Europaudvalget 2016
KOM (2016) 0864
Offentligt
1730778_0001.png
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
 kom (2016) 0864 - Ingen titel
1730778_0002.png
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
 kom (2016) 0864 - Ingen titel
1730778_0003.png
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
 kom (2016) 0864 - Ingen titel
1730778_0004.png
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)
305
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0005.png
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.
306
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0006.png
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
307
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0007.png
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.
308
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0008.png
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).
309
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0009.png
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).
310
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0010.png
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.
311
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0011.png
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).
312
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0012.png
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.
313
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0013.png
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/).
314
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0014.png
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
-
-
-
-
315
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0015.png
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).
316
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0016.png
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).
317
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0017.png
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.
318
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0018.png
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
319
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0019.png
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
320
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0020.png
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.
321
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0021.png
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
322
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0022.png
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.
323
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0023.png
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.
324
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0024.png
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).
325
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0025.png
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.
326
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0026.png
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.
327
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0027.png
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.
328
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0028.png
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.
329
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0029.png
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.
330
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0030.png
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).
331
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0031.png
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.
332
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0032.png
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
333
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0033.png
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
334
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0034.png
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.
335
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0035.png
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
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
337
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0037.png
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
338
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
339
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
7.1. Addressing energy poverty
340
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0040.png
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.
341
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0041.png
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.
342
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0042.png
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.
343
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0043.png
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).
344
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0044.png
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.
345
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0045.png
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)
346
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0046.png
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.
347
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0047.png
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
348
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0048.png
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.
349
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0049.png
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.
350
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0050.png
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
351
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0051.png
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
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0052.png
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.
353
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0053.png
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.
354
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0054.png
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.
355
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0055.png
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.
356
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0056.png
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.
357
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0057.png
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;
358
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0058.png
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.
359
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0059.png
-
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.
360
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0060.png
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.
361
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0061.png
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
362
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0062.png
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.
363
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0063.png
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.
"
364
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0064.png
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
365
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0065.png
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
366
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
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.
367
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0067.png
Table 10: Additional working days with a two month disconnection notice
106
Member State
Additional number of days
Cyprus
33
Czech Republic
33
Bulgaria
30
Ireland
30
Malta
26
Estonia
25
Lithuania
25
Portugal
25
Slovakia
25
Austria
20
Slovenia
20
Sweden
15
Germany
10
Italy
10
Luxembourg
10
Poland
10
France
5
Source Insight_E (Forthcoming); Data: Eurostat; CEER National Indicators Database 2015
Safeguards against disconnection
–
prior to disconnection notice, consumers should
receive: (i) information on the sources of support and (ii) be offered the possibility to delay
payments or restructure their debt.
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
energy supplier is required to engage with the customer before commencing the actual
disconnection. This communication can take the form of a letter, registered letter, e-mail,
phone call, text message or house call. The use of these measures varies across Member
States and while a comprehensive review of how this is undertaken is not available, it is
clear that some variation of consumer engagement occurs nonetheless.
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.
Safeguards against disconnection - winter moratorium of disconnections for vulnerable
consumers.
This measure stops disconnection from energy provision (electricity and gas), for
vulnerable consumers, during the winter months. Already, 10 Member States provide
seasonal disconnection prohibitions at particular times.
Of those Member States, eight define clearly the winter period during which
disconnections are banned (See Figure 8).
106
Denmark does not stipulate a number of days but rather that a minimum of two notices be sent
368
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0068.png
Figure 8: Winter period with ban on disconnection in Member States
Sep
BELGIUM
ESTONIA
FINLAND
FRANCE
HUNGARY
IRELAND
NETHERLANDS
UK
Source: Insight_E (Forthcoming)
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
On the other hand, other countries define the winter as ‘cold season’ or depending on
temperatures (e.g. Lithuania prohibit disconnections when the highest daily air temperature
is lower than minus 15 °C or higher than plus 30 °C).
This measure, unlike the others, will specifically target vulnerable consumers. Hence, the
coverage of the measure depends on the definition of consumer vulnerability in energy
markets in each of the Member States.
With regard to the disconnection safeguards discussed in this Section, it needs to be noted
that Member States may be better suited to design these schemes to ensure that synergies
between national social services and disconnection safeguards can be achieved. These
synergies may also result in public sector savings which may be significant given the
substantial costs of some of these measures, see Table 22 and Table 23.
Comparison of the options
This Section quantifies the costs and benefits for the BaU and each of the policy options.
The tables below summarise the main results of the Cost Benefit Analysis (CBA). The
methodology, assumptions and calculations are subsequently explained.
369
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0069.png
Table 11: BaU: costs and benefits
Promoting good
practices.
Costs
Description
Exchange of good
practices and
collaboration
across Member
States
Quantification
EUR 0.
Benefits
Description
Continuous
Knowledge
exchange.
Quantification
N.A. only
qualitative.
Table 12: Option 0+: costs and benefits
EU Observatory of
Energy Poverty.
NRAs to monitor
and report figures
on disconnections.
Costs
Description
Running the EU
Observatory of
energy poverty.
Better
implementation of
current legislation
Electricity
Directive Article
37 (j) and (e).
Quantification
EUR100,000 per
year .
No additional cost.
Benefits
Description
Knowledge
exchange.
Improved
information on
number of
disconnections.
Quantification
N.A. only
qualitative.
N.A. only
qualitative.
Table 13: Policy Option 1: costs and benefits
Costs
Description
Quantification
Benefits
Description
Quantification
N.A. only
qualitative.
Energy poverty
Generic
Enumerate the
No additional
Transparency,
adaptable
main
cost.
clarification and policy
description of
characteristics
synergies.
the term energy that define
poverty in the
energy poverty.
legislation.
Member States
Produce a metric Administrative
Understanding the extent
to measure
to measure
cost.
of the problem. Improved
energy poverty. energy poverty.
transparency.
Note: Policy Option 1 includes the measures described in option 0+.
N.A. only
qualitative.
370
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0070.png
Table 14: Policy Option 2: costs and benefits
Costs
Description
Energy poverty
Specific
definition of
energy poverty
Produce a
specific
harmonised
definition of
energy poverty.
Member States to Collecting
measure energy
detailed
poverty using
housing stock
required energy
data.
Disconnection safeguards
A minimum
All customers
notification
will receive a
period before a
disconnection
disconnection.
notice at a
minimum of at
least
two
months (or 40
working days)
before
disconnection
from the first
bill unpaid.
All customers to
Prior to issuing
receive
a disconnection
information on
notice, all
the sources of
consumers
support and be
should: receive:
offered the
(i) information
possibility to
on the sources
delay payments
of support, and;
or restructure
(ii) be offered
their debts, prior
the possibility
to disconnection. to delay
payments or
restructure their
debt.
Quantification
No additional
cost.
Benefits
Description
Transparency,
clarification and policy
synergies.
Quantification
N.A.
only
qualitative.
Administrative
cost.
Understanding the extent
of the problem. Improved
transparency.
N.A.
only
qualitative.
Cost of unpaid
bills.
In case of non-
payment
vulnerable
consumers will
not be
disconnected
from the
electricity and
gas grid during
Winter.
Note: Policy Option 2 includes the measures described in option 0+.
Winter
moratorium of
disconnections
for vulnerable
consumers.
