION OF RELEVANT EUROPEAN R&D PROJECTS ............................... 549
304
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6. D
ETAILED MEASURES ASSESSED UNDER
P
ROBLEM
A
REA
III:
A NEW LEGAL FRAMEWORK FOR PREVENTING AND MANAGING CRISES SITUATIONS
Summary table
Objective: Ensure a common and coordinated approach to electricity crisis prevention and management across Member States, whilst avoiding undue government intervention
Option 0: Do nothing
Option 0+: Non-
regulatory
approach
This option was
-
disregarded as no
means
for
enhanced
-
implementing of
existing
acquis
nor for enhanced
voluntary
cooperation were
identified
-
Option 1: Common minimum
EU rules for prevention and
crisis management
Member States to identify and
assess rare/extreme risks based on
common risk types.
Option 2: Common minimum EU rules plus regional
cooperation, building on Option 1
Option 3: Full harmonisation
and full decision-making at
regional level, building on
Option 2
All
rare/extreme
risks
undermining security of supply
assessed at the EU level, which
would be prevailing over
national assessment.
Assessments
Rare/extreme risks and
-
short-term risks related to
security of supply are
assessed from a national
perspective.
Risk
identification
&
assessment methods differ
across Member States.
Member
States
take
-
measures to prevent and
prepare for electricity crisis
situations focusing on
national approach, and
without sufficiently taking
into account cross-border
impacts.
ENTSO-E to identify cross-border electricity crisis scenarios
caused by rare/extreme risks, in a regional context. Resulting
crisis scenarios to be discussed in the Electricity Coordination
Group.
Common methodology to be followed for short-term risk
assessments (ENTSO-E Seasonal Outlooks and week-ahead
assessments of the RSCs).
Member States to develop
mandatory
national
Risk
Preparedness Plans setting out
who does what to prevent and
manage
electricity
crisis
situations.
Plans to be submitted to the
Commission and other Member
States for consultation.
Plans need to respect common
minimum
requirements.
As
regards cybersecurity, specific
guidance would be developed.
Mandatory Risk Preparedness Plans including a national and
a regional part. The regional part should address cross-border
issues (such as joint crisis simulations, and joint arrangements
for how to deal with situations of simultaneous crisis) and
needs to be agreed by Member States within a region.
Plans to be consulted with other Member States in the relevant
region and submitted for prior consultation and
recommendations by the Electricity Coordination Group.
Member States to designate a 'competent authority' as
responsible body for coordination and cross-border
cooperation in crisis situations.
Development of a network code/guideline addressing specific
rules to be followed for the cybersecurity.
Extension of planning & cooperation obligations to Energy
Community partners
Mandatory Regional Risk
Preparedness Plans, subject to
binding opinions from the
European Commission.
Detailed templates for the plans
to be followed.
A dedicated body would be
created
to
deal
with
cybersecurity in the energy
sector.
-
-
Plans
No common approach to
risk
prevention
&
preparation
(e.g.,
no
common rules on how to
tackle cybersecurity risks).
-
-
a)
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Each Member State takes
measures in reaction to
crisis situations based on its
own national rules and
technical TSO rules.
No co-ordination of actions
and measures beyond the
technical (system operation)
level. In particular, there are
no rules on how to
coordinate
actions
in
simultaneous
crisis
situations between adjacent
markets.
No systematic information-
sharing
(beyond
the
technical level).
Monitoring of security of
-
supply predominatly at the
national level.
ECG as a
information
platform.
voluntary
exchange
Minimum common rules on crisis
prevention and management
(including the management of
simultaneous electricity crisis)
requiring Member States to:
(i) not to unduly interference with
markets;
(ii) to offer assistance to others
where needed, subject to financial
compensation, and to;
(iii) inform neighbouring Member
States and the Commission, as of
the moment that there are serious
indications of an upcoming crisis
and during a crisis.
-
Systematic discussion of ENTSO-
E Seasonal Outlooks in ECG and
follow up of their results by
Member States concerned.
Minimum obligation as set out in Option 1.
Cooperation and assistance in crisis between Member States,
in particular simultaneous crisis situations, should be agreed
ex-ante; also agreements needed regarding financial
compensation. This also inclues agreements on where to shed
load, when an to whom. Details of the cooperation and
assistance agreements and resulting compensation should be
described in the Risk Preparedness Plans.
Crisis management
Crisis is managed according to
the regional plans, including
regional load-shedding plans,
rules
on
customer
categorisation, a harmonized
definition
of
'protected
customers' and a detailed
'emergency rulebook' set forth
at the EU level.
Montoring
Systematic monitoring of security of supply in Europe, on the
basis of a fixed set of indicators and regular outlooks and
reports produced by ENTSO-E, via the Electricity
Coordination Group.
Systematic reporting on electricity crisis events and
development of best practices via the Electricity Coordination
Group.
A European Standard (e.g. for
EENS and LOLE) on Security
of Supply could be developed
to
allow
performance
monitoring of Member States.
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Minimum requirements for plans
would ensure a minimum level of
preparedness across EU taking
into account cyber security.
EU wide minimum common
principles
would
ensure
predictability in the triggers and
actions taken by Member States.
Common methodology for assessments would allow
comparability and ensure compatibility of SoS measures
across Member States. Role of ENTSO-E and RSCs in
assessment can take into account cross-border risks.
Risk Preparedness Plans consisting of a national and regional
part would ensure sufficient coordination while respecting
national differences and competences. Minimum level of
harmonization for cybersecurity throughout the EU.
Designation of competent authority would lead to clear
responsibilities and coordination in crsis.
Common principles for crisis management and agreements
regarding assistance and remuneration in simultaneous
scarcity situations would provide a base for mutual trust and
cooperation and prevent unjustified intervention into market
operation.
Regional plans would ensure
full coherence of actions taken
in a crisis.
Pros
Lack of cooperation in risk
preparedness and managing
crisis may distort internal
market and put at risk the
security of supply of
neighbouring countries.
Risk assessment and preparedness
plans on national level do not take
into account cross-border risks
and crisis which make the plans
less efficient and effective.
Enhanced role of ECG would provide adequate platform for
discussion and exchange between Member States and regions.
The coordination in the regional context requires
administrative resources.
Cybersecurity here only covers electricity, whereas the
provisions should cover all energy sub-sectors including oil,
gas and nuclear.
Regional risk preparedness
plans and a detailed templates
would have difficulties to fit in
all national specificities.
Detailed emergency rulebook
might create overlaps with
existing Network Codes and
Guidelines.
Minimum principles of crisis
management
might
not
sufficiently adress simultaneous
scarcity situations.
Most suitable option(s): Option 2,
as it provides for sufficient regional coordination in preparation and managing crsis while respecting national differences and competences.
Cons
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Description of the baseline
In the area of risk prevention and management of crisis situations the current legislation is
scattered over different legal acts.
Regarding
risk assessment and preparedness,
currently Article 4 of the Electricity
Directive obliges Member States to ensure the monitoring of security of supply issues.
Such monitoring should, in particular, cover the balance of supply and demand, the quality
and level of maintenance of the networks, as well as the measures to cover peak demand
and to deal with shortfalls of one or more suppliers. This also includes the obligation to
publish every two years, by 31 July, a report outlining the findings resulting from the
monitoring, as well as any measures taken or envisaged to address them. Member States
should submit the report to the Commission.
Additionally,
ENTSO-E
has the obligation to carry out
seasonal outlooks
(6 month
summer & winter outlooks) as required by Article 8 of the Electricity Regulation. The
assessments, which follow a probabilistic generation adequacy methodology, explore the
main risks identified within a seasonal period and highlighting the possibilities for
neighbouring countries to contribute to the generation/demand balance in critical
situations.
In terms of coordination and exchange of information among Member States, the
Commission created in 2012 the
Electricity Coordination Group
1
in the aftermath of
Fukushima crisis. The Group is a platform for the exchange of information and
coordination of electricity policy measures having a cross-border impact. It also should
facilitate the exchange of information and cooperation on security of electricity supply
including the coordination of action in case of an emergency within the Union.
The legislation on
crisis management
is set by Directive 2005/89/EC (SoS Directive),
Article 42 of the Electricity Directive and, as regards technical issues, the network codes,
in particular by the Network Code on Emergency and Restoration ('NC ER') which is
currently in comitology for approval. In addition, also the CACM Guideline and the
Guideline on System Operation (SO Guideline) set out operational procedures during crisis
situations, in particular on system operation to be implemented by TSOs.
The Electricity Directive
contemplates in its Article 42 the possibility for Member States
to take temporary safeguard measures in the event of a sudden crisis and where the physical
safety or security of persons, apparatus or installation or system integrity is threatened.
Member States are obligated to notify those measures without delay to the other Member
States and the Commission. Any safeguard measures taken by Member States must "cause
the least possible disturbance in the functioning of the internal market and must not be
wider in scope than is strictly necessary
[...]."
In taking safeguard measures “Member
States shall not discriminate between cross-border contracts and national contracts"
according to Article 4(3) of the SoS Directive.
1
Commission Decision of 15 November 2012 setting up the Electricity Coordination Group. OJ C353,
17.11.2012, p.2.
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Table 2: Specific provisions in network codes and guidelines governing crisis
prevention and management at the technical level
The
Network Code on Emergency and Restoration ('NC ER')
requires in preparation for emergency
situations that the relevant Regional Security Coordinators (RSCs) ensure consistency of individual TSO
System Defence Plans
2
. This includes inter-TSO information exchange, identification of threats within
the capacity calculation region and identification of incompatibilities of planned measures. During
emergency "each
TSO shall provide through interconnectors any possible assistance"
to its neighbours
and to prepare automatic load-shedding plans to ensure stable system frequency
3
. Concerning suspension
of (cross-border) market activities, TSOs can suspend the provision of cross-zonal capacity and the
submission of balancing bids under the following circumstances
4
: (a) blackout state or imminent risk of a
blackout state after market mechanisms are exhausted; (b) continuing market activities decreases
effectiveness of restoration towards normal/alert state; (c) communication tools of TSO to facilitate
market are not available. It also addresses recovery and settlement of costs related to emergency measures
between TSOs and market participants, subject to assessment through NRAs
5
.
The
Regulation on Capacity Allocation and Congestion Management (CACM)
addresses the firmness
of cross-zonal allocated capacity in case of 'force majeure' or emergency situations. It defines 'force
majeure' as unusual event which has happened, is objectively verifiable, is beyond the control of a TSO
and makes it impossible for the TSOs to fulfil its obligations as set out by the CACM Guideline. According
to Article 72, the event of 'force majeure' allows TSOs to curtail allocated cross-zonal capacity in
coordination with other concerned TSOs. TSOs are further obliged to notify market participants which
are concerned by curtailment, provide compensation and limit both consequences and duration of force
majeure.
The
Guideline on System Operation (SO Guideline)
defines the operational system states of 'normal',
'alert', 'emergency' and 'restoration' in its Article 18. This provides a framework for 'remedial actions'
which are used by the TSOs to manage operational security violations (Art. 20
23) and as an example
include manually controlled load-shedding (Art. 22, paragraph 1(j)). TSOs shall prepare and coordinate
their remedial actions among each other and their RSCs (Art. 21, paragraph 1(b)) and prefer remedial
actions which make available the largest cross-zonal capacity (Art 21, paragraph 2(d)). Moreover, they
are obliged to jointly develop a procedure for sharing costs of remedial actions (Article 76, paragraph
1(b)(v)).
Source: EU legislation
Finally, on
cybersecurity,
NIS Directive provides the horizontal framework to boost the
overall level of network and information security across the EU. It imposes a set of
obligations on Member States as well as on essential service providers - including the
electricity, oil and gas subsectors.
Deficiencies of the current legislation
The
evaluation of Directive 2005/89/EC
(SoS Directive) has revealed the existence of
numerous deficiencies in the current legal framework
6
. In first place, the evaluation
concludes in the
ineffectiveness
of the SoS Directive in achieving the objectives pursued,
notably contributing to a better security of supply in Europe. Whilst some of its provisions
have been overtaken by subsequent legislation (notably the Third Package and the TEN-E
2
3
4
5
6
See Article 6 of NC ER.
See Articles 14 & 15 of NC ER.
See Article 35 of NC ER.
See Article 8 and 39 of NC ER.
See Evaluation of the EU rules on measures to safeguard security of electricity supply and infrastructure
investment (Directive 2005/89/EC).
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Regulation), there are still regulatory gaps notably when it comes to preventing and
managing crisis situations.
The evaluation also reveals that the SoS Directive intervention is no longer relevant today
as
it does not match the current needs on security of supply.
As electricity systems are
increasingly interlinked, purely national approaches to preventing and managing crisis
situations can no longer be considered appropriate. It also concludes that its
added value
has been very limited
as it created a general framework but left it by and large to Member
States to define their own security of supply standard. Whilst electricity markets are
increasingly intertwined within Europe, there is
still no common European framework
governing the prevention and mitigation
of electricity crisis situations. National
authorities tend to decide, one-sidedly, on the degree of security they deem desirable, on
how to assess risks (including emerging ones, such as cyber-security) and on what
measures to take to prevent or mitigate them.
The existing regulatory gap on preventing and managing crisis situations is described in
detail below.
The existing obligations for the Member States on monitoring security of supply (Article
4 of the Electricity Directive and Article 7 of the SoS Directive) focus mainly on generation
adequacy and
do not address the preparation for or dealing with crisis situations.
In
practice, the reports submitted under Article 4 of the Electricity Directive are a mere
compilation of information on supply and demand figures showing the evolution in a
certain time horizon, while the lists of measures described cover mainly infrastructure
projects on generation and cross-border interconnections.
There is
no legal
obligation for Member States
to carry out a risk assessment or to draw
up a risk preparedness plan
7
. All Member States set an explicit or implicit obligation to
carry out an assessment of electricity security of supply risks; however, not all Member
States describe the types of risks covered under the assessment
8
. The analysis shows that
the risks to be assessed vary considerably
9
. Furthermore each Member State has designed
its own "risk
preparedness"
or "emergency
plan"
to deal with stress situations, which has
resulted in different national practices across Europe which tend to differ in nature, scope
7
8
9
Only ten Member States set clear obligations to draw up risk preparedness plans, whilst eighteen other
Member States do not have such an obligation, but take risk preparedness considerations into account in
reports, plans or measures (source: Risk Preparedness Study).
In addition, Directive 2008/114/EC on the identification and designation of European critical
infrastructures defines the obligation that each identified European Critical Infrastructure needs an
operator security plan (Art. 5) which will be also reflected in the coming System Operation Guideline
(Art. 26). However, these plans focus only on each identified asset and not the electricity system as
whole.
Only nine Member States have direct obligations to carry out a risk assessment; other Member States
are implicitly looking at risks when monitoring the security of electricity supply (source:
Risk
Preparedness Study).
23 Member States define risks to be addressed which vary considerably (source:
Risk Preparedness
Study).
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and content and rarely take into account cross-border effects. Diverging perception of risks
could lead to different levels of preparedness.
The evidence shows that national plans
do not look at the impacts beyond the national
borders or simultaneous crisis situations.
There is close cooperation on the level of
TSOs which is not matched by a cooperation of national authorities
10
.
Uncoordinated national measures to ensure the supply in emergency situations may not be
efficient or could have negative effects on neighbouring countries. The lack of cooperation
on the level of national authorities could also lead to diverging actions on TSO and
governmental level (e.g. decision on governmental level on export bans) which could have
detrimental effect on security of electricity supply.
Regarding transparency and information exchange, implementation of
Article 42
of the
Electricity Directive shows that up to now the Commission was only notified of such
measures in few cases (e.g. Poland in 2015
11
), and only ex-post, where there was no
possibility ex-ante to assess their suitability. The current wording of Article 42 is of rather
general nature
and does
not lead to sufficient cross-border coordination beforehand.
The Electricity Coordination Group has
limited powers
beyond the exchange of
information. There is no explicit obligation to convoke the group in case of a crisis or when
at least two Member States are in emergency. It is purely a consultative body without
powers to issue recommendations for example on the measures that Member States could
put in place during an emergency.
On
managing crisis situations,
currently Member States predominantly resort to national
measures without sufficient account being taken of their impact on their neighbours or
synergies stemming from a coordinated approach. There are hardly any cross-border
procedures on how Member States should act in crisis situations. However, with
increasingly integrated markets, measures taken by one Member State are highly probable
to affect its neighbours. The cross-border impact is particularly serious and immediate in
case of an actual physical shortage in real time
12
.
10
11
12
There are examples of existing regional co-operation is some regions involving national authorities, e.g.
among the Nordic countries in the framework of NordBER (Nordic Contingency Planning and Crisis
Management Forum) or Pentalateral Energy Forum, however, currently this co-operation is mainly
restricted to the exchange of best practice.
Poland activated a crisis protocol mid-August 2015 allowing TSO to restrict power supplies to large
industrial consumers (load restrictions did not apply however to households and some sensitive
institutions such as hospitals). However, Poland notified the adoption of these measures under Article
42 one month after (mid-September).
Physical shortage arises when it has not been possible to fulfil the given demand, neither by market
transactions in day-ahead and intraday markets nor by balancing activities of the TSO. In this case, load
shedding will be carried out by each TSO to remedy its deficit. After market closure there is no ambiguity
regarding the deficit’s allocation across affected countries –
each TSO knows exactly the magnitude of
its control area’s deficit and consequently its 'scheduled curtailment'. For exporting Member States who
strive to protect their customers from disconnection, two scenarios may arise: (i) closing down
interconnectors to stop exports altogether or (ii) carry out less-than-scheduled load shedding in order to
reduce export flows. In both cases the national action can have an impact on cross-border power flows,
affecting the neighbours' supply.
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In case of a
simultaneous scarcity situation
in two or more Member States, stopping or
limiting exports to overcome national physical shortage before domestic demand has been
curtailed would directly translate into aggravating supplies to customers in the
neighbouring Member State. The management of interconnectors and the possible spill
over effects of Member States' national actions become particularly relevant when a
concurrent physical energy shortage remains over several days (e.g. due to a heat
wave/cold spell causing a sustained demand spike or when a large number of generation
units is put out of operation). This case of energy shortage is especially exposed to the risk
of intervention with system operation or premature non-market measures by Member
States.
The network codes, i.e. the
draft NC ER, the CACM Guideline and the SO Guideline
are an important step in the harmonisation of technical procedures and interoperatibility of
rules in the EU. However, a
general legislative framework
setting out how Member
States should act and co-operate with each other to prevent and manage electricity crisis
situations
is still missing.
There is still no framework clarifying roles and responsibilities,
aligning national rules, and prescribing co-operation between Member States to resolve
political issues relating to crisis management. As a result, large-scale electricity crisis
situations, as well as situations of a simultaneous crisis, cannot effectively be resolved (for
instance, there is no framework for how to deal with crisis situations caused by extreme
weather conditions, or a fuel shortage; there are no rules on which consumers should be
protected most, how to communicate and intervene at a political level etc).
Article 4(3) of the SoS Directive does not define clear Dos and Don'ts at the Member State
level even though electricity crisis situations, especially in situations of simultaneous
scarcity, which require political decision and clear rules, roles and responsibilities. In such
situations, the market should be allowed to function as long as possible and deliver power
flows to countries with higher scarcity. Exporting Member States should not introduce
exports bans without restricting national consumers in a proportionate manner as this
would 'export' the scarcity across the borders. The treatment of interconnection capacity
and consequently the way possible load-shedding measures could be shared across
countries is not sufficiently defined. A few Member States explicitly foresee (potentially
unproportioned) export bans in their national legislation
13
and a recent case of export bans
in South-Eastern Europe has proven this risk in reality.
On
cybersecurity,
the fragmented approach of the NIS directive could be problematic for
the energy sector, as energy infrastructure is arguably one of the most critical
infrastructures that other sectors - like banking, health and mobility, depend upon to deliver
essential services. Currently, the energy sector consists of both legacy and next generation
technologies. New grid technologies are introducing millions of novel, intelligent
components to the energy sector that communicate in much more advanced ways (two-
way communications, dynamic optimization, and wired and wireless communications)
than in the past. These new components will operate in conjunction with legacy equipment
that may be several decades old, and provide little to no cybersecurity controls. In addition,
with alternative energy sources such as solar power and wind, there is increased
13
One Member State specifically includes a legal provision on export bans in its legislation; eleven more
Member States include forms of export restrictions in national law, TSO regulations or multilateral
agreements (Source: Risk Preparedness Study).
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interconnection across organizations and systems. With the increase in the use of digital
devices and more advanced communications, the overall risk has increased. For example,
as substations are modernized, the new equipment is digital, rather than analogue. These
new devices include commercially available operating systems, protocols, and applications
rather than proprietary solutions. This increased digital functionality provides a larger
incident surface for any potential adversary, such as nation-states, terrorists, malicious
contractors, and disgruntled employees. This new technology increases the complexity of
addressing cyber risks. Many of the commercially available solutions have known
vulnerabilities that could be exploited when the solutions are installed in control system
components. Potential impacts from a cyber-event include: billing errors,
brownouts/blackouts, personal injury or loss of life, operational strain during a disaster
recovery situation, or physical damage to power equipment. The current legislative
framework does not prepare for these impacts.
Presentation of the options
Options
to reinforce coordination between Member States for preventing and
managing crisis situations (Problem Area III)
Table 3: Overview of the Options for Problem Area III
Option 0:
Option 0+:
Option 1:
Option 2:
Option 3:
Baseline scenario
Improved implementation of current legislation without regulatory action at EU level
Common minimum rules to be implemented by Member States
Common minimum rules to be implemented by Member States plus regional cooperation
Full harmonisation and full decision-making at regional level
Option 0: Baseline scenario
Under the baseline scenario, Member States would continue
identifying and addressing
rare/extreme risks and possible crisis situations based on a national approach,
in
accordance with their own national rules and requirements. As a consequence, neither risks
originating across borders, nor possible synergies in preparation for crisis are sufficiently
taken into account.
The recently adopted network codes and guidelines (i.e. The Network Code on Emergency
and Restoration, the Regulation on Capacity Calculation and Congestion Management and
the Guideline on System Operation) bring a certain degree of harmonisation on how to
deal with electricity systems in different states (normal state, alert state, emergency state,
black-out and restoration). This ensures more clarity as regards how TSOs should act in
crisis siuations, and as to how they should co-operate with one another.
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The innovative tools
14
developed for TSOs in the area of the system security in the last
years, will also contribute to improve monitoring, prediction and managing secure
interconnected power systems preventing, in particular, cascading failures
15
.
However, the TSOs cooperation would be limited to technical-level decisions, and would
be hampered in practice by the absence of a proper framework for national rules and
decisions on how to prepare for and handle electricity crisis situations, in particular in
situations of siumultaneous scarcity. Such political decisions continue to be taken at a
purely national level, in an intransparent manner, without taking account of other Member
States' interests, both in a preparatory phase, and when crisis situations kick in.
Monitoring results would be published bi-annualy without any requirement to coordinate
among each other or develop any risk preparedness plan. Furthermore Member States
would not be obliged to
exchange information
when a possible crisis approaches. A
current mandate of the
Electricity Coordination Group
would also not be sufficient to
act as information exchange platform in crisis situations. This could lead to inefficiencies
when preventing and managing a crisis situation or have negative effects on neighbouring
countries.
On
cybersecurity,
the NIS Directive, aiming at a high common level of network and
information security across the Union, provides the horizontal framework to boost the
overall level of network and information security across the EU on a cross-sectoral and
generic level. However, as the NIS Directive is defining only very generic and high-level
obligations, there is room for a more sectoral approach defining concrete modalities to
ensure a minimum of coordination among Member States and resilience of the
interconnected European electricity grid. Energy infrastructure is arguably one of the most
critical infrastructures that other sectors - like banking, health and mobility- which depend
upon to deliver essential electricity services. Thus it is essential to tackle the potential risks
of a major blackout taking into account coordinated attacks to more than one Member State
and the interconnectivity and the system complexity of the energy sector.
14
15
ITESLA project (which was financed under FP7) developed methods and tools for the coordinated
operational planning of power transmission systems, to cope with increased uncertainties and variability
of power flows, with fast fluctuations in the power system as a result of the increased share of resources
connected through power electronics, and with increasing cross-border flows. The project shows that
the reliance on risk-based approaches for corrective actions can avoid costly preventive measures such
as re-dispatching or reduced the overall risk of failure.
In addition the AFTER project (which was financed under FP7) also developed tools for TSOs to
increase their capabilities in creating, monitoring and managing secure interconnected electrical power
system infrastructures, being able to survive major failures and to efficiently restore service supply after
major disruptions (http://www.after-project.eu/).
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Table 4: R&D Results
The technical base to produce accurate prediction of rapid fluctuations and prevent cascading failures has
been developed in
ITESLA
through a framework for the exchange dynamic models of power system
elements. It showed that the reliance on risk-based approaches for corrective actions can avoid costly
preventive measures such as re-dispatching or reduced while the overall risk of failure is decreased. This
requires more and more formalised data exchange among TSO's to support the new methods and tools.
AFTER
has developed a framework for electrical power systems vulnerability identification,
defence
and restoration. It uses a large set of data (big data) coming from on-line monitoring systems available at
TSOs’ control centres. A fundamental outcome of the tool consists in
risk-based ranking list of
contingencies, which can help operators decide where to deploy possible control actions.
SESAME,
developed a comprehensive decision support system to help the main public actors in the
power system, TSOs and Regulators, on their decision making in relation to network planning and
investment, policies and legislation, to address and minimize the impacts (physical, security of supply,
and economic) of power outages in the power system itself, and on all affected energy users, based on the
identification, analysis and resolution of power system vulnerabilities.
Source: European Commission (DG ENER)
Table 5: Innovative Tools for Electrical System Security within Large Areas
(ITESLA)
Project
FP7-ITESLA
Innovative Tools for Electrical System Security within Large Areas
Addressing mainly:
Co-optimisation of interconnection capacity, Regional operational centres
The project developed methods and tools for the coordinated operational planning of power transmission
systems, to cope with increased uncertainties and variability of power flows, with fast fluctuations in the
power system as a result of the increased share of resources connected through power electronics, and
with increasing cross-border flows. The project aims at enhancing cross-border capacity and flexibility
while ensuring a high level of operational security.
Fact Sheet:
http://cordis.europa.eu/project/rcn/101320_en.html
Web Site:
http://www.itesla-project.eu/
Important project outcomes include
-
A platform of tools and methods to assist the cooperation of transmission system operators in dealing
with operational planning from two days ahead to real time, particularly to ensure security of the
system. These tools support the optimisation of security measures, in particular to consider corrective
actions, which only need to be implemented in rare cases that a fault occurs, in addition to preventive
actions which are implemented ahead of time to guarantee security in case of faults. The tools provide
risk-based support for the coordination and optimisation of measures that transmission operators need
to take to ensure system security. The platform also supports "defence and restoration plans" to deal
with exceptional situation where the service is degraded, e.g. after storms, or to restore the service
after a black-out. The platform has been made publicly available as open-source software.
A clarification of the data and data exchanges that are necessary to enable the implementation of
these coordination aspects.
A framework to exchange dynamic models of power system elements including grids, generators and
loads, and a library of such models covering a wide range of resources. These models are essential to
produce accurate prediction of the rapid fluctuations that take place in the power grid after faults, and
to prevent cascading failures.
The tools and models allow reducing the amount of necessary preventive measures. The reliance on
risk-based approaches can avoid or minimise costly preventive measures such as re-dispatching while
the overall risk of failure is decreased.
A set of recommendations to policymakers, regulators, transmission operators and their associations
(jointly with the UMBRELLA project). These foster the harmonisation of legal, regulatory and
operational framework to allow the exploitation of the newly developed methods and tools. They also
-
-
-
-
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identify the need for increased formalised data exchange among TSO's to support the new methods
and tools.
Source: European Commission (DG ENER)
Option 0+: Non-regulatory approach
As current legislative framework established by the SoS Directive set general principles
rather than requires Member States to take concrete measures, better implementation and
enforcement actions will be of no avail.
In fact, as the progress report of 2010 shows
16
, the SoS Directive has been implemented
across Europe, but such implementation did not result in better co-ordinated or clearer
national policies regarding risk preparedness.
The recently adopted network codes and guidelines offer some improvements at the
technical level, but do not address the main problems identified.
In addition, today voluntary cooperation in prevention and crisis management is scarce
across Europe and where it takes place at all, it is often limited to cooperation at the level
of TSOs. It is true that certain Member States collaborate on a voluntary basis in order to
addresss certain of the problems identified (e.g. Nord-BER, PLEF). However, these
initiatives have different levels of ambition and effectiveness, and they geografically cover
only part of the EU electricity market. Therefore, voluntary cooperation will not be an
effective tool to solve the problems identified timely and in the whole EU.
Option 1: Common minimum rules to be implemented by Member States
Assessments and plans
Under Option 1 Member States would be obliged to develop
national
Risk Preparedness
Plans ('Plan') with the aim to prevent or better manage the electricity crisis. The Plan should
respect minimum common requirements and include a
risk assessment
of the most
relevant crisis scenarios originated by rare/extreme risks. For that purpose, at least the
following types of risks could be considered: a) rare/extreme natural hazards
17
, b)
16
17
Report on the progress concerning measures to safeguard security of electricity supply and
infrastructure investment
COM (2010) 330 final.
Extreme weather events are likely to affect the power supply in various ways: (i) thermal generation is
threatened by lack of cooling water (as shown e.g. in summer 2015 at the French nuclear power stations
Bugey, St. Alban and Golfech); (ii) heat waves cause high demand of air conditioning (which e.g.
resulted in price peaks in Spain in late July 2015 when occurring in parallel with low wind output); (iii)
heat waves affect grid performance in various ways, e.g. moisture accumulating in transformers (which
e.g. lead to blackouts in France on June 30
th
2015) or line overheating (leading to declaration of
emergency state by the Czech grid operator CEPS on July 25
th
in 2006) (source: S&P Global, Platts:
European Power Daily,
Vol. 18, Issue 123).
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accidental hazards which go beyond N-1, c) consequential hazards such as fuel shortage
18
,
d) malicious attacks (terrorist attacks, cyberattacks).
The Plans would need to respect a set of minimum requirements, namely how Member
States
would prepare for crisis situations
and how they should
deal with the identified
crisis
scenarios. Preparatory measures could include, e.g. training for all staff involved in
crisis management and regular simulations of crisis. Risk preparedness plans should
further include how to prevent and manage cyber-attack situations which would be one of
the risks to be covered by the plans. This will be combined with a soft guidance on
cybersecurity in the energy sector based on NIS Directive.
Plans should be adopted by relevant governments
/ ministries, following an inclusive
process, and (at least some parts of the Plans) should be rendered public. Plans should be
updated on a regular basis
(e.g., every three years, unless major incidents or market
developments require an earlier update). For the purpose of consultation, Plans should be
submitted to other Member States and the Commission.
The main benefit this option would bring is better preparedness, due to the fact that a
common approach is followed across Europe, thus excluding the risk that some Member
States 'under-prepare'. In addition, better preparedness, transparency and clear rules on
crisis management are likely to reduce the chances of premature market intervention.