Consumer
information cost
varies depending
on the type of
intervention
which may
include
registered letters;
phone calls; text
message; or
emails.
Debt
management
cost depends on
the type of
intervention.
The cost of
unpaid bills.
General benefits from
avoiding disconnection in
the form of improvements
in households' health and
well-being;
cross-
departmental savings; and
avoiding
cost
of
disconnection
and
reconnection.
Gives
customers more time to
make arrangements to pay
their bills.
General benefits from
avoiding disconnection.
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
General benefits from
avoiding disconnection.
The most vulnerable
customers will benefit
from a guaranteed energy
supply through the coldest
months of the year.
N.A.
only
qualitative.
N.A.
only
qualitative.
N.A.
only
qualitative.
371
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0071.png
Methodology
The methodology follows the Better Regulation Guidelines. In this Section, we present the
steps taken for the calculation of the costs and benefits.
Introduction - Costs and Benefits Analysis (CBA)
This impact assessment takes account of societal costs and benefits when assessing the
impact of the policies. In addition, the net impact on total welfare and the net impacts on
specific groups (i.e. winners and losers) are relevant as these provisions are likely to benefit
more those in lower income or vulnerable economic conditions.
The cost of the measures occurs immediately following the adoption of the policies into
national legislation and are borne by public authorities (i.e. measuring energy poverty) and
energy providers (e.g. disconnection safeguards). Benefits, on the other hand, tend to
emerge over a longer time frame and are more difficult to quantify.
As far it has been possible, costs and benefits are based on market prices. However, this
has not always been possible, particularly when quantifying the benefits.
In the case of disconnection safeguards, the costs of this measure represent the mirror
image of the benefits for those households who are not disconnected as a result of the
safeguards. Even though this is a symmetrical change in private welfare and therefore it
cancels out at the aggregate level, there is an impact in terms of transfer of welfare between
those who are not in risk of disconnection (wealthier households) and those in risk of
disconnection (poorest households). It can be argued that this transfer has a positive impact
on efficiency if we assume poorest household have a higher marginal utility for each
additional euro received than wealthier households. This approach has been followed in
some Impact Assessments
107
using empirical evidence from the academic literature
108
. Due
to lack of data, however, these effects have not been quantified.
The discount rate used equals 4%. The time period starts when the measures are
implemented at Member State level and ends in 2030. We assume measures are
implemented in 2020
109
. In reality, the starting period may be subject to change depending
on which year the measures are approved in each Member State. This will advance or delay
the costs and benefits impacting the overall net benefit of the policies.
As stated in the Better Regulation guidelines, CBA has important limitations. The main
limitations refer to:
-
-
the assumption that income can be a proxy for happiness or satisfaction,
the fact that it willingly ignores distributional effects; and
107
108
109
UK Treasury
'Green Book Appraisal and Evaluation in Central Government
(2003). Annex 5
Distributional
Impacts.
Available
at:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/220541/green_book_co
mplete.pdf
Cowell and Gardiner (1999); Pearce and Ulph (1995)
We assume the legislation proposed in the Winter Package will be approved by the co-legislator in 2017
and Member States will require three years for implementing the new measures.
372
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0072.png
-
its lack of objectivity when it comes to the selection of certain parameters (e.g. the
inter-temporal discount rate), which can tilt the balance in favour of certain
regulatory options over others.
The overall goal of the intervention is to achieve the benefits at the overall lowest cost.
The policy options will contribute to advancement in social welfare in terms of economic
efficiency, consumer protection and life satisfaction.
Quantifying the costs
Producing a description of energy poverty (policy Option 1); and a specific definition of
energy poverty (policy Option 2) will be undertaken by the European Commission at no
additional cost.
Business as Usual
–
calculating the costs
Exchange of good practices
The European Commission continues fostering the exchange of good practices across
Member States through its network of stakeholders such as the Vulnerable Consumers
Workings Group. No additional cost is estimated.
Option 0+
–
calculating the costs
The cost of the EU Observatory of Energy Poverty
The European Commission has published a contract service to build and maintain the EU
Observatory of Energy Poverty. The current budget equals EUR 800,000 for a 40 month
contract. The continuation of the work after the contract is estimated at EUR 100,000 per
year
110
.
The cost of NRAs monitoring and reporting figures on disconnections
The current energy legislation requires national regulators to monitor disconnections.
However, not all Member States report figures on disconnections
111
. Full implementation
of the current legislation represents no extra cost as there is no additional obligation.
Policy Option 1
–
calculating the costs
The cost of Member States to measuring energy poverty making reference to household
income and household energy expenditure
Measuring energy poverty will result on a new information obligation for Member States.
This is a direct cost related to compliance i.e. the need to divert resources to address the
110
111
"Selecting Indicators to Measure Energy Poverty".
(2016). Trinomics.
ACER Market Monitoring Report
(2014)
373
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0073.png
direct consequences of the policy options which creates an administrative cost
112
to comply
with the new information obligation.
The administrative costs consist of two different cost components: the business-as-usual
costs and administrative impacts. The administrative impacts stem from the part of the
process which is done solely because of a new legal obligation.
To compute these costs we follow the Better Regulation Guidelines which state that the
effort of assessment should remain proportionate to the scale of the administrative costs
imposed by the legislation and must be determined according to the principle of
proportionate analysis.
To calculate the administrative cost we use the Standard Cost Model. The main objective
of the model is to assess the cost of information obligations imposed by EU legislation.
The following Table presents the steps that will need to be followed to measure energy
poverty.
112
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.
374
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0074.png
Table 15: Steps to measuring energy poverty
Activity
Identification of
information
obligations
Measuring energy poverty making reference to household income and household
energy expenditure.
Data requirements: household income and household energy expenditure. Source:
Household Budget Survey and/or Survey of Income and Living Conditions.
Familiarising with the information obligation: senior managers will need to assess
the information needed and allocate tasks within the Civil Service to measure energy
poverty.
Training employees about the information obligation: civil servants will need
training on the necessary data to measure energy poverty. The amount of training
necessary is likely to be limited since the information needed (i.e. household income
and household energy expenditure) is already collected by Member States.
Retrieving relevant information from existing data: civil servants will need to retrieve
household income and household energy expenditure data either from the Household
Budget Survey and/or Survey on Income and Living Condition.
Producing new data: civil servants will need to use household income and household
energy expenditure to produce an indicator of energy poverty. For those Member
States with no official metric to measure energy poverty, it is likely that the Civil
Service will produce different metrics and recommend one for adoption. The work
required to produce the most common indicators of energy poverty is not particularly
burdensome
113
.
Holding meetings: senior civil servants will hold several meetings to decide which
metric should be used to measure energy poverty. Ultimately a decision will need to
be made at the Government level before the metric is reported to the European
Commission.
Inspecting and checking: civil servants will need to perform quality control activities
on the data to ensure the robustness of the results.
Submitting the information: civil servants will need to submit the information to the
European Commission. It is likely that in some cases civil servants may need to
allocate additional time for discussion with European Commission officials for
clarification.
Public Authorities
Once a year
Identification of
required actions
Identification of
target group
Identification of
frequency
of
required actions
Identification of
relevant
cost
parameters
Assessment of the
number of entities
concerned
No particular relevant cost such as external costs (e.g. using consultancies or
gathering new data) has been identified.