Crisis management
To ensure transparency and information exchange, Member States would be obliged to
inform
immediately in situations of "early
warning"
or "crisis"
their neighbours and
the European Commission to provide them with all the necessary information, in particular
on the actions they intend to take.
"Early
warning"
could be defined as the state where there is concrete, serious and reliable
information that an event may occur which is likely to result in significant deterioration of
the supply situation and is likely to lead to a crisis level. While "crisis" could be defined
as the event of significant deterioration of electricity supply over a time span lasting long
enough to give room for political action and when all relevant market measures have been
implemented but the supply is insufficient to meet the remaining demand
19
.
18
One example proving that such risks should be taken into account is the shortage of anthracite coal in
Ukraine in June 2016. Due to the political situation in Ukraine affected the rail transport of coal. As
several Ukrainian nuclear power units are offline for maintenance in parallel, the responsible ministry
called for limiting power consumption. (Source: S&P Global, Platts:
European Power Daily,
Vol. 18,
Issue 123).
19
In most of the cases the declaration of "crisis" by the national authorities will coincide with the "emergency
state"
of the transmission system as severe technical problems could lead to the "exceptional
situation".
But in very extreme or rare cases where situations demand political decisions and are not solely limited
to system operation in real time (e.g. fuel supply scarcity, energy shortage for longer time periods) the
government could decide to declare emergency - without necessary being in "emergency
state"-
with the
aim to take safeguard measures (non-market based measures).
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Under this option, the Commission could also set out legal principles governing
crisis
management.
This will replace the current Article 42 of the Electricity Directive, which
allows Member States to take 'safeguard measures' in situations of a sudden crisis and when
security of persons or equipment is threatened. When dealing with emergency Member
States should respect three basic rules:
- 'Market comes first':
Non-market measures should be introduced only once market
measures cannot tackle the situation. Measures should not unduly distort functioning of
the market. They should be introduced only temporary and on the basis of an objective
trigger described in the Plans. In particular, market rules on cross-border trade need to be
respected
20
.
- 'Duty to offer assistance':
In case crisis arises, Member States should react in a spirit of
good cooperation and solidarity
21
. Practical arrangements regarding cooperation and
solidarity measures shall be established in advance by Member States and be reflected in
the risk preparedness plans.
- 'Transparency and information exchange':
Member States should ensure transparency of
the actions taken from the moment that there are serious indications of a crisis and during
a crisis. This should be ensured through the regional part of the risk preparedness plans
and through informing neighbours and the Commission in case of declaration of 'early
warning' or 'crisis'.
By imposing obligations to co-operate and lend assistance, Member States are also less
likely to 'over-protect' themselves against possible crisis situations, which in turn will
contribute to more security of supply at a lesser cost.
Monitoring
In order to anticipate and mitigate potential upcoming crisis, under Option 1 Member
States would be obliged to take into account the
results of the ENTSO-E seasonal
assessments
(winter & summer outlooks). Member States should take measures
accordingly, if there are serious indications that they could be in a predefined crisis
situation (i.e. in an 'early warning' situation), as well as in a situation of crisis.
Option 2: Common minimum rules to be implemented by Member States plus
regional co-operation
Assessments and plans
Option 2 would be built on Option 1 adding rules and tools facilitating cross-border
cooperation in a regional and Union wide context.
Under Option 2 Member States should also develop their Risk Preparedness Plans.
However, the identification of the
crisis scenarios and the risk assessment
would be
20
21
Rules on cross-border capacity allocation are set out in the CACM Guideline. Its Article 72 allows TSOs
to curtail allocated cross-zonal capacity in the event of 'force majeure'.
At TSO level, providing cross-border assistance through the available interconnectors is provided for in
Article 12 of the draft Network Code on Emergency and Restoration.
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carried out by ENTSO-E. This approach would ensure that the risks originating across the
borders, including scenarios of a possible simultaneous crisis, are taken into account.
ENTSO-E would be required to develop a methodology for the identification of risk
scenarios. Such methodology would need to include at least following elements:
-
-
-
-
consider all relevant national and regional circumstances;
the interaction and correlation of risks across the borders;
running simulations of simultaneous crisis scenarios;
ranking of risks according to their impact and probability.
To take account of all regional specificities ENTSO-E could delegate all or part of its tasks
to the ROCs. The crisis scenarios identified by ENTSO-E would be discussed in the
Electricity Coordination Group. The regional approach in the
identification of the crisis
scenarios
ensures a common strategy to minimise impacts of possible crisis, focus in
particular on correlated risks and on risks that could affect simultaneously several Member
States. This would significantly improve level of preparedness at national, regional and
EU level, as the cross-border considerations are duly taken into account since the
beginning.
Table 6: Best practice examples of Member State cooperation
Nordic Contingency and Crisis Management Forum (NordBER)
The Nordic (including Iceland) TSOs, regulators and energy authorities founded a Nordic cooperation
body (NordBER) in order to improve crises management and preparedness. The cooperation focuses on
the exchange of information and experiences on contingency planning and emergency exercises.
Moreover, it requires a common contingency planning for the overall Nordic power sector as a supplement
to the national emergency work and as an extension of operation and planning cooperation between the
TSOs.
Pentalateral Energy Forum
The Pentalateral Energy Forum is the framework for regional cooperation of relevant ministries, NRAs,
TSOs and market parties in Central-Western Europe (BENELUX-DE-FR-AT-CH). Its Support Group 2
gives guidance on regional cooperation in the field of security of supply and acts as "development center
for new ideas" with the goal to reach specific recommendations.
Source: https://nordber.org/ and http://www.benelux.int/nl/kernthemas/energie/pentalateral-energy-forum/
The
Risk Preparedness Plans
under this option
would contain two parts
a part
reflecting national measures and a part reflecting measures to be pre-agreed in a regional
context. The latter part includes particular preparatory measures such as simulations of
simultaneous crisis situations in neighbouring Member States ("stress tests" organised by
ENTSO-E in a regional context); procedures for cooperation with other Member States in
different crisis scenarios, and rules for how to deal with simultanous crisis situations. In
this context the Member States should, among others, agree in advance in which situations,
what load and to whom will be curtailed in simultaneous crisis situations. In order to
facilitate the extent of offered assistance, in particular in cases where no other agreement
has been made for assistance in simultaneous crisis, it might be necessary to allign
principles for priorization and the share of customers which is prioritized highly in order
to avoid overprotection at the cost of neighbouring Member States.
The draft Plans should be consulted with other Member States in each region and submitted
for prior consultation to the Electricity Coordination Group. Through regionally co-
ordinated plans, Member States would be able to ensure that increased TSO cooperation is
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matched by a more structured co-operation between Member States
22
. The regions for such
cooperation should therefore be the same as the TSO regions developed for the RSCs. To
ensure cooperation further, the obligation on coordinated planning should be extended to
Energy Community Partners.
To facilitate the cross-border cooperation and to overcome the current situation of unclear
roles and responsibilities, Member States should designate one
'competent authority',
which would be the responsible body for coordination and cross-border cooperation in a
crisis situation. The Competent Authority should belong either to the national
administration or to the NRA.
In order to also adress specific rules to be followed to ensure
cybersecurity
a network
code or guideline should be developed.The network code/guidelines should take into
account at least the following elements: a) methodology to identify operators of essential
services for the energy sector; b) risk classification scheme; c) minimum cyber-security
prerequisites to ensure that the identified operators of essential services for the energy
sector follow minimum rules to protect and respond to impacts on operational network
security taking the identified risks into account. A harmonized procedure for incident
reporting for the energy sector shall be part of the minimum prerequisites.
Crisis management
As described in Option 1, all measures taken by Member States to prepare to or deal with
'crisis' should be based on a
common framework
and the principles of 'market comes
first', 'duty to offer assistance' and 'transparency and information exchange'.
The 'duty to offer assistance' should especially address simultaneous scarcity situations
which would be set to further rise in the near future given the increasing interconnectivity
of the European electricity systems and markets (see Graphs 1 and 2). In situations of
concurrent energy shortage over several days
23
, Member States should agree in advance,
when and what loads would be curtailed in crisis situations with a cross-border impact
24
.
Solidarity measures in simultaneous scarcity, including coordinated demand restrictions in
various markets, could be subject to financial compensation ex-post, following agreements
between Member States according to the principles set out in Article 39 of NC ER
(avoiding market distortion, incentivizing balanced positions). In order to avoid 'exporting'
22
23
24
For cases of crisis, in particular simultaneous scarcity, also ENTSO-E sees a need for "not
only on a
technical level but political cooperation"
and plans which "should cover extreme crisis situations beyond
the measures provided by e.g. network codes and RSCs services" (s.
ENTSO-E recommendations to the
regulatory framework on risk preparedness (WS5)
(2016), ENTSO-E, document in the process of
publication).
Unlike sudden power outages, an energy shortage could be (i) anticipated e.g. several days in advance
and (ii) last over a period of several days. Therefore, decision making on customer disconnection, rota
plans etc. is likely to not only affect TSOs, but also involve Member States. A good example of a rota
plan
is
the
"Electricity
Supply
Emergency
Code"
of
the
UK:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/396424/revised_esec_ja
nuary_2015.pdf
One example of a load shedding plan prioritizing regions is the Belgian "Plan
de délestage en cas de
pénurie d'électricité"
http://economie.fgov.be/fr/penurie_electricite/plan-delestage/#.VpTd2v7luUk
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energy scarcity to neighbouring markets Member States should also allow for domestic
load shedding to be carried out by their TSOs according to schedules. Any rules on
protected customers should not lead to unjustified over-protection of a too high share of
national customers
25
.
25
As already existing in many Member States today, Member States can introduce rules on customer
categorization to prioritize customers in case of load shedding. Such rules on protected customers should
take into account national and local specifics, but respect harmonized principles.
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Graph 1: Distribution of system stress hours by Member States over fifty years of
historical demand data
Stress hours are defined as hours of extremely high demand. The graph shows the 150 hours per Member
State of the highest demand in the historical period of fifty years (1960-2010). The intensity of the colour
indicates the intensity of demand (red means super peaks of demand). Rows indicate Member States.
Columns indicate the respective historical years.
Source: METIS
Graph 2: Distribution of prices at VoLL in the context of a well-integrated market
by Member States over fifty years of historical demand data
As result of better integration of the markets the stress hours would decrease and be concentrated in periods
affecting simultaneously several Member States.
During these stress hours the price becomes equal to VoLL.
Source: METIS
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Table 7: Best practice example of TSO agreements of Nordel
The Nordic TSOs pre-agreed on certain procedures to be taken in crisis situations (s. Apendix 9 of Nordel
System Operation Agreement 3 (5)). In
Power Shortages,
it demands information of the other TSOs as
quickly as possible and forbids that prearranged trading between players can be changed. In
Critical
Power Shortages
and after all manual balancing reserve (i.e. available generation capacity) has been
exhausted, it sets out a procedure for load shedding without a commercial agreement. After the subsystem
with the greatest physical deficit has started load shedding and two or more subsistems have an equally
large deficit, load shedding is distributed thereafter between those subsystems
26
.
Source: Nordel System Operation Agreement 1 (5), Appendix 9
Monitoring
Building on Option 1, ENTSO-E would carry out seasonal assessments, which would need
to be further improved via the introduction of a
common methodology,
to be developed
by ENTSO-E on the basis of criteria set out in EU legislation. This could be a probabilistic
methodology that should take into account uncertainties of input variables (e.g. probability
of transmission capacity outage, of severe weather conditions, of unplanned outage of
power plants, variability of demand, etc.). The methodology would also indicate the
probability of a critical situation actually occuring and of low level of cross-border
capacity. This methodology should be used not only for seasonal outlooks but also for
weekly risk assessments by RSCs.
This option also contemplates the
reinforcement of tasks and powers of the Electricity
Coordination Group
with a view to ensure transparency and wide discussion between
Member States in the preventive phase and after declaration of early warning/crisis. In
particular, the Group would be the forum for the discussion of the draft plans and the
measures that Members States foresee to implement based on the results of the seasonal
outlooks. The Group could also play a role in the assessment of measures adopted by
Member States in early warning/crisis. More generally, the Group could be given concrete
tasks to discuss policies in the area of security of supply, for instance, through regular
discussions on the basis of ENTSO-E adequacy outlooks. It could issue recommendations
and develop best practice. The reinforced role would enhance the coordination of measures
and ensure more uniformity and coherent plans. Overall, the reinforcement of tasks and
powers of the Electricity Coordination Group would contribute to enhance cooperation and
to build trust and confidence among Member States.
In addition to the obligation to notify immediately the declaration of early warning or crisis
and provide Member States concerned and the Commisison with all relevant information,
under Option 2 Member States would be obligated to carry out
an ex-post evaluation.
The
evaluation should be submitted to the Commission at the latest six weeks after the lifting
of early warning or crisis. The assessments should be presented by the Member States
concerned at the Electricity Coordination Group.
To allow for a precise monitoring of how well Member States' systems perform in the area
of security of supply,
security of supply indicators
would be introduced. ENTSO-E
would calculate for all Member States the following security of supply indicators: expected
26
That agreements similar to the Nordic TSOs could be a best practice also for the system of continental
Europe as it mentioned by the Dutch TSO TenneT to the public consultation. It recommends to have
common rules and definitions and defining allowed measures on different levels of criticality, as security
of electricity supply is becoming an issue of reginal rather than national importance.
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energy non served (EENS) expressed in GWh/year and loss of load expectation (LOLE)
expressed in hours/year. ENTSO-E would conduct the security of supply performance
measurements based on the indicators on annual basis, at the occasion of the adequacy
assessment outlook. The introduction of security of supply indicators to assess how well
Member States perform in the area of security of supply would enhance comparability and
mutual trust in neighbours.
Option 3: Full harmonisation and full decision-making at regional level
Assessments and plans
Built on Option 2, under Option 3 the assessment of rare and extreme risks would be carried
out at EU level, which would prevail over national assessments.
The
risk preparedness plans
would be developed on
regional level
27
. In each region the
Member States would need to agree on one risk preparedness plan which would address
the most relevant risks in each region. The list of measures to mitigate the risks should be
developed on and co-ordinated at the regional level by the ROCs. This would allow a
harmonised response to potential crisis situation in each region.
Even though the regional plans would ensure full coherence of actions ahead and in
particular in a crisis, it would be difficult that all national specificities could be addressed
through regional plans.
On
cybersecurity
Option 3 would go one step further and nominate a dedicated body
(agency) to deal with cybersecurity in the energy sector. This would guarantee full
harmonisation on risk preparedness, communication, coordination and a coordinated cross-
border reaction on cyber-incidents.
Crisis management
Regarding
crisis management,
under Option 3 crisis would have to be managed according
to the regional plans agreed among Member States. The Commission would determine the
key elements of the regional plans such as: commonly agreed regional load-shedding plans,
rules on customer categorisation, a harmonised definition of 'protected customers' (high
priority grid users) at regional level or specific rules on crisis information exchanges in the
region. Under Option 3, the Commission would also create a
detailed 'emergency
rulebook'
with an exhaustive list of measures that can be taken by Member States and
TSOs in crisis situations.
27
The results of the public consultation showed that only few stakeholders were in favour of regional or
EU wide plans. Some stakeholders mentioned the possibility to have plans on all three levels (national,
regional and EU), e.g. see the answers of Latvian government, EDSO, GEODE, Europex.
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Monitoring
The seasonal outlooks carried out by the ENTSO-E and ROCs would include a proposal
of ROCs for each reagion of measures to mitigate the risks identified. Member States
would be obligated to implement them.
In order to also harmonize monitoring practices on a European level and ensure full
consistency, a European standard (e.g. for EENS and LOLE) on Security of Supply could
be developed and fixed (e.g. determined value to be fulfilled by all Member States) which
could be used to monitor the Member State performance.
Comparison of the options
Option 1 (Common minimum rules to be implemented by Member States)
Contribution to the policy objectives
Under this option, Member States would be required to draw up risk preparedness plans,
built on common elements, and to respect certain common minimum rules when managing
crisis situations.
The main benefit this option would bring is better preparedness, due to the fact that a
common approach is followed across Europe, thus excluding the risk that some Member
States 'under-prepare'. In addition, better preparedness, transparency and clear rules on
crisis management are likely to reduce the chances of premature market intervention.
By imposing obligations to co-operate and lend assistance, Member States are also less
likely to 'over-protect' themselves against possible crisis situations, which in turn will
contribute to more security of supply at a lesser cost.
Economic Impacts
Overall, the policy tools proposed under this option should have positive effects. Putting
in place a more common approach to crisis prevention and management would not entail
additional costs for businesses and consumers. It would, by contrast, bring clear benefits
to them.
First, a more common approach would help better prevent blackout situations, which are
extremely costly. The immense costs of large-scale blackouts provide an indication of
potential benefits of improved preparation and prevention
28
.
28
Previous blackouts in Europe had severe consequences. For example, the blackout in Italy in September
2003 resulted in a power disruption for several hours affecting about 55 million people in Italy and
neighbouring countries and causing around 1.2 billion euros worth of damage. (source:
The costs of
blackouts in Europe
(2016), EC CORDIS:
http://cordis.europa.eu/news/rcn/132674_en.html).
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Table 8: Overview over most severe blackouts in Europe
Number of end-
Duration,
Country & year
consumers
energy not
interrupted
served
0.86 million
2.1 hours,
Sweden/Denmark,
(Sweden);
18 GWh
2003
2.4 million
(Denmark)
2 days–2 weeks,
France, 1999
1.4 - 3.5 million
400 GWh
Italy/Switzerland,
55 million
18 hours
2003
1 day
5 weeks,
Sweden, 2005
0.7 million
11 GWh
Less than
Central Europe, 2006
45 million
2 hours
Estimated costs to
whole society
EUR 145
180 million
EUR 11.5 billion
EUR 400 million
Source: SESAME: Securing the European Electricity Supply Against Malicious and Accidental Threats
A more common approach to emergency handling, with an obligation for Member States
to help each other, would help to avoid or limit the effects of potential blackouts. A more
common approach, with clear obligations to e.g., follow up on the results of seasonal
outlooks, would also reduce the costs of remedial actions TSOs have to face today
29
. This,
in turn, should have a positive effect on costs overall.
In addition, improving transparency and information exchange would facilitate
coordination, leading to a more efficient and less costly measures.
By ensuring that electricity markets operate as long as possible also in stress situations,
cost-efficient measures to prevent and resolve crisis are prioritized.
The overall impact of the Commission Recommendations on cybersecurity for the energy
sector can be very broad, given the voluntary nature of this approach. If fully followed by
all Member States, the same impacts as in Option 2 should be considered. If only partially
considered by Member States, the average administrative cost would be rather low.
Who should be affected and how
Option 1 is expected to have a positive effect on society at large and electricity consumers
in particular, since it helps prevent crisis situations and avoid unnecessary cut-offs. Given
the nature of the measures proposed, no major other impact on market participants and
consumers is expected.
29
The example of the Summer Outlook 2016 for Poland involves the following remedial actions to prevent
emergency situations: (i) switching measures of the respective TSOs PSE and 50Hertz, as well as (ii)
rescheduling of DC loop flows involving DE, DK, SE, PL, (iii) bilateral re-dispatch between DE and PL
and (iv) multilateral re-dispatch additionally involving e.g. AT, CH. Out of those, (i) and (ii) are non-
costly measures whereas re-dispatch induces significant costs.
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On cybersecurity, given the voluntary approach of this option, several stakeholders (TSOs,
DSOs, generators, suppliers and aggregators) could be affected. However, the impact is
estimated limited as the costs of cybersecurity for regulated entities merely need to get
considered and taken into account by the regulatory authority. Thus, the TSOs and DSOs
affected could recover their costs via grid tariffs. In that case, the pass through of costs
would have an impact on consumers that could see a slightly increased in the final prices
of electricity.
Impact on business and public administration
The preparation of risk preparedness plans as well as the increased transparency and
information exchange in crisis management imply a certain administrative effort
30
.
However, the impact in terms of administrative impact would remain low, as currently
Member States already assess risks relating to security of supply, and all have plans in
place for dealing with electricity crisis situations
31
.
In addition, it is foreseen to withdraw the current legal obligation for Member States to
draw up reports monitoring security of supply
32
, as such reporting obligation will no longer
be necessary where national plans reflect a common approach and are made transparent.
This would reduce administrative impacts.
Option 2 (Common minimum rules to be implemented by Member States plus
regional co-operation)
Contribution to the policy objectives
Option 2 build on Option 1, but adds the dimension of regional (and some) EU-level co-
operation. In particular, it requires Member States to pre-agree on certain aspects of the
Risk Preparedness Plans (notably on how to deal with situations of a simultaneous
electricity crisis). It also calls for a more systematic assessment of rare/ extreme risks at
the regional level. Given the interlinked nature of EU's electricity systems, enhanced
regional co-operation brings clear benefits when it comes to preventing and managing
crisis situations.
The regional approach in the identification of the crisis scenarios ensures a common
strategy to minimise impacts of possible crisis, focus in particular on correlated risks and
on risks that could affect simultaneously several Member States. This would significantly
improve level of preparedness at national, regional and EU level, as the cross-border
considerations are duly taken into account since the beginning. The regional coordination
of plans would build trust between Member States which is crucial in times of crisis. The
harmonised approach via Network Codes/Guidelines would also ensure a minimum level
of harmonization for cybersecurity in the energy sector throughout the EU.
30
31
32
Administrative costs are defined as the costs incurred by enterprises, the voluntary sector, public
authorities and citizens in meeting legal obligations to provide information on their action or production,
either to public authorities or to private parties.
All twenty-eight Member States have a general obligation to monitor the security of electricity supply
from which implicitly follows the obligation to assess electricity supply risks, while nine countries have
a direct legal obligation to carry out an assessment of these risks. (Source:
Risk Preparedness Study).
Article 4 of the Electricity Directive; Article 7 of the Electricity SoS Directive.
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The agreement at
regional level of some aspects of the risk preparedness plan
would
ensure that coordination and cooperation is agreed in advance. This is particularly relevant
as regards situations of simultaneous crisis.
The regional approach for the
ENTSO-E's seasonal outlooks
would ensure a more
granular and in-depth assessment of possible cross-border situations. This could give a
better indication of the impacts of possible crisis situations and the possible solutions that
cooperation could bring.
The introduction of
security of supply indicators
to assess how well Member States
perform in the area of security of supply would enhance comparability and mutual trust in
neighbours.
The reinforced role of the
Electricity Coordination Group
would ensure transparency
and wide discussion in prevention and managing crisis. It would also facilitate the
exchange of information in situations of early warning and crisis and the ex-post
evaluation. In addition, it would enhance the coordination of measures and ensure more
uniformity and coherent plans. Overall, the reinforcement of tasks and powers of ECG
would contribute to enhance cooperation and to build trust and confidence among Member
States.
Economic Impacts
This option would lead to better preparedness for crisis situations at a lesser cost through
enhanced regional coordination. The results of METIS simulations
33
show that well
integrated markets and regional coordination during periods of extreme weather conditions
(i.e. very low temperature
34
) are crucial in addressing the hours of system stress hours (i.e.
hours of extreme electricity demand), and minimizing the probability of loss of load
(interruption of electricity supply).
Most importantly, while a national level approach to security of supply disregards the
contribution of neighboring countries in resolving a crisis situation, a regional approach to
security of supply results in a better utilization of power plants and more likely avoidance
of loss of load. This is due to the combined effect of the following three factors: (i) the
variability of renewable production is partly smoothed out when one considers large
geographical scales, (ii) the demands of different countries tend to peak at different times,
and (iii) the power supply mix of different countries can be quite different, leading to
synergies in their utilization.
The following table compares the security of supply indicator "expected energy non-
served" (EENS) assessed by METIS for the three levels of coordination (national, regional,
33
34
"METIS
Study S16: Weather-driven revenue uncertainty for power producers and ways to mitigate it",
Artelys (2016).
Even though periods with very low temperature occur rarely (9C difference between the 50 year worst
case and the 1% centile) countries can face high demand peaks (e.g. Nordic countries and France) mainly
due to the high consumption for the electric heating. As example, the additional demand for the 50 years
peak compared to the annual peak demand is 23% for France, 18% for Sweden and 17.3% for Finland.
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European)
35
. It highlights an overestimation of the loss of load, when it is measured in a
scenario of non-coordinated approach, which does not take into account the potential
mutual assistance between countries.
Table 9 - Global expected energy non-served as part of global demand within the
three approaches
Level
National level
Regional level
European level
Source: METIS
EENS (% of annual load)
ENTSO-E V1
36
scenario
0,36 %
0,02 %
0,01 %
The EENS for the three levels of coordination are represented on the figure below. When
the security of supply is assessed at the national level, many countries of central Europe
seem to present substantial levels of loss of load. However, since these countries are
interconnected, a regional assessment of security of supply (taking into account power
exchanges within this region) significantly decreases the loss of load levels.
Figure 1 - EENS (%) estimation by country for scenario ENTSO-E 2030 v1 with
CCGT/OCGT current generation capacities. From left to right: EENS estimated at
European, regional and national levels
Source: METIS
METIS simulations also show that thanks to regional cooperation the stress situations
would decrease and concentrate in a limited number of hours that may occur
simultaneously. Therefore, it highlights the need for specific rules on how Member States
should proceed in these particular circumstances, as proposed in this Option 2.
35
36
"METIS
Study S04: Stakes of a common approach for generation and system adequacy",
Artelys (2016).
ENTSO-E 2030 v1: vision for 2030 "Slowest progress". The perspective of Vision 1 is a scenario where
no common European decision regarding how to reach the CO2-emission reductions has been reached.
Each country has its own policy and methodology for CO2, RES and system adequacy.
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As the overall cost of the system would decrease thanks to enhanced coordination this
could have a positive impact on prices for consumers.
On the contrary, a lack of coordination on how to prevent and manage crisis situations
would imply significant opportunity costs. A recent study also evidenced that the
integration of the European electricity market could deliver significant benefits of 12.5 to
40 billion euro until 2030. However, this amount would be reduced by 3 to 7.5 billion euro
when Member States pursue security of electricity supply objectives following going alone
approaches
37
.
Overall, the costs to develop and to follow a Network Code or Guidelines on cyber-security
would be limited. Additionally, given the administrative nature of the Option, the impact
could be estimated limited as it mostly requires harmonising existing practices available in
most of Member States. In addition, some obligations specific for the energy sector would
reinforce existing provisions on the NIS Directive such as the identification of operations
of essential services and the reporting obligation of cyber-incidents. Security does in
general not present a separate budget line; that is why it is very hard to estimate how much
is already spent on cybersecurity expenditures. Some of the costs might also be hidden in
other budget lines, like in human resources, securing buildings, etc. Thus there is very few
evidence on cybersecurity expenses in the energy sector. As example, according to a US
survey in a small sample of 21 utilities and energy companies, they spent an average of
$45.8 million a year on computer security to prevent 69% of known cyber strikes against
their systems in 2011
38.
On the contrary, the damages of cybersecurity breaches could be
huge. Even though the range of costs varies on the incident, a recent study reveals a wide
spectrum of costs ranging from $156,000 (very low end estimate) to $5.5 million per single
event
39
. Additional costs may arise through losses in stock value. Overall, the costs of a
blackout following a cyber-incident are the same as for a physical incident. Therefore, the
overall impact of rules on cybersecurity would be limited while the benefits of preventing
cyber-incidents could be high.
Who should be affected and how
As in the case for Option 1, Option 2 is expected to have a positive effect on society at
large and electricity consumers in particular, since it helps prevent crisis situations and
avoid unnecessary cut-offs. Given that, under Option 2, Member States would be required
to effectively cooperate, and tools would be in place to monitor security of supply via the
Electricity Coordination Group, such crisis prevention and management would be even
more effective.
The measures would also have a positive effect on the business community, as there would
be much more transparency and comparability as regards how Member States prepare for
and intend to manage crisis situations. This will increase legal certainty for investors,
37
38
39
"Benefits of an Integrated European Energy Market (2013)",
BOOZ&CO.
Insurance as a risk management instrument for energy infrastructure security and resilience
(2013), U.S.
Department of Energy:
http://www.bloomberg.com/news/articles/2012-02-01/cyber-attack-on-u-s-
power-grid-seen-leaving-millions-in-dark-for-months.
Insurance as a risk management instrument for energy infrastructure security and resilience"
(2013),
U.S. Department of Energy:
http://www.bloomberg.com/news/articles/2012-02-01/cyber-attack-on-u-s-
power-grid-seen-leaving-millions-in-dark-for-months.
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power generators, power exchanges but also for TSOs when managing short-term crisis
situations.
Among the stakeholders the most affected would be the competent authorities (e.g.
Ministry, NRA) as actors responsible for the preparation of the risk preparedness plans
(see below, assessment of impacts on public authorities).
Other actors, such as TSOs, could be also affected, given in particular the possibility for
the Competent Authorities to delegate certain tasks (e.g. carry out the risk assessment).
However, as the tasks delegated would be closely linked to the tasks attributed by law to
the TSOs (e.g. ensuring the ability of the system to meet demand), the impact of the specific
tasks delegated would be limited.
ENTSO-E could be affected as well as it has to identify the cross-border scenarios and
improved the seasonal outlooks with more robust regional analysis. Given the possibility
for ENTSO-E to delegate certain tasks to the ROCs, the national TSOs as members of the
ROCs could be also affected. However, the impact would remain limited given the current
experience of TSOs on risk analysis and the existing cooperation among the TSOs.
Impact on business and public authorities
The assessment of this option shows a limited increase in administrative impact, although
it would be to some extent higher than Option 1, given that national authorities would be
required to pre-agree part of their risk preparedness plans in a regional context.
However, existing experiences show that a more regional approach to risk assessment and
risk preparedness is technically and legally feasible. Further, since the regional parts of the
plans would in practice be prepared by regional co-ordination centres between TSOs, the
overall impact on Member States' administrations in terms of 'extra burdens' would be
limited, and be clearly offset by the advantages such co-operation would bring in
practice.
40
In addition, more regional cooperation would also allow Member States to create
synergies, to learn from each other, and jointly develop best practices. This should,
overtime, lead to a reduction in administrative impacts.
Finally, European actors such as the Commission and ENTSO-E would provide guidance
and facilitate the process of risk preparation and management. This would also help reduce
impacts on Member States.
It should be noted, that under Option 2 (as is the case for Option 1) no new body or new
reporting obligation is being created, and that existing obligations are being streamlined.
Thus, the Electricity Coordination Group is an existing body meeting regularly, for the
future it is foreseen to make this group more effective by giving it concrete tasks. Further,
national reporting obligations would be reduced (e.g. repealing the obligation of Article 4
40
The Nordic TSOs, regulators and energy authorities cooperate through
NordBER,
the Nordic
Contingency and Crisis Management Forum. This includes information exchange and joint working
groups and contingency planning for the overall Nordic power sector as a supplement to the national
emergency work and TSO cooperation (www.nordber.org).