28 Member States
The administrative impact will decrease after the first year since Member States will be
familiar with the new obligation and have agreed on the internal procedures to measure
113
"Selecting Indicators to Measure Energy Poverty".
(2016). Trinomics.
375
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0075.png
energy poverty. Hence, we have computed the administrative impact for year 1 and the
administrative impact for the subsequent years separately.
An estimation of the time and frequency of the tasks was gathered from information
provided by Member States.
France, the UK and Ireland already measure energy poverty. Hence, this obligation will
not constitute an additional cost for these Member States.
To quantify the administrative impact we used the Standard Cost Model. The model does
not include information for Croatia. The cost of measuring energy poverty in Croatia was
calculated using information on labour cost from Slovenia. Even though this is not ideal,
we prefer this approach to avoid any under-estimation of the cost of the obligation. At the
EU level, the relative small size of Croatia means that the EU wide cost will not be
significantly affected by this assumption. The final cost is shown in the Table below.
Table 16: Cost of measuring energy poverty making reference to household income
and household energy expenditure (EUR)
Standard Cost Model
Estimated cost in France, UK,
Ireland
Estimated cost in Croatia
Final cost
Source: European Commission's calculation
First year
EUR 454,129
(-EUR57,137)
EUR 10383
EUR 407,375
Following years
EUR 255,277
(-EUR32,444)
EUR 5788
EUR 228,621
For completeness, we include the results of the Standard Cost Model in the tables below.
These results include the cost of measuring energy poverty in all Member States but
Croatia.
376
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0076.png
Table 17: Administrative costs of measuring energy poverty in year 1
Obligation
Measuring
poverty
energy
Action
Familiarizing with the information obligation
Training employees about the information
obligations
Retrieving relevant information from existing data
Adjusting existing data
Producing new data
Holding meetings
Inspecting and checking
Copying
Submitting the information
Source: European Commission's calculation
Target
Group
28 MS
28 MS
28 MS
28 MS
28 MS
28 MS
28 MS
28 MS
28 MS
Staff type
Legislators, senior
managers
Professionals
Professionals
Professionals
Professionals
Legislators, senior
managers
Professionals
Professionals
Professionals
officials
and
officials
and
Hourly
rate
41.5
32.1
32.1
32.1
32.1
41.5
32.1
32.1
32.1
Man
hours
65
33
50
25
143
52
31
50
23
Total
Activity cost
(EUR)
75,530
29,660
44,491
22,470
128,079
60,424
27,638
44,940
20,897
454,129
377
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0077.png
Table 18: Administrative costs of measuring energy poverty in following years
Obligation
Measuring
poverty
energy
Action
Familiarizing with the information obligation
Training employees about the information
obligations
Retrieving relevant information from existing data
Adjusting existing data
Producing new data
Holding meetings
Inspecting and checking
Copying
Submitting the information
Source: European Commission's calculation
Target
Group
28 MS
28 MS
28 MS
28 MS
28 MS
28 MS
28 MS
28 MS
28 MS
Staff type
Legislators, senior
managers
Professionals
Professionals
Professionals
Professionals
Legislators, senior
managers
Professionals
Professionals
Professionals
officials
and
officials
and
Hourly
rate
41.5
32.1
32.1
32.1
32.1
41.5
32.1
32.1
32.1
Man
hours
27
29
33
12.5
45
26
33
45
18
Total
Activity
cost
(EUR)
31,374
26,065
29,660
11,235
40,446
30,212
29,660
40,446
16,178
255,277
378
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0078.png
Option 2
–
calculating the costs
The cost of Member States measuring energy poverty using required energy
The UK measures energy poverty using required energy rather than actual expenditure.
Social and physical surveys are carried out in each constituent country to gather all the
necessary information to estimate and monitor energy poverty.
The European Commission requested the assistance of the Scottish Government to gather
the necessary information to understand the activities and estimate the costs of measuring
energy poverty using required energy. The estimated cost for using this approach at the EU
level is based on the cost of an analogous exercise to measure energy poverty in Scotland.
The main tool to gather all the data to estimate the level of energy poverty in Scotland is
the Scottish House Condition Survey
114
(SHCS). The objective of the survey is much
broader than measuring energy poverty. The survey includes a range of additional topics,
as well as information on several characteristics of the household. Each year a Technical
Report
115
is published to summarise the survey methodology and delivery of the survey
work.
The SHCS includes a sample of more than 3,000 paired households and dwellings. The
Table below breaks down the different components of the SHCS. Member States already
undertake social surveys
116
, making the physical survey the main additional cost of this
measure.
Table 19: SHCS
–
cost structure
SHCS
–
Activities
Description of activities
Project management, recruitment, briefing and training, etc.
45 minutes social interview and 60 minutes physical survey,
and work to secure interviews.
Survey management
Fieldwork costs
-
Social
surveys
-
Physical
survey
SHCS
–
Share
of total cost
15%
24%
33%
Processes and final Data processing, sampling, selection, questionnaire
output
development, validation, clean datasets, and survey reports.
Estimating
energy Energy poverty modelling using information collected in the
poverty
surveys
Source: European Commission's calculation
24%
4%
The methodology to calculate cost of gathering data to measure energy poverty using
required energy at EU level is as follows:
1. Calculate the cost per interview.
114
115
116
The Scottish House Condition Survey run as a standalone survey every 5 years, in 1991, 1996, and 2002.
In 2004 it became an annual survey, running separately until 2011. From 2012, the SHCS was merged
with the Scottish Household Survey.
"Scottish
Household
Survey
Technical
Report".
Available
at:
http://www.gov.scot/Topics/Statistics/SHCS/2009techrep
For instance, physical surveys can be run as a sub-sample of larger surveys such as the Household
Budget Survey which will significantly reduce the costs.
379
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0079.png
2. Adjust cost per interview by Member States labour costs.
3. Multiply cost per interview in each Member States by the number of effective
interviews necessary to get a representative sample in each Member States.
Based on the information provided by the Scottish Government, we estimate the cost of
the SHCS per interview to be around EUR 268. This cost includes the activities described
in the Table above: survey management; fieldwork cost (physical survey); processes and
final output; and estimating energy poverty.
A significant component of that cost relates to labour costs. Thus, we adjust the cost per
interview by the different labour costs across the EU using information on wages provided
in the Standard Cost Model. As previously mentioned, the model does not contain labour
costs for Croatia. As before, we approximate Croatian labour costs using the labour cost
in Slovenia.
The total number of households that would need to be interviewed depends on several
statistical considerations. We use the effective sample size of the Household Budget
Surveys
117
provided by Eurostat.