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of Electricity Directive) and EU-level reporting would take place within the context of
existing reports and existing reporting obligations (e.g. ACER annual report Monitoring
the Internal Electricity and Natural Gas Markets).
Option 3 (Full harmonisation and full decision-making at regional level)
Contribution to the policy objectives
The measures of this Option pursue the maximum level of harmonisation at EU level with
the clear aim to increase the level of preparedness ahead of a crisis and the mitigation of
the impact in the case of an unexpected event occurs.
The starting point for this option is the preparation of
risk preparedness plans at regional
level.
Even though the regional plans would ensure full coherence of actions ahead and in
particular in a crisis, it would be difficult that all national specificities could be addressed
through regional plans.
The creation of a new EU agency dedicated to cybersecurity in the energy sector would
ensure full harmonisation on risk preparedness, communication and coordination across
Europe. Additionally, the agency would facility a quick and coordinated cross-border
reaction on cyber-incidents.
Economic Impacts
The regional coordination through the regional plans would have a positive impact in term
of cost as the number of plans would be necessary less than twenty-eight plans and limited
to the number of regions. In addition, the coordination at European level would decrease
slightly the loss of load level compared to the regional coordination (EENS 0,01%
compared to 0,02%).
On the contrary, on cybersecurity, the creation of a dedicated agency at EU level would
have important economic implications as this agency would be a new body that does not
exist yet and which is also not foreseen in the NIS Directive. The costs of creating this new
agency are not only limited to the creation of a new agency itself, but the costs would also
have to include the roll-out of a whole security infrastructure. For example, the estimated
costs of putting in place the necessary security infrastructure and related services to
establish a comparable national body - cross-sectorial governmental Computer Emergency
Response Team (CERT) with the similar duties and responsibilities at national level as the
planned pan-European sector-specific agency - would be approximately 2.5 million EUR
41
per national body. This means that the costs for the security infrastructure would be
manifold for a pan-European body. In terms of human resources, for the proper functioning
of the new agency with minimum scope and tasks at EU level, it is estimated a staff of 168
full time equivalents (considering 6 full time equivalents per Member State sent to the EU
agency). The representation from all Member States in the agency is essential in order to
41
SWD(2013) 32 final.
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ensure trust and confidence on the institution. However, the availability of network and
information security experts who are also well-versed in the energy sector is limited.
Who should be affected and how
The obligation of regional plans would have important implications for the competent
authorities as the coordination and agreement of common issues (e.g. load shedding plan,
harmonised definition of protected customers) would be a lengthy and complex process.
On cybersecurity, the creation of the new agency at EU level would mobilize highly
qualified human resources with skills in both energy and information and communication
technologies (ICT). This could have a potential impact on national administrations and
energy companies as long as some of the experts in the field could be recruited by the new
institution. However, the impact would be limited as the representation for all Member
States should be guaranteed. Therefore, a small number of experts (around 6) per country
could be recruited.
Impact on business and public authorities
Overall Option 3 would imply significantly administrative impact in the preparation of the
regional plans. It would require important efforts to gather information related to national
and regional circumstances and contribute to the joint task of assessing the risks and
identifying the measures to be included in the plans. In any case, it would seem difficult to
coordinate within a region the national specificities and risks originate mostly in one
Member State.
The creation of a new agency on cybersecurity would imply significant administrative
impacts in the preparation and set-up of the agency, as well as in the communication
structure with already existing cross-sectorial bodies of Member States (CERTs/CSIRTs).
Conclusion
From the point of view of impacts, particularly costs and administrative impact, Option 1
could in principle appear as preferred option. However, the performance in terms of
effectiveness and efficiency is limited compared to Option 2 and 3. Additionally, impacts
associated with Option 3 are neither proportionate nor fully justified by the effectiveness
of the solutions, which makes Option 3 perform poorly in terms of efficiency compared to
Option 2.
Overall, the more harmonized approach to security of supply through minimum rules
pursued by Option 1 would not solve all the problems identified, in particular, the
uncoordinated planning and preparation ahead of a crisis. As regards Option 1, the main
drawback of this approach is that each Member State would be drafting and adoption the
national risk preparedness plans under its own responsibility. Given the urgency to enhance
the level of protection against cyber threats and vulnerabilities, it must be concluded that
Option 1 regarding cybersecurity is not recommended, because it is not viable for reaching
the policy objectives, given that the effectiveness would depend on whether the voluntary
approach would actually deliver a sufficient level of security.
Option 2 addresses many of the shortcomings of Option 1 providing a more effective
package of solutions. In particular, the regionally coordinated plans ensure the regional
identification of risks and the consistency of the measures for prevention and managing
crisis situations. For cybersecurity this option creates a harmonised level of preparedness
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in the energy sector and ensures that all players have the same understanding of risks and
that all operators of essential services follow the same selection criteria for the energy
sector throughout Europe.
Overall, Option 3 represents a highly intrusive approach that tries to address possible risks
by resorting to a full harmonisation of principles and the prescription of concrete solutions.
The assessment of impacts in Option 3 shows that the estimated impact on cost is likely to
be high and looking at the performance in terms of effectiveness, it makes Option 3 a
disproportionate and not very efficient option.
In the light of the previous assessment, the preferred option would be Option 2. This
option is the best in terms of effectiveness and, given its economic impacts, has been
demonstrated to be the most efficient as well as consistent with other policy areas.
Subsidiarity
The necessity of EU action is based on the evidence that national approaches not only lead
to sub-optimal measures, they also make the impacts of a crisis more acute. Additionally,
the risk of a blackout is not confined to national boundaries and could directly or indirectly
affect several Member States. Therefore, national actions in terms of preparedness and
mitigation cannot only be defined nationally, given the potential impact on the level of
security of supply of a neighbouring Member State and/or on the availability of measures
to tackle scarcity situation.
The increasing interconnection of the EU electricity markets requires a coordination of
measures. In the absence of such coordination, security of supply measures (including
measures on cybersecurity) implemented at national level only are likely to jeopardize
other Member States' or the security of supply at EU level. Situations like the cold spell of
2012 showed that coordination of action and solidarity are of vital importance. An action
in one country can provoke risks of blackouts in neighbouring countries (e.g. electricity
export limitations imposed by Bulgaria in February 2012 had an impact in the electricity
and gas sectors in Greece). By contrary, coordination may offer a wider range of solutions.
So far, the potential for more efficient and less costly measures thanks to the regional
coordination has not being fully exploited, which is detrimental to EU consumers.
However, the regional approach to security of supply also requires paying special attention
to the divergences that between regions could appear. Therefore such coordinated approach
requires action at the EU level. Action at EU level could be also needed under certain
situations where the security of supply in the EU, cannot be sufficiently achieved by the
Member States alone and can therefore, by reason of the scale or efforts of the action, be
better achieved at Union level.
The EU action is framed under Article 194 of Treaty of the Functioning of the Energy
Union (TFEU) which recognizes that certain level of coordination, transparency and
cooperation of the EU Member states' policies on security of supply is necessary in order
to ensure the functioning of the energy market and the security of supply in the Union.
Stakeholders' Opinions
The results of the
Public Consultation on Risk Preparedness in the area of Security of
Electricity Supply
showed that the majority of respondents (companies, associations and
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Governments) take the view that the current legal framework (the SoS Directive) is not
sufficient to address the interdependencies of an integrated European electricity market.
Assessments and Plans
A majority of stakeholders is in favour of requiring Member States to draw up risk
preparedness plans (see as example the answers from the Dutch and Latvian Governments,
GEODE, CEDEC, EDF UK, TenneT, Eurelectric and Europex).
Stakeholders also see a need for regional coordination of the assessment and preparation
for rare/extreme risks (see for example the anwers of the Estonian, Finish, French, Dutch,
Swedish Governments as well as ENTSO-E and Eurelectric). However, there is no
agreement on how to 'define' regions for planning and cooperation. Most stakeholders
suggest to use existing (voluntary) systems for regional cooperation as a staring point (e.g.
the Finish Government) and emphasize the role of the existing RSCs (e.g. the Czech
Government). Also the European Parliament
42
takes the view that it makes sense to step
up cooperation within and between regions under the coordination of ACER and with
cooperation of ENTSO-E, particularly as regards evaluating cross-border impacts.
Stakeholders further make the case for a common methodology for assessing risks to
ensure comparability of results (e.g. EDF). This could be achieved through common high-
level templates (e.g. answers from the Finish, Dutch, Norwegian Governments and the
German Association of Local Utilities). There is general acknowledgement of the
importance of preventing risks related to cyber-attacks.
Many stakeholders stress the need for a definition/clarification on roles and responsibilities
as well as operational procedures to be followed (e.g. who to contact in times of crisis).
Stakeholders see the added value of designating one 'competent authority' per Member
States, however there is no agreement on who this should be. Some argue that the choice
should be left with the Member States (see for example the answers from the Norwegian
Government or the German Association of Local Utilities) while others prefer a strong
mandate of the TSOs (e.g. TenneT).
Crisis management
Stakeholders, in particular from the industry also request more transparency to reduce the
scope for measures that unnecessarily distort markets. A majority of stakeholders sees a
need for clear provisions on the suspension of market activities, "protected customers" and
cost compensation (e.g. EDF).
Even though stakeholders point out that the draft Network Codes and current practice
should be taken into account, they see a need for political discussion on regional level and
the definition of clear principles for crisis management as e.g. curtailment in simultaneous
42
See:
Towards a New Energy Market Design
(June 2016), Werner Langen, European Parliament,
paragraph 68.
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scarcity situations requires political decision (e.g. ENTSO-E
43
). The need to develop a
more common approach to managing crisis situations within the EU while taking into
account the existing regional solutions is also seen by the Dutch Presidency of the
European Council
44
and the Florence Forum
45
.
Monitoring
In order to ensure adequate oversight, most stakeholders are in favour of a system of peer
reviews to be conducted in a regional context or in the frame of the Electricity Coordination
Group which could provide the interlinkage between technical and political/economical
aspects. Monitoring could be further enhanced through more common and transparent
approach to standards. Some stakeholders wish a stronger role for ACER/ENTSO-E and a
rather facilitating role for the Commission (e.g. CEER, ENTSO-E)
43
44
45
See for example
ENTSO-E's presentation on Capacity Mechanisms (TOP 2.4)
from the Florence Forum
in June 2016, ENTSO-E (available:
https://ec.europa.eu/energy/en/events/meeting-european-electricity-
regulatory-forum-florence).
See
Note to the Permanent Representatives Committee/Council: Messages from the Presidency on
electricity market design and regional cooperation,
paragraph 7.
See
Conclusions from Florence Forum,
March 2016, paragraph 10.
336
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7. D
ETAILED MEASURES ASSESSED UNDER
P
ROBLEM
A
REA
4:
THE SLOW DEPLOYMENT
OF NEW SERVICES
,
LOW LEVELS OF SERVICE AND POOR RETAIL MARKET PERFORMANCE
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7.1. Addressing energy poverty
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Summary table
Objective: Better understanding of energy poverty and disconnection protection to all consumers
Option: 0
Option: 0+
Option 1
BAU: sharing of good practices.
BAU: sharing of good practices
Setting an EU framework to monitor energy
and increasing the efforts to
poverty.
correctly implement the
legislation.
Voluntary collaboration across
Member States to agree on scope
and measurement of energy
poverty.
Energy poverty
-
EU Observatory of Energy
-
Option 0+: EU Observatory of Energy
-
poverty (funded until 2030).
Poverty (funded until 2030).
-
Generic description of the term energy
-
poverty in the legislation. Transparency in
relation to the meaning of energy poverty
and the number of households in a situation
-
of energy poverty
-
Member States to measure energy poverty.
Better implementation of the current
provisions.
Disconnection
-
NRAs to monitor and report
-
NRAs to monitor and report figures on
-
safeguards
figures on disconnections.
disconnections.
-
-
Option 2
Setting a uniform EU framework to
monitor energy poverty, preventative
measures to avoid disconnections and
disconnection winter moratorium for
vulnerable consumers.
Option 0+: EU Observatory of Energy
Poverty (funded until 2030).
Specific definition of energy poverty
based on a share of income spent on
energy.
Member States to measure energy
poverty using required energy.
Better implementation and transparency
as in Option 1.
NRAs to monitor and report figures on
disconnections.
A minimum notification period before a
disconnection.
All customers to receive information on
the sources of support and be offered the
possibility to delay payments or
restructure their debts, prior to
disconnection.
Winter moratorium
46
of disconnections
for vulnerable consumers.
-
46
An all season moratorium may be suitable to some MS but not necessarily to all. In addition, evidence on Excess Summer Death is less developed than for Excess Winter Deaths which
makes it difficult to quantify the cost/benefits. Finally, stakeholders have noted that while in winter, heating is necessary, particularly if affected by bad health. Other cost effective solutions
can be found for heatwave (drink water; staying indoors). We are aware that in some MS the housing stock is not prepared for heatwaves and houses are overheated. However, this may be
better assessed at Member State level.
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Standardised energy poverty concept
and metric which enables monitoring of
energy poverty at EU level.
-
Equip Member States with the tools to
reduce disconnections.
Cons
-
Existing shortcomings of the legislation
-
Insufficient to address the
-
New legislative proposal necessary.
-
New legislative proposal necessary.
are not addressed: lack of clarity of the
shortcomings of the current
-
Higher administrative costs.
-
Administrative costs.
concept of energy poverty and the
legislation with regard to energy
-
-
Potential conflict with principle of
number of energy poor households
poverty and targeted protection.
subsidiarity.
persist.
-
Specific definition of energy poverty
-
Energy poverty remains a vague concept
may not be suitable for all Member
leaving space for Member States to
States.
continue inefficient practices such as
-
Safeguards against disconnection may
regulated prices.
result in higher costs for companies
-
Indirect measure that could be viewed as
which may be passed to consumers.
positive but insufficient by key
-
Safeguards against disconnection may
stakeholders.
also result in market distortions where
new suppliers avoid entering markets
where risks of disconnections are
significant and the suppliers active in
such markets raise margins for all
consumers in order to recoup losses
from unpaid bills.
-
Moratorium of disconnection may
conflict with freedom of contract.
Most suitable option(s): Option 1
is recommended as the most balanced package of measures in terms of the cost of measures and the associated benefits. Option 1 will result in a clear
framework that will allow the EU and Member States to measure and monitor the level of energy poverty across the EU. The impact assessment found that the propose disconnection
safeguards in Option 2 come at a cost. There is potential to develop these measures at the EU level. However, Member States may be better suited to design these schemes to ensure that
synergies between national social services and disconnection safeguards can be achieved. Please note that Option 1 and Option 2 also include the measures described in Option 0+.
Pros
-
-
-
Continuous knowledge exchange.
Stronger enforcement of current
-
legislation and continuous
knowledge exchange.
Clarity on the concept and measuring of
energy poverty across the EU.
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Description of the baseline
Energy has a fundamental role to ensure adequate households' standards of living. Energy
services are crucial to ensure warm homes, water and meals, lighting, refrigeration and the
operation of other appliances. European households are, however, increasingly unable to
meet their basic energy needs due to energy prices increasing faster than household income
and inefficient housing and household appliances leading to higher energy bills
47
.
An affordable connection to energy supply facilitates modern daily life by providing
essential services and enabling social interactions. Lack of access to an energy supply
impinges on the rights of energy consumers and negatively affects living conditions and
health
48
. This is well recognised in legislation
49
and reflected in the overall objectives of
the European Internal Energy Market (IEM).