117
Eurostat Household Budget Surveys 2010 Achieve Sample Sizes. Quality Report. Source:
http://ec.europa.eu/eurostat/documents/54431/1966394/LC142-
15EN_HBS_2010_Quality_Report_ver2+July+2015.pdf/fc3c8aca-c456-49ed-85e4-757d4342015f
380
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0080.png
Table 20: Cost per dwelling adjusted by Member States labour costs
Member State
Adjustment factor
(MS' labour cost /
UK labour cost
–
category:
professional)
1.3
0.1
0.3
1.2
1.1
0.2
1.1
0.7
0.7
1.0
1.0
0.8
0.2
0.2
1.3
0.2
0.4
0.9
1.0
0.3
0.6
0.2
0.5
0.3
0.9
1.0
0.5
Cost per
interview (EUR)
Sample size
required
Total cost (EUR)
BE
BG
CZ
DK
DE
ET
IE
EL
ES
FR
IT
CY
LV
LT
LU
HU
MT
NL
AT
PL
PO
RO
SL
SK
FI
SE
HR
Total Cost
Source: European Commission's calculation
346
27
82
320
298
62
291
184
193
274
272
219
44
44
356
60
116
249
269
91
156
45
138
69
253
258
138
3,459
1,343
3,182
1,697
37,606
1,619
2,562
1,512
8,743
5,114
8,884
1,910
1,653
1,242
3,068
4,175
3,157
1,461
2,962
4,022
30,228
6,328
2,658
2,076
2,532
2,157
2,464
1,195,000
36,000
262,000
544,000
11,209,000
100,000
746,000
278,000
1,688,000
1,404,000
2,420,000
419,000
73,000
55,000
1,092,000
250,000
366,000
364,000
796,000
367,000
4,708,000
288,000
366,000
143,000
640,000
556,000
340,000
30,704,000
As the housing stock changes slowly, a physical survey of the housing stock does not need
to be carried out annually. The survey can be run every two years and produce accurate
results
118
. Hence, we estimate that the
total annual cost
of measuring energy poverty using
required energy to be approximately EUR
15.35 million.
The annual cost may increase for those Member States that have to start procurement
processes to gather this data. It is likely, however, that the cost of measuring energy poverty
using required energy is over-estimated. This is because the SHCS gathers more
information than what is explicitly required to measure energy poverty.
The cost of disconnection safeguards
–
40 working days minimum notification period
The cost of a minimum notification period can be assessed as the amount of the unpaid
energy bills during the period in which disconnection is not possible. This could be either
a cost, in case the consumer never pays back the bills, or a delayed income, in case the
118
Based on interview with Scottish Survey manager.
381
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0081.png
measure is successfully implemented and the non-paying consumer only delays in paying
the bill.
The direct monetary benefit comes in the form of avoided disconnection and reconnection
costs to society. To calculate the average amount of time spent on disconnection and
reconnection, the cost of disconnection and reconnection was divided by the hourly wage
of a technical staff using data from the Standard Cost Model. The average time was equal
to 2.4 hours. To calculate the potential savings to society, we assume that the notification
reduces the number of disconnections by 10%. We consider 10% to be a conservative
assumption. The examples of UK and Belgium show that long pre-disconnection periods
contribute, among other factors, to low disconnection numbers. In addition, in many cases
disconnections are solved within few days. Notifications are sent to all consumers, many
of them, are not necessarily vulnerable or in low-income but have simply forgotten to pay
their energy bills.
After the notification, households will be disconnected and acquire a debt with their energy
supplier. In many cases, those households will be reconnected again and the debt will be
repaid either by the households or the Government. In other cases, a household can be
declared in bankruptcy and never repay the debt. For those cases, the unpaid bill during
the notification period will be a cost for the supplier. To calculate this cost, we assume
119
a high cost scenario where 30% of households will never repay their debts and a central
cost scenario for which 10% households will never repay their debt.
There are no statistics available with the number of households permanently without
electricity or gas as a result of non-payment. Anecdotal evidence, gathered through
discussions with national regulators, indicate that this number may be small. Given that
the majority of European households connected to the electricity or gas grid do receive
energy services, it is possible that before or after a household is being disconnected, some
kind of process starts by which the affected household or the public sector repay the debt
or it is condoned by the supplier.
This is highly likely in Member States with strong social security systems such those who
may have to extend their notification like Austria, Germany, Denmark, France, or Sweden
and Member States such as Ireland and Poland where pre-payment meters are offered to
households as a last resort measures to provide energy and slowly repay the debt. For these
Member States, extending the notification period may not result in any added cost.
However, to avoid any under-estimation of the cost we have added all the Member States
with notification periods lower than 40 days.
The steps taken to calculate the total net costs are the following:
-
-
-
Calculate the cost of connection and disconnection in each Member State impacted
by this measure.
Estimate the savings of a longer notification period which equals to the avoided
cost of connection and reconnection.
Calculate the average household energy expenditure for 40 working days in each
Member State impacted by this measure.
119
The assumed number of households unable to repay the debt was checked against regulators'
experiences.
382
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0082.png
-
-
Estimate the cost of the measure assuming that 10% (central cost scenario) and
30% (high cost scenario) of households will never repay their debt.
Calculate the net cost of the policy.
The net cost of unpaid bills for these two scenarios for those Member States with a
notification period lower than 40 working days is presented in Table 21.
Table 21: Estimated cost of extending notification period
Member State
Central Cost (10%) in EUR
High Cost (30%) in EUR
AT
148,160
1,027,465
BG*
184,081
624,502
CY
236,164
942,264
CZ*
405,482
1,587,838
DE
627,268
9,340,006
DK
219,079
1,216,659
EE*
-5,018
96,725
FR
1,617,788
6,439,202
IE
35,596
222,339
IT
-570,068
18,342,145
LT
6,046
24,428
LU*
3,194
24,311
MT
11,103
47,098
PL
945,689
4,131,371
PT
2,328,274
9,210,831
SE*
156,570
778,667
SI*
204,133
708,164
SK
109,395
484,050
Total Annual Cost
6,662,934
55,248,063
Note: * indicates Member States without available data on disconnections. For these Member States
disconnections was proxy by the average number of disconnections.
Source: European Commission's calculation
Estonia and Italy enjoy a net benefit from extending the notification period i.e. expressed
as a negative cost. In these Member States, the savings from avoiding the cost of
connection and reconnection during the notification period is higher than the total debt in
the central cost scenario where 10% of households do not repay their debt.
The results in Table 21 are nonetheless sensitive to the assumptions used with regard to
the number of disconnections avoided and the number of households who will never repay
their debt. For instance, if we assume that just 5% of households do not repay their debt,
extending the notification period results in an EU net benefit of more than EUR 5 million.
It is also important to note that publically available data on disconnection rates across all
Member States is incomplete, despite Member States’ obligation to report such data to
National Regulatory Authorities. For the purpose of the present analysis, the average
number of disconnection was applied to proxy for potential disconnection in those Member
States without available data. This assumption may not be adequate for Member States
such as Luxembourg or Sweden which may have a significantly lower number of
disconnections than the average.
Overall, it is likely that the conservative assumption used in the calculation of the costs led
to conservative estimates of the cost which may over-estimate the impact of the measures.
In addition to the above it is important to note that Member States with robust social
security schemes are unlikely to face any additional costs as a result of the extension of the
disconnection notice period as rapid intervention of social security services typically helps
households in those Member States to avoid disconnections.
383
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0083.png
The cost of disconnection safeguards - prior to disconnection notice, consumers should
receive: (i) information on the sources of support and (ii) be offered the possibility to delay
payments or restructure their debt.
To calculate the cost of these measures, we collected information on the cost of similar
schemes currently operating in Member States and estimate the cost of replicating these
schemes in the Member States where debt management or customer engagement activities
do not exist.
The steps taken to calculate the total costs are the following:
-
-
-
Gather information on case studies and calculate the cost per household for debt
management and customer engagement.
Calculate the cost per household in each Member States taking account of different
labour costs using information from the Standard Cost Model.
Multiply the cost per household by the number of households in arrears (high cost
scenario) and the number of disconnections (central cost scenario)
Similarly to the cost of extending notification period, it is likely that in some Member
States, particularly those with strong social security system, households may never need
debt management advice or information on the sources of support.
It might well be that even though Member States such as Denmark, Finland, or the
Netherlands do not have official debt management advice or customer engagement
activities
120
, households in these Member States do receive support prior to disconnection
or when facing difficulties to pay their energy bills. That will make these measures
superfluous. In those cases, Member States will not face any additional cost. However, to
avoid any under-estimation of the costs, the impact assessment includes all the Member
States without these services
121
.
Using the number of households in arrears as a proxy for the number of disconnections
may also over-estimate the costs. First of all, not all households in arrears may be in a
position to require support. Arrears may well be for other reasons than financial constraints
or difficulties to make ends meet. Secondly, in some Member States, households in arrears
may receive support from local authorities or social services which will erase the need for
these measures and thus the cost.
As a result of these assumptions, we believe the costs presented here are conservative.
The cost of debt management
Step Change is a UK based charity which helps people overcome their debt difficulties
122
.
In 2014, the charity served more than 300,000 people at an operating cost of around GBP
120
121
122
"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
Step Change:
http://www.stepchange.org/
384
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0084.png
140 per beneficiary which equates to around EUR 172
123
. A similar scheme operates in
Germany at the local level
124
. The cost of the Germany scheme was on average EUR 167
per households. The estimations are based on the cost from the UK based programme since
it is run nationally. Nonetheless, the UK and German program have similar cost per
households.
Assuming the same efficiency in other Member States but different labour costs, the cost
of replicating Step Change activities in other Member States is shown in Table 22. The
same Table also shows the cost of extending the services to all households in arrears with
utility bills (as potential households in need of assistance with managing utility bills
–
high
cost scenario) and the cost of providing the service to those households who are actually
disconnected
125
–
central cost scenario.
When estimating the costs of debt management it is important to note that debt
management assistance have positive long-term impacts on households. This means that a
substantial share of households benefiting from debt management assistance can be
expected to manage their payments more effectively after the initial intervention. Thus, the
annual cost of this intervention can be expected to decrease annually reflecting the success
rate of the measure.
For instance, from the more of 1,200 households receiving support in Germany, 90% of
the beneficiaries felt their future energy needs would be secured and therefore were not in
need to reapply to receive assistance. In addition 80% of the disconnection threats were
averted which generates savings in the form of avoided disconnection and reconnection
costs.
The 90% success rate in the German example may not be easy to replicate in other Member
States. As a conservative assumption we assume a success rate of 25%. Hence, the annual
cost of the measure will decrease by 25% year-on-year.
It is also important to note that this type of services, despite being of a considerable cost
per customer provide an added-value to the energy suppliers. For example, Step Change is
partly funded by the energy suppliers as they enjoy the benefits of having an intermediary
that provides support to customer on arrears or in risk of disconnection for non-payment.
The cost of customer engagement
Irish suppliers have established an Energy Engage Code which provides guidelines on the
approach suppliers should take with customers in arrears and those with possible
disconnection. According to the Code, suppliers should communicate with customers
having difficulties in paying their bills and advise them on possible debt management
plans. The cost of this option involves communication costs including letter, phone calls
123
124
125
2014 average exchange rate of GBP 0.806 for one euro.
Information
on
the
scheme
can
be
found
at:
https://www.verbraucherzentrale.nrw/mediabig/238730A.pd
and
https://www.verbraucherzentrale.nrw/mediabig/237456A.pdf
Information on the total number of disconnections was not available for all Member States. For those
Member States for which this information was not available, we applied the average disconnection rate.
385
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0085.png
and SMS messages. Information on the estimated cost of customer engagement provided
by one of the main Irish suppliers is presented below:
-
-
-
Written communication: EUR 1.5
Phone calls: EUR 5
Mobile Text: 8 euro cents
It is likely that this measure may have positive long-term impacts reducing the number of
beneficiaries and the cost of the scheme. However, we did not find any evidence of the
possible success rate. To avoid any under-estimation of the cost we assume the number of
beneficiaries remains constant over time.
This amounts to an estimated cost of customer engagement of around EUR 6.6 per
customer. The same approach as per debt management was used to calculate the cost of
extending similar schemes to other Member States. We first adjust the cost of customer
engagement per customer for each Member State using Eurostat Purchasing Power Parity
Index. The cost per customer was multiplied by the total number of households in arrears
–
high cost scenario and total number of disconnections
–
central cost scenario.
Table 22: Cost of debt management and customer engagement
Member State
BG
DK
EE
FI
HR
LT
LV
PT
RO
SK
Estimated cost of debt
management (EUR)
Central Cost
114,408
7,665,949
65,607
708,564
1,016,791
95,899
22,088
33,574,204
293,008
121,024
High cost
6,770,270
73,559,897
3,882,393
41,930,412
22,934,923
5,634,449
1,266,903
91,806,810
17,339,207
7,161,768
Member State
Estimated cost of customer
engagement (EUR)
Central Cost
21,056
121,107
9,217
7,045
25,786
900,327
52,140
410,753
11,309
3,129
12,187
High Cost
1,245,997
97,921
545,417
416,885
1,525,929
4,138,621
1,176,085
1,139,442
664,469
179,479
100,663
9,876,748
164,857
21,272,514
BG
CY
CZ
EE
FI
GR
HR
HU
LT
LV
MT
NL
SI
116,888
Total Annual Cost
43,677,542
272,287,031 Total Annual Cost
1,690,944
Note: the number of reported disconnections in the Netherlands was nil. CEER database
Source: European Commission's calculation
The cost of disconnection safeguards - winter moratorium of disconnections for vulnerable
consumers.
A winter disconnection moratorium for vulnerable consumers may result in a cost for the
energy supplier, consumers or the government, depending on how the measure is financed.
The cost of this measure can be estimated as the cost of the unpaid energy bill from non-
paying vulnerable consumers during winter. However, the debt per each non-paying
household might be recovered at a certain point, therefore not resulting in a cost.
The cost per non-paying household of a possible winter disconnection is reported in Table
23. This was calculated assuming that a household does not pay the energy costs for the
full winter, assumed to be four months long which is equal to the average legislated winter
386
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
length in countries that have disconnection safeguards for the winter. This was calculated
using the average energy expenditures for the lowest income quintile.
We also assume that a percentage of vulnerable consumers will not repay their energy bill
due to the moratorium. A high and a central cost scenario are presented in the table below.
The scenarios assume that 30% (high cost) and 10% (central cost) of the vulnerable
households will not repay their energy bills during winter. It can be argued, as it was done
previously for the other disconnection safeguards, that these assumptions are likely to over-
estimate the cost.
It might be that some Member States such as Austria, Germany or Luxembourg have
sufficient tools in place to protect vulnerable households from being disconnected making
a moratorium unnecessary. For those Member States, the costs of the moratorium will not
be realised. However, as in the other Sections of the impact assessment, we have included
all Member States without a winter moratorium for vulnerable consumers.
As previously discussed, anecdotal evidence suggests that the number of households
permanently cut-off from electricity and gas services because of non-payment may be
significantly lower.