Under the existing provisions in the Electricity and Gas Directive, Member States have to
address energy poverty where identified. The evaluation of the provisions found important
shortcomings stemming from the opaqueness of the term
energy poverty,
particularly in
relation to consumer vulnerability, and the lack of transparency with regards to the number
of households suffering from energy poverty across Member States.
The aim of this Section is to describe the two policy areas impacted by the proposed
options: energy poverty and disconnection safeguards.
Energy poverty: drivers of energy poverty and number of households in energy poverty
Energy poverty is often defined as the situation in which individuals or households are not
able to adequately heat their homes or meet other required energy services at an affordable
cost
50
.
Energy poverty is usually discussed in the context of general poverty. Yet, households face
widely varying costs to achieve the same level of warmth for reasons other than income,
such as, energy efficiency of the dwelling or household's ability to interact with the market.
In addition, an adequate level of energy is essential for citizens to function and actively
participate in society
51
.
47
48
49
50
51
Energy poverty and vulnerable consumers in the energy sector across the EU: analysis of policies and
measures.
(2015). Insight_E.
COM (2015)
"A framework Strategy for a Resilient Energy Union with a Forward-looking Climate
Change Policy"
Directive 2009/72/EC Point 45 states that “Member States should ensure that household
customers...enjoy the right to be supplied with electricity of a specified quality at clearly comparable,
transparent and reasonable prices.”
Energy
poverty
and vulnerable consumers in the energy sector across the EU: analysis of policies and
measures.
(2015). Insight_E.
Fuel Poverty: The problem and its measurement.
2001. John Hills. Available at:
http://sticerd.lse.ac.uk/dps/case/cr/CASEreport69.pdf.
Working Paper on Energy Poverty.
2016.
Vulnerable Consumer Working Group. The Vulnerable Consumer Working Group (VCWG) provides
advice to the European Commission on the topics of consumer vulnerability and energy poverty.
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Insight_E identifies high energy bills, low income and poor energy efficiency as the main
drivers of energy poverty
52
.
Figure 1: Drivers of energy poverty
HIGH
ENERGY
BILLS
Indicators:
-
Energy consumption
(type)*
-
Type
of
heating
system & share of
central heating*
Indicators:
-
Income
-
Energy prices*
-
Energy
consumption
(level)
ENERGY
AFFORDABILITY
ENERGY
USE
PATTERNS
ENERGY
POVERTY
LOW
INCOME
POOR
ENERGY
EFFICIENCY
HOUSING
PATTERNS
Indicators:
-
Tenure system*
-
Housing
characteristics*
* :
exogenous
Source: Insight_E (2015)
Looking at the drivers, it is likely that energy poverty impacts low-income households with
higher energy needs. Eurostat publishes the number of households who felt unable to keep
warm during winter. This indicator is widely used in the literature as a proxy indicator of
energy poverty. In 2014, around 10% of the EU population was not able to keep their home
adequately warm
53
(see Figure below).
52
53
Industry, consumer associations, regulators and Member States representatives are members of the
group.
Energy poverty and vulnerable consumers in the energy sector across the EU: analysis of policies and
measures.
(2015). Insight_E.
The indicator is measured as part of the Eurostat Survey on Income and Living Conditions (EU-SILC).
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Figure 2: Percentage of all households and households in poverty that consider they
are unable to keep warm
Source: Eurostat
SILC indicators (Inability to keep home adequately warm - Code: ilc_mdes01)
Evidence suggests that energy poverty is increasing in Europe. In recent years, energy
prices have risen faster than household disposable income
54
, which has been particularly
problematic for low-income households, who depending on their individual circumstances,
may have had to under-heat their homes, reduce consumption on other essential goods and
services or get into debt to meet their energy needs
55
.
Data from Member States on household energy consumption shows that the poorest
households have seen their share of disposable income spent on gas, electricity and other
fuels used for domestic use
56
increased more than middle-income households. The Figure
below presents the EU share of household expenditure on domestic energy between 2000
and 2014.
54
55
56
Source: Eurostat (Electricity prices for domestic consumers; Gas prices for domestic consumers;
disposable income of households per capita; period 2010
2014).
Working Paper on Energy Poverty.
2016. Vulnerable Consumer Working Group.
Domestic use refers to heating, lighting and powering appliances.
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Figure 3: EU average - share of households' budget spent on domestic energy services
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
9%
6%
5%
6%
Poorest households
Middle income households
Source: National Statistical Authorities of EU Member States; VCWG (2016)
In 2014, expenditure on energy services for the poorest households in the EU increased by
50%, reaching almost 9% of their total budget.
Preliminary analysis for the upcoming Energy Price and Cost Report indicates that in most
of the EU Member States the share of energy in total expenditure grew faster in the lowest
income quintile than in the third quintile, implying that increasing energy costs impacted
poorer households more significantly than those on middle income. For instance, the EU
average spending for households in the lowest income quintile on electricity and gas
increased by 24% in real terms. As a comparison, middle income households saw their
domestic energy expenditure increase by 18% in real terms.
The lack of affordability of domestic energy services, which can be understood as a proxy
for energy poverty, can have serious consequences on households' well-being.
The Marmot Review highlighted the strong relationship between colder homes, Excess
Winter Deaths (EWDs) and increased incidence of other health problems. The review
found that 22% of EWDs in the UK could be attributed to cold housing. Healy
57
found that
countries with the poorest housing (Portugal, Greece, Ireland, the UK) show the highest
excess winter mortality.
The Figure below presents EWD
58
for the EU Member States in 2014. The Figure shows
that deaths in winter are significantly higher than during the rest of the year, particular for
some Member States.
57
58
Excess winter mortality in Europe: a cross country analysis identifying key risk factors.
(2003). Healy.
Excess Winter Deaths
=
winter
death (December
March)- 0.5Non-winter deaths (August
November, April
July�½ / (average of non-winter deaths)
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Figure 4: Excess Winter Deaths
2014
Source: EU Buildings Database (BPIE)
In addition to the negative impacts on health, energy poverty can result in high level of
indebtedness or even disconnection. At the EU level, energy poverty risks excluding some
consumers from the energy transition, preventing them from enjoying the benefits of the
IEM.
The issue of energy poverty or lack of affordability of domestic energy services is likely
to remain relevant. In a scenario where energy prices follow GDP growth while wages,
especially for low-income workers remain flat, the gap between household income and
energy prices will widen and energy poverty is likely to increase. There are two main
channels through which wages for low-skilled workers may be supressed:
-
Automation: routine tasks which are usually carried out by low-skilled workers can
be automated as technology allows. As the cost of technology falls, low-skilled
wages may be supressed to compete with capital
59
.
Skill-bias innovation: modern economics rely on a more educated workforce. As
demand for skilled individuals increases, it decreases the demand for unskilled
workers and their wages
60
-
These effects combined are likely to supress wages, making affordability of energy
services more difficult for low-income households and, as a result, increase the number of
households in energy poverty.
Disconnection safeguards: protecting energy poor and vulnerable consumers
59
60
Unemployment and Innovation,
No 20670, NBER Working Papers. 2014. Stiglitz.
"Skills,
Tasks and Technologies: Implications for employment and earnings",
No 16082, NBER
Working Papers. 2010. Acemoglu and Autor.
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The evaluation identified that given the rising levels of energy poverty. Member States
may have been discouraged to phase out regulated prices. Regulated prices, however, have
negative implications on consumers, hindering competition and innovation
61
.
The evaluation recommended that any future legislative change could look into reinforcing
EU assistance on energy poverty proposing appropriate tools for addressing energy poverty
which support Member States' efforts to phase-out regulated prices
62
. Article 3 of the
Electricity Directive
63
and Gas Directive
64
markets reinforces the role of consumer
protection and the additional need for protection of vulnerable consumers through
particular measures, referring to the prohibition of electricity (and gas) in critical times as
one option.
Disconnections in electricity or gas supply to residential households typically arise out of
non-payment and can become especially problematic for households struggling to keep up
with their bills. In addition, there may be a disproportionately negative impact on
households with children or elderly residents in terms of health, education, etc.
In what follows, we provide an overview of the number of households being disconnected
and the main disconnection safeguards applied by Member States.
Overview of electricity and gas disconnections in the EU
Disconnection rates vary significantly across Member States. Figure 5 indicates that the
higher the disconnection level, as can be expected, the higher the arrears on utility bills
65
,
which increases when the income falls below 60% of the median income. Similar
disconnection levels (Malta, Denmark, France, and Austria) exhibit similar levels of
arrears on utility bills. However, there are some exceptions: UK, Lithuania, Belgium and
Luxembourg have relatively high arrears and low disconnection rates.
61
62
63
64
65
A detail description of the negative impacts of regulated prices and the Member States currently applying
some kind of price regulation mechanism is included in Annex on Price Regulation
All energy consumers explicitly have a number of rights including a right to an electricity connection,
choice of and ability to switch supplier, clear contract information and right of withdrawal, and accurate
information and billing on energy consumption, vulnerable customers should receive specific protection
measures to ensure adequate protection.
“Member
States shall take appropriate measures to protect final customers, and shall, in particular,
ensure that there are adequate safeguards to protect vulnerable customers. In this context, each Member
State shall define the concept of vulnerable customers which may refer to energy poverty and, inter alia,
to the prohibition of disconnection of electricity to such customers in critical times. Member States shall
ensure that rights and obligations linked to vulnerable customers are applied. In particular, they shall
take measures to protect final customers in remote areas.”
Directive 2009/73/EC of the European Parliament and the Council of 13 July 2009 concerning common
rules for the internal market in natural gas and repealing Directive 2003/55/EC (OJ L 211, 14.8.2009, p.
94).
Eurostat EU-SILC 2014
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Figure 5: Share of customers with electricity disconnections, gas disconnection, and
share of population in arrears on utility bills
Source: Insight_E (Forthcoming); Data: Eurostat; CEER National Indicators Database 2015
The rate of electricity disconnections, where the data is available, is highest across the
southern European Member States that have arguably been hardest hit by recessionary
effects of the recent economic downturn
66
. In fact, in those Member States, households
exhibit the highest shares of debt on utility bills.
In terms of gas disconnections, where the data was reported, Portugal, Italy, Greece and
Hungary exhibit the highest levels of gas disconnections followed by France, Spain,
Poland, Austria, Germany and Slovakia.
Disconnection safeguards: a classification of measures
Disconnection safeguards represent one of the measures that Member States implement to
protect energy consumers. These measures ensure consumers have a continuous supply of
energy. Such safeguards can be applied to the entire customer base or to specific groups,
such as vulnerable consumers.
Disconnection safeguards can be grouped into four key measures, which can take the form
of direct protection measures, such as disconnection prohibitions, and / or other
complementary associated measures such as debt management, and customer engagement.
See Table below
67
.
66
67
"Measures
to protect vulnerable consumers in the energy sector: an assessment of disconnection
safeguards, social tariffs and financial transfers".
Forthcoming publication. Insight_E.
"Measures
to protect vulnerable consumers in the energy sector: an assessment of disconnection
safeguards, social tariffs and financial transfers".
Forthcoming publication. Insight_E.
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Table 1: Summary of disconnection safeguards
Description
Moratorium on disconnecting the energy supply (either electricity, gas or both) for all
customers, a specific target group or time period (e.g., Winter)
Debt management can include a negotiated a payment plan, delayed payment
responsibility or a financial grant to assist with costs.
Customer engagement typically involves communication between the energy supplier
Customer
and the customer, where either the customer contacts the energy supplier for assistance
engagement
or the energy supplier is required to engage with the customer before commencing the
actual disconnection.
Source: Insight_E (Forthcoming)
Measure
Disconnection
prohibition
Debt management
Member States use a combination of these measures to prevent consumers from
disconnection. A summary of those is reported in Table 2.
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Table 2: Disconnection protection safeguards by Member States
Measures
Focus
All consumers
AT
BE
BG
CY
CZ
DE
DK
EE
ES
FI
FR
GR
HR
HU
IE
IT
LT
LV
LU
MT
NL
PL
EG
PT
RO
SE
SK
SI
UK
year-round measures
Disconnection prohibition
Vulnerable consumers/low
income/socio-demographic
Consumers with (or at risk
of) medical conditions
Services (such as public
lighting, hospitals and
transport)
Unemployed consumers
Under bill dispute
settlement
E
E
EG
EG
EG
EG
EG
EG
E
E
EG
E
EG
EG
EG
EG
E
EG
E
E
EG
EG
EG
E
E
EG
EG
EG
EG
E
Seasonal measures
(Winter or certain days
of the week)
All consumers
EG
EG
E
Vulnerable consumers/low
income/socio-demographic
Consumers with (or at risk
of) medical conditions
LV
Debt management
LV
Prepaid meters
LV
Customer engagement
Elec Discon per 1000
customers
Prepaid meters per 1000
customers
LV
LV
L
LV
L
LV
LV
L
L
LV
LV
EG
EG
EG
EG
EG
EG
EG
E
EG
EG
L
V
EG
L
EG
L
L
L
L
L
L
L
L
L
Complementary
measures
L
L
L
L
L
L
L
LV
LV
L
L
L
LV
L
V
Statistics
9.1
1.5
55.1
7.5
10.0
23.0
10.0
32.6
6.3
3.6
40.0
1.8
3.0
10.0
20.0
56.1
14.0
0.0
1.4
46.0
0.0
0.4
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
15.1
0.0
0.0
12.0
E
electricity
G
gas
L
legislated
V
voluntary
Source: CEER National Indicators Database 2015, INSIGHT_E Country Reports 2015
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Disconnection safeguards - disconnection prohibition
Disconnection prohibitions are non-financial measures where moratoriums on
disconnections are declared, often for specific customer groups or for specific time periods.
These include measures that forbid disconnection to all customers or a target group, or
measures that allow disconnection only after certain stringent steps have been taken.
Prohibition can apply at particular times of the year (e.g., Winter), target particular socio-
demographic characteristics (e.g., either defined through the official definition for
“vulnerable consumer” or target households with elderly or children), where this would
have a negative impact on health, to customers in a legitimate complaint process, or to a
situation where a country is going through a national economic crisis
68
.
Nineteen states have either year-round or seasonal disconnection prohibition.
Disconnection prohibition is legislated exclusively all year-round for specific customer
groups in seven Member States (Cyprus, Denmark, Spain, Luxembourg, Poland, Portugal,
Sweden), two Member States offer seasonal disconnection prohibition only (Belgium, UK)
and eleven Member States offer both year-round and seasonal disconnection prohibition
to varying customer groups (Estonia, Finland, France, Greece, Hungary, Ireland, Italy,
Lithuania, Netherlands, Romania and Slovenia).
Only four Member States provide blanket coverage for consumers in relation to
disconnection protection, but only on a seasonal basis (Belgium, Estonia, Italy, and the
Netherlands). Other widely protected consumers are those with (or at risk of) medical
conditions (in ten Member States - Cyprus, Estonia, Spain, Finland, Greece, Hungary,
Ireland, the Netherlands, Sweden, Slovenia), and customers currently under dispute
settlements (in six Member States - Italy, Luxembourg, the Netherlands, Poland, Portugal,
Sweden).
Disconnection safeguards - debt management
Debt management can include non-financial arrangements such as counselling or
assistance with budgeting as well as financial arrangements including a negotiated
payment plan, delayed payment responsibility or a financial grant to assist with costs. In
some instances, this is a measure that regulators or energy suppliers are required to offer,
whereas in other Member States, this can be offered either voluntarily through a
government agency, an energy supplier, or other consultation bodies.
The use of debt management measures is legislated in 17 Member States (Austria,
Belgium, Cyprus, Czech Republic, Germany, Spain, France, Hungary, Ireland, Italy,
Luxembourg, Malta, the Netherlands, Poland, Sweden Slovenia, and UK), while four
Member States (Austria, Belgium, Germany, Spain) also implement additional voluntary
measures, whereas Greece implements only voluntary measures for debt management.
Disconnection safeguards - customer engagement
Customer engagement typically involves communication between the energy supplier and
the customer, where either the customer contacts the energy supplier for assistance or the
68
"Measures
to protect vulnerable consumers in the energy sector: an assessment of disconnection
safeguards, social tariffs and financial transfers".
Forthcoming publication. Insight_E.
352
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energy supplier is required to engage with the customer before commencing the actual
disconnection.
Energy consumers have a right to clear and transparent billing information and a single
point of contact, whose role is to ensure that consumers receive all the information that
they need regarding their rights.
Some form of customer engagement is implemented in 15 Member States (Austria,
Belgium, Germany, Denmark, Spain, France, Ireland, Italy, Luxembourg, Poland,
Portugal, Romania, Sweden, Slovakia, and UK). Limited information is available on how
the various energy companies choose to engage with customers, but a review of the
regulators showed that the legislation usually ensures that consumers are notified about
their bills or an impending disconnection usually in the form of a letter
69
.
Finally, 22 Member States combine the use of debt management and some form of
customer engagement including: Austria, Belgium, Cyprus, Czech Republic, Germany,
Denmark, Spain, France, Greece, Hungary, Ireland, Italy, Luxembourg, Malta, the
Netherlands, Poland, Portugal, Romania, Sweden, Slovakia, Slovenia and UK.
On the other hand six Member States do not have debt management or customer
engagement safeguards either in their legislation or voluntarily and include Bulgaria,
Estonia, Finland, Croatia, Lithuania and Latvia.
Disconnection notification periods and procedures for disconnection and reconnection
across Member States
Even if the time frames differ among Member States, the practice for disconnecting and
reconnecting customers to electricity and gas provision is similar. The general practice in
most Member States consists of at least one (or more) written notices of unpaid bills,
followed by disconnection. Both the days between the unpaid bill and the final notice of
disconnection, and between the latter and the disconnection are usually legislated
70
.
The number of days before disconnection varies among Member States (Figure 6). The
disconnection period is the highest in Belgium with a lengthy disconnection process
71
,
followed by the UK. Both Belgium and the UK have the lowest share of customers
disconnected from electricity. The explanation for such low disconnection levels might be
in the fact that those two states have the highest requirements in terms of days before
disconnection is legally possible, but could also be linked to the fairly high share of prepaid
meters and strong use of complementary measures. Denmark does not have a specific
69
70
71
CEER National Indicators Database 2015
"Measures to protect vulnerable consumers in the energy sector: an assessment of disconnection
safeguards, social tariffs and financial transfers".
Forthcoming publication. Insight_E.
Upon defaulting on payments, a customer is given at least 30 day notice of cancellation of the contract,
followed by a 60 day grace period to find another supplier. If the customer defaults on payments with
the second supplier, this process is repeated. Thereafter, the supplier can apply to the local council for
permission to disconnect the customer, especially if they refuse the installation of a prepaid meter.
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number of days legislated, but rather specifies that at least two notifications must be sent
out
72
.
Certain Member States (e.g., Sweden and Luxembourg) contact the social services in
between the final notice period and the disconnection of a consumer. Other Member States
have longer disconnection times where a smart meter is in place (e.g., in Italy before the
disconnection takes place, the maximum power supply is reduced to 15% for 15 days
73
).
Figure 6: Working days before electricity disconnection, in ascending order for
notification period (2014)
Source: Insight_E (Forthcoming)
Reconnection happens in most Member States only upon receipt of payment of the entire
outstanding debt to the service provider or when an alternative repayment plan has been
negotiated. In some Member States, the customer is reconnected if the unpaid bill is
disputed. In those cases, the service provider cannot disconnect the customer again until
the dispute is settled.
72
73
"Measures to protect vulnerable consumers in the energy sector: an assessment of disconnection
safeguards, social tariffs and financial transfers".
Forthcoming publication. Insight_E.
"Measures to protect vulnerable consumers in the energy sector: an assessment of disconnection
safeguards, social tariffs and financial transfers".
Forthcoming publication. Insight_E.
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Deficiencies of the current legislation
This Section summarises Section 7.1.1 and Annex III of the Commission evaluation of the
provisions on consumer vulnerability and energy poverty in the 2009 Electricity and Gas
Directives. The full evaluation is included in a separate document.
The legislators' original objectives of these provisions were:
1. To ensure protection of vulnerable consumers by having Member States define the
concept of vulnerable consumers and implement measures to protect them.
2. To mitigate the problem of energy poverty by having Member States address
energy poverty, where identified, as an issue.
These provisions were put in place to facilitate the decision by Member States to proceed
with electricity and gas market liberalisation, as it was recognised by the legislators that
actions to protect vulnerable consumers were needed in the context of liberalising the
European energy market.
The evaluation assesses the legislation against five criteria. The Table below provides a
summary of this assessment.
Table 3: Evaluation of the provisions on consumer vulnerability and energy poverty
Criterion
Effectiveness
Legislation
meets
criterion
Partially
Assessment
Achievements
Member
States
define
vulnerable consumer and
adopt measures to protect
them.
Shortcomings
Uneven protection of vulnerable
consumers.
Lack of data on the scale and drivers of
energy poverty
Growing energy poverty levels across
the EU
Lack of assistance by Member States
to address energy poverty.
NRA lack data to fulfil monitoring
role.
Some Member States still quote energy
poverty as a reason for maintaining
price regulation and not going ahead
with full energy market liberalisation
Efficiency
Relevance
Completely
Completely
Coherence
Partially
Low costs compared with
potential benefits.
Consumer vulnerability will
remain relevant as some
drivers of vulnerability are
permanent.
No inconsistencies with or
elements working against
objectives of the provisions.
Energy poverty likely to grow in the
future if no policy adopted.
Lack of an agreed description of the
term energy poverty and caveats in the
obligations stand in contrast to the call
for action in the Directive.
Member States have taken
action as a result of EU
intervention.
Source: Evaluation of the provisions on consumer vulnerability and energy poverty
EU-added
value
Completely
The evaluation concluded that the provisions in the Electricity and Gas Directive related
to consumer vulnerability and energy poverty were mostly
effective.
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EU action successfully encouraged Member States to define the concept of vulnerable
consumers in their legislation and to adopt measures to protect vulnerable consumers. The
provisions have also brought the issue of energy poverty to the attention of Member States.
However, the evaluation also identified certain shortcomings. With respect to energy
poverty, the evaluation shows that even though most Member States have correctly
implemented the provisions on consumer vulnerability, the incidence of energy poverty
has continued to rise across the EU. In addition, even though Member States have to
address energy poverty where identified, the Electricity and Gas Directives do not include
any reference to the meaning of energy poverty nor do they explain in which circumstances
energy poverty can be identified as an issue.
At the same time current legislation does not enable comparable data on energy poverty to
be sourced from Member States to deliver a full picture of energy poverty in the EU, in
terms of scale, drivers and potential future evolution. In addition, while the provisions on
vulnerable consumers and energy poverty were put in place to facilitate the decision by
Member States to proceed with electricity and gas market liberalisation, 17 Member States
still maintain electricity and/or gas price regulation, often quoting increase in energy
poverty as a risk associated with deregulating energy prices.
While research indicates that energy poverty and consumer vulnerability are two distinct
issues
74
, the provisions in the Electricity and Gas Directives refer to energy poverty as a
type of consumer vulnerability. The evaluation argues that this may have led to an incorrect
expectation that a single set of policy tools could address both problems simultaneously.
The evaluation also identifies shortcomings in the effectiveness of the provisions referring
to the role of National Regulatory Authorities (NRAs) in monitoring electricity and gas
disconnections.
The evaluation found that the provisions were
efficient
and
relevant.
While efficiency was
difficult to quantify due to lack of data, it is likely that the benefits derived from defining
consumer vulnerability at the Member State level and implementing measures to protect
them outweighed the costs of setting up such policies. In terms of relevance, evidence
suggests that the problem of energy poverty is growing and it is likely to continue without
policy intervention. European Commission
75
research suggests that consumer vulnerability
in the energy market will continue to be a relevant policy issue in the future as a substantial
share of those characterised as vulnerable consumers have permanent characteristics that
make them vulnerable.
Regarding
coherence,
there were no inconsistencies or elements in the legislation working
against the objectives of the provisions on vulnerable and energy poor consumers.
Nevertheless the misidentification of consumer vulnerability and energy poverty as the
same issue in the Electricity and Gas Directives means that the expected combined impacts
74
75
"Energy poverty and vulnerable consumers in the energy sector across the EU: analysis of policies and
measures".
(2015). Insight_E.
European
Commission
(2016).
Available
at:
http://ec.europa.eu/consumers/consumer_evidence/market_studies/vulnerability/index_en.htm-
summit/2015/files/ener_le_vulnerability_study_european_consumer_summit_2015_en.pdf.
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are not occurring and energy poverty grows while Member States take action to protect
vulnerable consumers.
In relation to
EU-added value,
while it is true that some Member States had been already
protecting their vulnerable energy consumers prior to EU intervention, others have been
obliged to take action as a result of EU intervention.
Overall,
the evaluation concluded that the provisions have mostly met their objectives.
However, the legislation did not give sufficient attention to the issue of energy poverty. As
the Electricity and Gas Directives define energy poverty as a type of consumer
vulnerability, the effectiveness of the provisions was reduced. This categorisation leads to
a simplistic expectation that a single set of policy measures from Member States would
automatically address both problems simultaneously. However, evidence suggests that
energy poverty has been rising over the years, despite the protection available for
vulnerable consumers. In parallel, Member States have maintained regulated prices, which
had a negative effect on the internal energy market.
The Options presented in this impact assessment attempt to address this situation.
Presentation of the options.
This Section presents the policy options in detail. Each Option includes a table with the
description of the specific measures. An assessment of the costs and benefits for each of
the measures is presented in the following Section.
Business as Usual (BaU): sharing of good practices.
The BaU includes measures that are currently implemented or in the pipeline. These
measures will be undertaken without legislative change and aim at improving knowledge-
exchange.
Table 4: BaU
Energy
poverty
Measures
Promoting
good practices
Pros
Continuous
Knowledge
exchange.
Cons
Existing shortcomings of the legislation are not
addressed: lack of clarity of the concept of energy
poverty and the number of energy poor households
persist.
Energy poverty remains a vague concept leaving
space for Member States to continue inefficient
practices such as regulated prices.
Indirect measure that could be viewed as positive but
insufficient by key stakeholders.
The Commission has already secured funding to set up an Observatory of Energy Poverty.
However, the BaU scenario assumes the funding for the Observatory will not be extended
beyond 2019 and therefore no additional cost will be incurred in the appraised period.
The Commission will continue promoting the exchange of good practices which are likely
to contribute to enhance transparency and knowledge dissemination. However, this option
may be insufficient to address the partial effectiveness of the current provisions as
identified in the evaluation as the current legislation does not require Member States to
measure energy poverty and hence to address it.
Option 0+: sharing of good practices and monitoring the correct implementation of the
legislation.
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There is scope to address some of the problems identified in the evaluation without new
legislation. This option seeks non-legislative measures such as voluntary collaboration
across Member States as a tool to address these problems. With the help of the EU
Observatory of Energy poverty, this option includes voluntary collaboration across
Member States to agree on the scope of energy poverty as well as the way of measuring.
Measures to ensure the monitoring of disconnections across Member States are also
included.
The evaluation identified that National Regulatory Authorities (NRAs) have not reported
to ACER data on the number of disconnections. As described in the evaluation, ACER
reported that only 16 NRAs were able to report data on disconnections. This is despite the
legal obligation stated in the Electricity Directive Article 37
Duties and powers of the
regulatory authority
under paragraphs (j)
76
and (e)
77
.
In addition, the Observatory delivers the exchange of good practices and better statistical
understanding of the drivers of energy poverty. Option 0+ assumes the Observatory
continues its operation at least until 2030 (the end of the assessment period for the Impact
Assessment).
Table 5: Option 0+
Energy
poverty
Measures
EU Observatory of Energy
Poverty.
NRAs to monitor and report
data on disconnections.
Voluntary collaboration across
Member States to agree on
scope and measurement of
energy poverty.
Pros
Stronger enforcement of
current legislation and
continuous knowledge
exchange.
Cons
Insufficient to address the
shortcomings of the current
legislation with regard to energy
poverty and targeted protection.
This option does not address all the shortcomings identified in the evaluation, such as the
need to measure energy poverty and the lack of adequate tools to protect vulnerable and
energy poor consumers. Furthermore, voluntary collaboration may not be a suitable
measure. The Commission already undertakes actions involving Member States, such as
the publication of guidelines and working paper in the context of the Vulnerable Consumer
Working Group, with have had a limited impact on Member States. Thus, legislative
action, beyond Option0+, is required.
Option 1: Setting an EU framework to monitor energy poverty.
76
77
Monitoring the level and effectiveness of market opening and competition at wholesale and retail levels,
including on electricity exchanges, prices for household customers including prepayment systems,
switching rates, disconnection rates, charges for and the execution of maintenance services, and
complaints by household customers, as well as any distortion or restriction of competition, including
providing any relevant information, and bringing any relevant cases to the relevant competition
authorities;
Reporting annually on its activity and the fulfilment of its duties to the relevant authorities of the Member
States, the Agency and the Commission. Such reports shall cover the steps taken and the results obtained
as regards each of the tasks listed in this Article;
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This option includes obligations on Member States that will need to be implemented
through new EU legislation. The measures included in this option are designed to address
the shortcomings identified in the evaluation:
- clarifying the concept of energy poverty,
- improving transparency with regard to the number of households in energy poverty.
Table 6: Option 1
Energy
-
poverty
Measures
Generic,
adaptable
-
description of the term
energy poverty in the
legislation.
Member States to measure
-
energy poverty.
-
Pros
Shared understanding of what energy
-
poverty entails while flexible enough
to cater for Member States'
-
differences.
Transparency when measuring and
monitoring energy poverty.
Synergies with the Observatory.
Cons
New legislation will
be necessary.
Administrative
impact on Member
States.
-
Option 1 includes a number of legislative changes that represent new obligations for
Member States. In what follows, we provide a detailed description of these new
obligations.
Energy poverty - a description of the term energy poverty
Option 1 adds a description of the term energy poverty in the EU legislation. The objective
of this measure is to clarify the term energy poverty.
A number of European institutions have called on the European Commission to propose
an EU-wide definition of energy poverty, calling for a common description of the term
energy poverty.
-
EESC (2011; 1)
78
:
"… energy poverty should be tackled at all tiers of government,
and that the EU should adopt a common general definition of energy poverty, which
could then be adapted by Member States".
Committee of the Regions (2014;15)
79
"…recognition of the problem at the
political level on the one hand, and to ensure legal certainty for measures to
combat energy poverty on the other; such a definition should be flexible in view of
the diverse circumstances of the Member States and their regions…”.
European Parliament (2016)
80
" Calls on the Commission to develop with
stakeholders a common definition of energy poverty which should aim at assessing
at least the following elements: material scope, difficulty for a household to gain
access to essential energy, affordability and share of total household cost, impact
-
-
78
79
80
European Economic and Social Committee (EESC) (2011) Opinion of the European Economic and
Social Committee on
‘Energy poverty in the context of liberalisation and the economic crisis’
(exploratory opinion). Official Journal of the European Union, C 44/53.
Committee of the Regions (CoR) (2014) Opinion of the Committee of the Regions -
Affordable Energy
for All.
Official Journal of the European Union, C 174/15.