The number of vulnerable consumers was not available for some of the impacted Member
States. In these cases, referred in the table below with an asterisk, the number of vulnerable
consumers the number of households unable to keep their homes adequately warm was
used as a proxy. This is likely to over-estimate the number of vulnerable households,
particularly in those Member States with an explicit definition of consumer vulnerability
in energy markets. Further information on the definition of consumer vulnerability in
energy markets can be found in the evaluation.
It needs to be added that the inability of a vulnerable household to pay its energy bill may
also be linked to the type of tariff. It might well be that vulnerable households are not in
the most advantageous tariff. In those cases, switching to a more competitive offer reduces
energy costs and may avoid disconnection. These interactions were not taken into account
in this impact assessment. However, it can be assumed that the preventative measures
undertaken prior to disconnection such as customer engagement and debt management
may assist vulnerable consumers to reduce their energy cost by switching to a more
economic tariff.
Finally, there might be scope for reducing the costs of winter moratorium of disconnections
if it is designed taking into account Member States national social services. However, as
social policy is a primary competence of Member States, an EU winter moratorium on
disconnections may go beyond the limits of subsidiarity (see Section 7.1.6 Subsidiarity).
387
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0087.png
Table 23: Cost of winter moratorium for vulnerable consumers
Mem
ber
state
AT*
BG*
CZ*
DE*
LU*
LV*
MT
PT
SK*
Vulnerabl
e
consumers
118,357
1,048,035
267,191
1,978,803
1,374
215,001
24,416
61,129
117,990
Electricity
Central cost case
High cost case
(10% disconnect
(30% disconnect
and never pays
and never pays
back) in EUR
back) in EUR
2,092,547
9,643,610
4,559,591
33,507,728
26,642
1,743,136
242,927
941,387
1,172,983
53,930,551
6,277,640
28,930,829
13,678,772
100,523,184
79,926
5,229,408
728,782
2,824,160
3,518,950
161,791,651
Gas
Central cost case
(10% disconnect
and never pays
back) in EUR
733,812
229,965
2,807,494
15,962,343
20,210
607,682
36,852
707,059
1,333,957
22,439,374
High cost case
(30% disconnect
and never pays
back) in EUR
2,201,435
689,895
8,422,483
47,887,029
60,630
1,823,046
110,557
2,121,176
4,001,872
67,318,123
Total Annual Cost
Note: Vulnerable consumers for AT, BG, CZ, DE, LU, LV and SK set as the number of households feeling
unable to keep warm during winter. It was not possible to calculate the cost for Croatia due to lack of data
on household energy expenditure
Source: European Commission's calculation
Summary Table
The annual cost and the total net present cost for the period 2020 and 2030 of the policy
options presented in the impact assessment are summarised in the Table below.
Table 24: Total Cost
Annual cost in EUR
BAU: sharing of good practices.
0
Option 0+: sharing of good
100,000
practices and increasing the
efforts to correctly implement the
legislation.
Policy Option 1: Setting an EU framework to monitor energy poverty
Central cost scenario
407,375 (first year)
2,261,696
228,621 (following years)
Policy Option 2: Setting a uniform EU framework to monitor energy poverty, preventative
measures to avoid disconnections and disconnection winter moratorium for vulnerable
consumers.
Central cost scenario
159,105,345
1,194,481,728
High cost scenario
587,348,869
3,820,183,393
Source: European Commission's calculation
Net present cost for the period
2020
–
2030 in EUR
0
911,090
388
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0088.png
Quantifying the Benefits
In this Section we describe the benefits derived from implementing the policies.
Overall benefits
Tackling energy poverty can have positive effects on individual's health and well-being,
savings for the health sector, as well as provide economy-wide gains on productivity levels.
Although it is difficult to quantify the specific impact of the policies presented in this
impact assessment towards these overall benefits, it is likely that applying these policies
will contribute to reap these benefits.
For instance, it is likely that on individual's health, there have been various studies linking
cold homes with respiratory illnesses and excessive winter mortality. The World Health
Organisation estimated that 30% of Excess Winter Deaths (EWD) can be directly related
to cold homes
126
. The 2009 Annual Report of the Chief Medical Officers
127
estimated that
for every £1 spent on ensuring homes are kept warm, the public health sector saves £0.42.
A recent study concluded that home environment is key to ensure citizens are healthy and
productive
128
. Remaining connected to an energy supply better enables households to
maintain healthy homes in terms of indoor temperature and humidity levels. Lack of energy
supply has been linked to an increase of respiratory illnesses, circulatory diseases, mental
health and allergies, which, left unchecked, lead to absence from work and loss of
productivity estimated to total 9.8 billion EURO annually in Europe
129130131
. Policies
proposes in the revision of the EED and the EPBD which contribute to better energy
efficiency in the domestic sector will also contribute to realise benefits of better health and
productivity.
The UK Healthy Homes Barometer 2016 estimates that minor illnesses, such as coughs,
colds, flus and illnesses can be attributed to 27 million lost working days, which affect
morale and productivity. The direct cost to the economy in the UK due to these absences
is estimated at £1.8 billion in 2013.
Ensuring energy provision can also have a positive impact on educational attainment,
lower missed school days and life chances for children
132
.
Identifying energy poverty will also assist Member States in assessing the level of energy
poverty. Such identification will support Member States to better target public policies to
those households in need of assistance. In addition, disconnection safeguards will further
help Member States to reduce the number of disconnections, benefiting in particular low-
126
127
128
129
130
131
132
"Indoor
cold and mortality. In Environmental Burden of Disease Associated with Inadequate Housing",
(Bonn: World Health Organisation (Regional office for Europe)). (2011). Rudge, J.
2009 Annual Report of the Chief Medical Officer (London: Department of Health). 2010. Donaldson,
L.
"Healthy
Homes Barometer".
(2016). Wegener and Fedkenheuer,
"Towards an identification of
European indoor environments’ impact on health and performance
-
homes and schools".
(2014). Grün & Urlaub,
"The Health Impacts of Cold Homes and Fuel Poverty"
(London: Friends of the Earth). (2011). Marmot
Review Team.
"Estimating the health impacts
of Northern Ireland’s Warm Homes Scheme"
2000-2008. (2008). Liddell.
Evaluating the co-benefits of low-income energy-efficiency programmes.
2013. Heffner & Campbell.
389
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0089.png
income households who are more likely to face energy poverty. With such measures in
place, Member States may feel more confident to phase out regulated prices.
The removal of regulated prices which will bring efficiency improvements, resulting on:
-
-
-
-
more competition in the energy markets with positive impacts on consumer and
innovation;
the removal of market distortions which alter the allocation of resources.
additional citizen's satisfaction due to the positive impacts of competition on
innovation in the form of enhanced service provision and quality;
a positive impact on the internal energy market. Companies wishing to engage in
cross-border trade will not be discouraged by regulated prices, which prevent
competition when set below cost,; and
improved public finances since regulated prices are an ineffective measure of
protection as they are applied to all households, including those who can afford to
pay a higher price. Phasing out regulated prices will unlock resources which can be
used for targeted protection.
-
Better information on the level of energy poverty and measures to reduce the number of
disconnections will have a positive impact on consumer protection and the health and well-
being of European citizens. Art. 38 of the Charter of Fundamental Rights of the EU
requires EU policies to ensure a high level of consumer protection. The Treaty establishes
that
'consumer protection requirements shall be taken into account in defining and
implementing other Union policies and activities'
(TFEU, art. 12), and that '…
the Union
shall contribute to protecting the health, safety and economic interests of consumers, as
well as to promoting their right to information, education and to organise themselves in
order to safeguard their interests.'