European Parliament. Committee on Employment and Social Affairs. Draft report on meeting the
antipoverty target in the light of increasing household costs.
(2015/2223(INI)). Rapporteur: Tamás
Meszerics.
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-
on basic household needs such as heating, cooling, cooking, lighting and
transport".
European Parliament (2016)
81
"Calls for the development of a strong EU
framework to fight energy poverty, including a broad, common but non-
quantitative definition of energy poverty, focusing on the idea that access to
affordable energy is a basic social right"
Thomson et al
82
summarise the arguments in favour and against of an EU-wide definition
of energy poverty.
Table 7: Arguments in favour and against an EU-wide definition of energy poverty
In favour
Policy synergy. Not all Member States are
addressing this problem and those that are, act on
their own, without seeking synergies with others,
which makes it harder to identify, assess and deal
with energy poverty at the European level.
Recognition. A common EU-level definition of
energy poverty may give the problem better
visibility at the Member State level.
Against
Limited evidence. Need to compile comparable
household data on energy consumption and income
to produce reliable statistics.
Clarification. Adopting even a general description
of fuel or energy poverty at the EU-level would
help to resolve the considerable terminological
confusion that presently exists, and may pave the
way for more detailed national definitions.
Source: Thomson et al (2016)
Comparability. A shared pan-EU definition would
need to be relatively broad in order to accommodate
the diversity of contexts found at the Member State-
level, in terms of climate conditions, socioeconomic
factors, energy markets and more.
Path dependency. An incorrect definition may lead
Member States to a wrong path from which it may
be difficult to depart as a result of path dependency.
The Vulnerable Consumers Working Group (VCWG)
83
looked into several definitions
used to describe energy poverty which have been put forward by Member States, European
institutions and research projects. Most of the definitions shared common themes:
-
-
-
domestic energy services refer to services such as heating, lighting, cooking and
powering electrical appliances;
the term affordable is used to refer to households receiving adequate energy
services without getting into debt; and
the term adequate usually means the amount of energy needed to ensure basic
comfort and health.
VCWG concluded that a prescriptive definition of energy poverty for the EU28 would be
too restrictive, given the diverse realities across Member States. Yet, the group agreed that
a generic definition represents a positive step forwards to tackle the problem of energy
poverty. The VCWG argues that, if such as EU-wide definition were to be identified, it
should be simple, focus on the problem of affordability and allow sufficient flexibility to
be relevant across Member States
84
. Such a definition can refer to elements such as
81
82
83
84
European Parliament. Committee on Industry, Research and Energy. Draft report on Delivering a New
Deal for Energy Consumers.
(2015/2323(INI)). Rapporteur: Theresa Griffin.
Fuel poverty in the European Union: a concept in need of definition?
2016. Thomson et al.
Working Paper on Energy Poverty.
2016. Vulnerable Consumer Working Group.
A few Member States already have a definition of energy poverty. These definitions are presented in
Sub-Annex 1.
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households with a low-income; inability to afford; and adequate domestic energy services.
Within the generic definition Member States can adapt it to suit national circumstances
(e.g. by adopting their own numerical threshold for low income).
Energy poverty - Measuring energy poverty
Option 1 requires Member States to measure energy poverty. To measure energy poverty,
Member States will need to construct a metric which should make reference to household
income and household domestic energy expenditure.
Measuring energy poverty allows Member States to understand the depth of the problem
and assess the impact of the policies to tackle it
85
.
Most researchers used Eurostat Survey on Income and Living Conditions (EU-SILC) to
produce proxy indicators of energy poverty at Member State level such as the perceived
inability to keep homes adequately warm
86
. However, this indicator has some well-known
limitations
87 88
:
-
-
-
-
subjectivity due to self-reporting;
limited understanding of the intensity of the issue due to the binary character of the
metric;
assumption that participants in a survey view such judgments like 'adequacy of
warmth' in a similar way; and
difficult to compare across Member States.
In Member States that have or are considering energy poverty metrics, most experiences
concern expenditure-based metrics rather than consensual-based metrics. The advantage
of an expenditure based metric is that it is quantifiable and objective. These indicators
measure energy poverty as a result of two of the main drivers of energy poverty: domestic
energy expenditure and household income. Nonetheless, these indicators also suffer from
some limitations
89
:
-
cannot assess whether consumers reduce expenditure because of budget constraints
or due to other factors. Thus, it does not take account of the issue of self-
disconnection i.e. households who do not consume adequate amount of energy to
avoid falling into arrears or debt;
it does not reflect consumers’ motivation for expenditure levels; and
sensitive to methodological decisions such as definition of income or the definition
of the threshold.
-
-
Member States will have the freedom to define the metric according to their circumstances.
A European Commission study reviewed 178 indicators of energy poverty and proposed a
final set of four indicators, three of them expenditure based metrics. The study confirmed
85
86
87
88
89
Working Paper on Energy Poverty.
2016. Vulnerable Consumer Working Group.
This kind of indicators is referred in the academic literature as consensual-based indicators.
Selecting Indicators to Measure Energy Poverty. 2016. Trinomics.
"Quantifying
the prevalence of fuel poverty across the European Union".
2013. Thomson and Snell.
"Selecting Indicators to Measure Energy Poverty".
2016. Trinomics.
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that all the final recommended indicators can be produced using data already collected by
Member States
90
.
These measures build upon the existing provisions on energy poverty in the Electricity and
Gas Directive. They offer the necessary clarity to the term energy poverty, as well as, the
transparency with regards to the number of household in energy poverty. Since currently
available data can be used to measure energy poverty, the administrative costs are limited.
Likewise, the actions proposed do not condition Member States primary competence on
social policy, hence, respecting the principle of subsidiary.
90
Trinomics
2016.
Available
at:
https://ec.europa.eu/energy/sites/ener/files/documents/Selecting%20Indicators%20to%20Measure%20
Energy%20Poverty.pdf
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Option 2: Setting a uniform EU framework to monitor energy poverty, preventative
measures to avoid disconnections and disconnection winter moratorium for vulnerable
consumers.
Table 8: Option 2
Energy poverty
Measures
-
Specific,
harmonised
definition of energy poverty.
- Require Member States to
measure energy poverty using
required energy.
Pros
- Improve comparability
of energy poverty as a
result of a harmonised
concept
of
energy
poverty.
- Measuring energy
poverty using required
energy.
Cons
- New legislation will
be necessary.
-
A
prescriptive
definition of energy
poverty may not be
adequate
for
all
Member States.
- High administrative
cost to measure energy
poverty using required
energy.
- New legislation will
be necessary.
- Administrative impact
on Member States.
- Administrative impact
on energy companies
- Safeguards against
disconnection
may
result in higher costs for
companies which may
be passed to consumers.
- Safeguards against
disconnection may also
result
in
market
distortions as suppliers
seek to avoid entering
markets where there are
likely to be significant
risks of disconnections
and the suppliers active
in such markets raise
margins
for
all
consumers in order to
recoup losses from
unpaid bills.
-
Moratorium
of
disconnection
may
conflict with freedom of
contract.
Safeguards
against
disconnection
- A minimum notification period
before a disconnection.
All customers to receive
information on the sources of
support and be offered the
-
possibility to delay payments or
restructure their debts, prior to
disconnection.
- Winter moratorium of
disconnections for vulnerable
consumers.
-
- Equips Member States
with the tools to prevent
and reduce the number
of disconnections.
- Gives customers more
time
to
make
arrangements to pay
their bills, i.e. avoids
unnecessary
disconnections and costs
of disconnecting and
reconnecting.
- Customers are given
information.
about
outreach points.
- Customers are given an
opportunity to better
handle their energy debts
- The most vulnerable
customers will benefit
from
a
guaranteed
energy supply through
the coldest months of the
year.
Option 2 represents additional obligations for Member States. In what follows, we describe
these new obligations.
Energy poverty - EU definition of energy poverty
Option 2 adds a specific definition of energy poverty in the EU legislation. Energy poverty
will refer to those households which after meeting their required energy needs fall below
the poverty line or other income related threshold. This measure will clarify the term
energy poverty (as in Option 1) and improve the comparability and monitoring of energy
poverty within the EU.
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A definition using a relative income threshold, such as the Low Income High Cost
91
, is
suited to measure energy poverty in the EU. Since the poverty threshold is a relative metric
(e.g. below 40% of the median income) this type of metric takes account of the distribution
of income in each Member State. However, it might well be that in some Member States a
significant number of households live below the poverty line. In those cases, a different
metric of energy poverty using a lower income threshold may be more suitable.
Some stakeholders will be in favour of such as measure since it addresses the need for a
common definition. However, as it was described in Option 1, the EESC (2011: 1) and
Committee or the Regions (2014;15) request the Commission a
'common general
definition'
;
'flexible in view of the diverse circumstances of the Member States and
regions'.
The VCWG
92
also stated that
'a prescriptive definition of energy poverty for the
EU28 would be too restrictive, given the diverse realities across Member States'.
Similar arguments were put forward in Thomson et al
93
with regard to comparability. The
authors argue that a shared pan-EU definition would need to be relatively broad in order
to accommodate the diversity of contexts found at the Member State level in terms of
climate conditions, socioeconomic factors or energy markets. This is in contradiction with
a more prescriptive definition of energy poverty at the EU level.
Energy poverty - measuring energy poverty
Option 2 requires Member States to measure energy poverty using
'required energy'.
Metrics using
'required'
rather than
'actual'
expenditure calculate the amount of energy
necessary to meet certain standards such as a specific indoor temperature during a number
of hours per day.
The main advantage of this type of measurement
94
is that it refers to an adequate level of
energy service. As such, it computes the amount of energy for a specific heating regime
rather than measuring actual expenditure, which may not be adequate for low-income
households that may under-consume due to budget constraints.
In order to be able to compute required energy, the following information is needed
95
:
-
-
-
-
heating system and fuels used;
dwelling characteristics;
regional and daily climate variations; and
number of days per year a household stays in their home.
91
92
93
94
95
Low income High Costs (LIHC) indicator"
(Hills, 2011): A household i) income is below the poverty
line (taking into account energy costs); and ii) their energy costs are higher than is typical for their
household type.
Working Paper on Energy Poverty.
2016. Vulnerable Consumer Working Group.
"Fuel poverty in the European Union: a concept in need of definition?"
2016. Thomson et al.
The UK, which has considerable experience in this field, measures energy poverty or fuel poverty using
required energy.
Selecting Indicators to Measure Energy Poverty.
2016. Trinomics.
"
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This data, especially the variables related to dwelling characteristics, are rarely available.
To collect it, Member States are likely to need to run a Housing Condition Survey
96
which
ideally should be linked to the Household Budget Survey.
Safeguards against disconnection - minimum notification period of 40 working days
Evidence suggests that stronger guidelines dictating adequate disconnection times and
procedures could be an effective way to prevent disconnections. For instance, in Belgium
and UK, the two countries with the highest disconnection time requirements, disconnection
levels are at the lowest
97
.
This measure requires Member States to give all customers at least two months
(approximately 40 working days) notice before a disconnection from the first unpaid bill.
In Member States, legislated working days before disconnecting a customer vary between
a week and 200 days, with an average of approximately 40 days (See Table below).
Table 9: Statistics on disconnection notices (legal requirements) in Member States
MIN
Working days to final disconnection notice
98
Working days to actually disconnect a final household
customer from the grid because of non-payment
3
7
MAX
45
200
Average
18.15
36.81
Standard
deviation
12.87
36.79
Source: Insight_E (Forthcoming); Data: Eurostat; CEER National Indicators Database 2015
Longer disconnection period may stop some disconnections as customers have more time
to engage or to seek help. The direct monetary benefit comes in the form of avoided
disconnection and reconnection costs to society. Other non-direct monetary benefits to the
utility are those of retaining the customer, and avoiding lost income, due to allowing the
consumer time to pay back arrears.
It is possible to calculate the amount of time before which it is not cost effective to
disconnect a household from electricity and gas provision. This is done by comparing the
cost of disconnection and reconnection with the average monthly household expenditure
for gas and electricity.
Figure 7 shows the number of days it is cost-effective not to disconnect a household for
those Member States with available data to perform the necessary calculations.
96
97
98
The Housing Condition Survey measures the physical characteristics of the dwelling such as height of
the ceilings, materials of the wall, or the size of the windows to calculate the energy performance of the
building.
"Measures
to protect vulnerable consumers in the energy sector: an assessment of disconnection
safeguards, social tariffs and financial transfers".
Forthcoming publication. Insight_E.
Denmark does not stipulate a number of days but rather that a minimum of two notices be sent
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Figure 7: Number of days from which it is cost-effective to disconnect a household
Source: Insight_E (Forthcoming)
Interestingly for both electricity and gas it is not cost effective to disconnect within a
certain time starting from the unpaid bill for any of the considered countries. For electricity,
in Germany and Italy, it is cost-effective to disconnect only after approximately 2 months
from the unpaid bill, while in Ireland and the UK at least one month is needed to justify
disconnection. That value is approximately 15 working days for France and Spain, having
less costly connection and reconnection procedures. For gas, as the cost of connection and
reconnection is higher, those values are larger. In Germany and Spain three or more months
of unpaid bills would justify a disconnection, for Italy and France more than one month
99
.
It is to be noted that these numbers merely compare the cost of connecting and
disconnecting a household with household energy bills. Including other social and health
benefits would increase the amount of days before a disconnection is cost effective. Those
costs are difficult to quantify. Nonetheless, a number of articles and research projects
99
"Measures to protect vulnerable consumers in the energy sector: an assessment of disconnection
safeguards, social tariffs and financial transfers".
Forthcoming publication. Insight_E
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1730778_0066.png
provide evidence of a link between warmer homes and improvements in health
100101102103
104 105
. More information on the benefits of a longer notification period is provided in the
next Section.
Setting a minimum notification period of 40 working days will lead to 18 Member States
having to increase their disconnection notice requirements (See Table below). Five of those
would have to increase the notice by 10 working days or less. Hungary, Latvia, Spain,
Finland, Romania, Greece, Croatia, the Netherlands, UK and Belgium would not be
impacted by this regulation. In addition, Member States with robust social security
schemes disconnection safeguards would not have any substantial impact as early
intervention typically assists vulnerable consumers and the energy poor with avoiding
disconnections, nota bene via direct financial support.
The extension of the disconnection notice period is associated with additional costs for the
suppliers in the form of bills which can be left unpaid by some of the customers. The
measure also has potential market distortion effects as suppliers seek to avoid entering
markets where there are likely to be significant risks of disconnections and the suppliers
active in such markets raise margins for all consumers in order to recoup losses from
unpaid bills.
100
Chilled to Death: The human cost of cold homes.
(2015). Association for the Conservation of Energy,
Available at:
http://www.ukace.org/wp-content/uploads/2015/03/ACE-and-EBR-fact-file-2015-03-
Chilled-to-death.pdf
101
"Fuel Poor & Health. Evidence work and evidence gaps".
DECC. Presented at Health, cold homes and
fuel poverty Seminar at the University of Ulster. (2015). Cole, E. Available at:
http://nhfshare.heartforum.org.uk/HealthyPlaces/ESRCFuelPoverty/Cole.pdf
102
Towards an identification of European indoor environments’ impact on health and performance
- homes
and schools.
(2014). Grün & Urlaub.
103
Excess winter mortality: a cross-country analysis identifying key risk factors. Journal of Epidemiology &
Community Health 2003. Healy.
104
Estimating the health impacts of Northern Ireland’s Warm Homes Scheme 2000-2008.
(2008). Liddell.
105
The Health Impacts of Cold Homes and Fuel Poverty
(London: Friends of the Earth). (2011). Marmot
Review Team.
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