(TFEU, Art. 169)
Policy Option 1
–
assessing the benefits
The benefits of a generic description of the term energy poverty in the legislation
Three main benefits have been identified as a result of a shared understanding of energy
poverty across the EU: recognition, clarification and policy synergy
133
.
In terms of recognition, an EU description of energy poverty may help Member States to
identify the problem. This is relevant as the majority of Member States have not defined
the phenomenon of energy poverty despite the evidence which suggest that household
across Europe are struggling to access adequate energy services
134
,
As for clarification, a major regulatory impediment to addressing energy poverty is the
unclear understanding of the term. This is particularly relevant as in many cases the term
energy poverty is mixed or used interchangeably with the broader term of consumer
vulnerability or general poverty
135
. Adopting a generic description of energy poverty
would help to resolve the terminological confusion that presently exists, and may pave the
way for more detailed national definitions. Above all a generic common understanding of
energy poverty in the EU, which focuses on the drivers of energy poverty, is a necessary
133
134
135
"Fuel
poverty in the European Union: a concept in need of definition?"
2016. Thomson et al.
"Quantifying the prevalence of fuel poverty across the European Union".
(2013). Thomson and Snell.
"Working
Paper on Energy Poverty".(2016).
Vulnerable Consumer Working Group.
390
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0090.png
prerequisite towards achieving reliable and comparable data on the current and future
evolution of the nature and scale of the issue.
In terms of policy synergy, there is potential for achieving synergies at the EU and Member
State level. Having a shared concept could also assist Member State cooperation and
knowledge exchange in this area.
The benefits of measuring energy poverty by referring to household income and household
energy expenditure
Measuring energy poverty will assist Member States to assess whether energy poverty is
getting better or worse over time. It will also help Member States to identify the people
affected so that they can be targeted by appropriate interventions. Hence, measuring energy
poverty will help policy makers to assess the impact of their policies
136
.
In summary, measuring energy poverty will enable Member States to:
-
-
-
-
-
measure the level of energy poverty at a particular moment of time
identify trends and changes on the levels of energy poverty,
understand the extent, depth and persistence of the problem,
identify the kinds of people affected; and
support policy design and delivery to tackle the problem
These offer the necessary clarity to the term energy poverty, as well as, the transparency
with regards to the number of household in energy poverty while respecting the principles
of subsidiarity.
Option 2– assessing the benefits
The benefits of a specific EU definition of energy poverty
A specific, harmonised EU definition of energy poverty such as the one explained
previously will bring benefits similar to those associated with a general definition of energy
poverty. In addition, being a more specific definition, we expect the benefits in relation to
clarification to be higher.
However, here it is important to remember the risks that a specific definition of energy
poverty at the EU level may bring in terms of currently limited comparable evidence,
comparability and relevance, and path dependency
137
.
As discussed before, a specific EU definition of energy poverty may be in conflict with the
diversity of contexts at the Member States in terms of climate conditions, socioeconomic
factors or energy markets. If the definition were to be inadequate for a Member State, it
would take considerable amount of time to change the EU legislation and amend this
situation.
136
Fuel Poverty: The problem and its measurement.
(2001). John Hills. Available
http://sticerd.lse.ac.uk/dps/case/cr/CASEreport69.pdf
137
"Fuel poverty in the European Union: a concept in need of definition? "
(2016). Thomson et al.
at:
391
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0091.png
The benefits of Member to measure energy poverty using required energy
Measuring an adequate level of energy services is the main advantage of using required
rather than actual expenditure. This is the approach taken in the UK and it is regarded as
most appropriate by several experts
138
. It requires, nonetheless, agreeing on what is
adequate. In some cases, the term adequate refers to a specific heating regime
139
.
Having defined what is adequate, the required energy approach calculates the amount of
energy needed to meet that heating regime. Energy poverty is later computed comparing
the required energy expenditure against household income. Hence, required energy
expenditure solves the main weakness of the actual expenditure approach. When using
actual expenditure, we are not able to distinguish between those households that do not
consume sufficient energy because of financial constraints from those that do not need
much energy to meet their energy needs because they live in a high energy efficient
dwelling.
The benefits of disconnection safeguards - minimum notification period
Longer disconnection periods will provide customers with additional time to engage with
suppliers and/or seek help. There is a direct monetary benefit in the form of avoided
disconnections and reconnection costs. In addition to these benefits, any avoided
disconnection stemming from this measure will bring benefits such as health
improvements and cross-department savings in social and health budgets, and
improvements in equality.
Suppliers will also benefit from lower disconnection rates as they will retain such
customers, thereby avoiding lost income, allowing the customer to pay back arrears, and
avoiding some of the costs related to new customer acquisition.
The benefits of disconnection safeguards - prior to disconnection notice, consumers should
receive: (i) information on the sources of support and (ii) be offered the possibility to delay
payments or restructure their debt.
Providing additional information to consumers and the possibility to delay payments or
restructure their debt may result in a number of disconnections being averted. Hence, the
benefits are similar as in the case of extended notification period In addition, households
will be better informed, and can improve their energy management and potentially avoid
future debt. As described in the case of minimum notification period, suppliers will also
benefit from lower disconnections. Investment in consumer engagement and debt
management services will support a number of jobs in services such as debt counselling.
The benefits of winter moratorium of disconnections for vulnerable consumers.
138
139
"Selecting Indicators to Measure Energy Poverty".
(2016). Trinomics.
For instance in the case of Scotland, the current definition of fuel poverty makes reference to a heating
regime for standard occupants between 21°C and 18°C for 9 hours during weekdays and 16 hours else
and for any occupant aged 60 or more or long-term sick and disabled between 23°C and 18°C 16 hours
per day. Source:
http://www.gov.scot/resource/0039/00398798.pdf
392
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0092.png
Similar to the other measures which reduce disconnections, a winter moratorium will bring
benefits in the form of health benefits to vulnerable consumers, cross-departmental savings
in social and health budgets, and avoided disconnection and reconnection costs.
Sensitivity analysis
This impact assessment suffers from important shortcomings to quantify the benefits. The
policy options bring multiple benefits in terms of better public policy with regard to energy
poverty, improvements in individuals' well-being and public sector saving from fewer
disconnections. However, we were not able to quantify the value of these benefits from
market prices.
Sensitivity analysis allows us to calculate the amount of benefits that would be necessary
to justify the costs from these policies.
One of the key benefits of the options presented stem from improvements in individual
health which can be particularly effective at addressing Excess Winter Deaths (EWD).
EWD refers to deaths which would not have occurred if dwellings had been properly
heated. The cost to society of EWD can be estimated as forgone GDP i.e. each excess
winter death translates in forgone monetary value approximated by GDP per capita. This
is a rather crude measure with some disadvantages (e.g. different values for different
countries) but it can be interpreted as an estimation of the loss to society.
To perform the sensitivity analysis, the following steps are taken:
-
-
-
Aggregate the cost of policy Option 1 and 2 for the high and central cost scenario.
Multiply the number of EWD
140
by the GDP per capital
141
Calculate the reduction in EWD that equals the cost of the policies.
The results of the calculation are presented below.
Table 25: Sensitivity analysis
Benefits from reduction in Excess
Winter Deaths equal to the cost of the
policies
Policy Option 1: Setting an EU framework to monitor energy
poverty
Policy Option 1
–
first year
0.004%
Policy Option 1
–
following years
0.002%
Policy Option 2: Setting an EU uniform framework to monitor
energy poverty and reduce disconnections for vulnerable
consumers.
Policy Option 2
–
central cost scenario
1.5%
Policy Option 2
–
high cost scenario
5.6%
Source: European Commission's calculation. Note: Policy Option 1 and 2 include the measures described
in option 0+.
140
141
The number of EWD is calculated following an approach similar to Johnson and Griffinths (2003). The
number of deaths is equal to the deaths between the months of December and March minus the average
number of deaths for other months. Data source: Eurostat. Mortality Statistics.
Eurostat. GDP per capital in euros at current prices.
393
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0093.png
The Table shows that a minimal reduction in EWD is sufficient to justify the cost arising
from policy Option 1. On the other hand, a reduction of 1.5% and 5.6% is necessary for
the cost of policy Option 2 to be equal to possible benefits. The differences between the
low and high cost scenario are explained by the assumptions used to calculate the cost,
and in particular, to the number of households that after being disconnected or because of
the moratorium will never repay their debt.
Box 1: Impacts on different groups of consumers
The benefits of the measures contained in the preferred option (Option 1), described in detail in the preceding
pages, accrue overwhelmingly to energy poor households. Depending on how individual Member States
choose to finance their new obligations to measure energy poverty levels (costs outlined in detail in Tables
15 to 17), the marginally increased burdens resulting from the implementation of these measures are
socialized amongst other ratepayers or taxpayers. The measures can therefore be considered progressive in
nature i.e. they tend to redistribute surplus from relatively high-income ratepayers/taxpayers to increase the
welfare of lower-income ratepayers
Subsidiarity
In this Section we assess the options presented in the impact assessment against the
subsidiarity principle as stated in Article 5 of the Treaty of the EU.
The subsidiarity principle is upheld because the objectives of the policy options, which
have been defined to address the shortcoming of the current legislation as identified in the
evaluation, cannot be achieved sufficiently by Member States.
The evaluation of the current provision of the Electricity and Gas Directive defined energy
poverty as a subset of consumer vulnerability. 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 this context, Member States have been reluctant to phase out regulated prices, pointing
towards the protection of vulnerable and energy poor households as one of the main
reasons. As a consequence, national regulation has had negative spill-over effects,
weakening the internal energy market.
The measures proposed in Option 1 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.
In addition, the protection of vulnerable and energy poor consumers has been quoted as
one of the reasons for maintaining regulated prices. This type of intervention, particularly
when prices are regulated below costs, has negative implications on the functioning of the
internal energy market. Article 114 and 194 pf the Treaty pf the Functioning of the
European Union states that in order to achieve the objectives in Article 26, the EU
legislators
shall adopt the measures for the approximation of the provisions laid down by
law, regulation or administrative action in Member States which have as their object the
establishment and functioning of the internal market.
Article 194 states that the Union
policy shall aim to ensure the functioning of the energy market.
It can be argued that Article 169 on Consumer Protection provides further justification for
action at the EU level. The options described in this IA include disconnection safeguards
394
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0094.png
either as preventative measures prior to disconnection or as a prohibition of disconnection
for vulnerable consumers.
The options presented in this Annex bring a double dividend: on the one hand they
contribute to the protection of consumers
–
as explained in the introduction there is a link
between energy poverty and excess winter deaths
–
and on the other hand, these measures
support the completion of the internal energy market.
It needs to be noted that, as we explained in Option 2, Member States may be better suited
to design schemes to protect households from disconnection in order to ensure that
synergies between national social services and disconnection safeguards are achieved.
In addition, a prohibition on disconnections for vulnerable consumers may restrict the
principle of freedom of contract, in particular for the ten Member States that do not have
such a measure in place. However, action at EU level may be the most effective way to
ensure a common level of protection for vulnerable consumers. Furthermore, in terms of
proportionality, Member States should carefully specify the group of vulnerable consumers
who cannot be disconnected to avoid going beyond what is necessary to achieve the
consumer protection objective.
Stakeholders' Opinions
The options described in this impact assessment have benefited from the continued
dialogue between the European Commission services and civil society through the
Vulnerable Consumer Working Group (VCWG).
The VCWG was reconvened after the 2015 Citizens' Energy Forum. The group has met
five times since then:
-
-
-
-
-
3 June 2015
21 October 2015
9 December 2015
26 January 2016
24 May 2016
The VCWG meetings are attended by key stakeholders from industry, consumer
associations, academics, regulators and representatives of Member States. A full list of the
members of the group who have attended at least one of the last five meetings is provided
below:
395
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0095.png
Table 26: Members of the Vulnerable Consumer Working Group
Organisation
Ministry of Economics
Ministry of Economy
Ministry of Employment and the Economy, Energy
Department
Ministry of National Development
Bulgarian Permanent Representation to the EU
Hungarian Permanent Representation to the EU
Czech Permanent Representation to the EU
FPS Economy - DG Energy
ERO - Energy Regulatory Office of the Czech
Republic
E-control Austrian Energy Regulator
OFGEM
NEON
Citizens advice
Danish Consumer Council
DECO
The Swedish Consumer Energy Markets Bureau
RWADE
University of Leicester
University of Stuttgart
European Disability Forum
Fondazione Consumo Sostenibile
GEODE
HISPACOOP
Housing Europe
International Union of Tenants
EURELECTRIC
EUROGAS
ADEME
AEEGSI
AISFOR
CEDEC
DGEC
EAPN
EFIEES
ENGIE
FdSS
Member State
Latvia
Poland
Finland
Hungary
Bulgaria
Hungary
Czech Republic
Belgium
Czech Republic
Austria
United Kingdom
European Organisation
United Kingdom
Denmark
Portugal
Sweden
Belgium
United Kingdom
Germany
European Organisation
Italy
European Organisation
Spain
Belgium
European Organisation
European Organisation
European Organisation
France
Italy
Italy
European Organisation
France
European organisation
European Organisation
France
France
In the meetings of the VCWG
142
, the group discussed the topic of energy poverty. These
discussions were captured in the Working Paper on Energy Poverty
143
. The group
conclusions were as follows
(emphasis added):
-
Measuring energy poverty is important to understand the depth of the problem and
also assess the impact of the policies which have been put in place to tackle it.
Metrics which account for the relationship between household income and
household energy needs or expenditure capture well the problem of affordability.
142
143
The minutes, agenda and presentations of the meetings
can be found online at:
https://ec.europa.eu/energy/en/events/citizens-energy-forum-london
VCWG
(2016)
Working
Paper
on
Energy
Poverty.
Available
at:
https://ec.europa.eu/energy/sites/ener/files/documents/Working%20Paper%20on%20Energy%20Pover
ty.pdf
396
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
-
-
-
Better information on housing stock, which can be efficiently gathered as part of
the regular Household Budget Survey, will help Member States to measure energy
poverty and design energy efficiency policies which benefit the energy poor.
Tackling energy poverty requires a combination of policies, dealing with the causes
and the symptoms of energy poverty. Good examples include targeted short-term
(financial support) and long-term measures (energy efficiency) in addition to
consumer protection and reasonable safeguards against disconnections.
A common understanding of the concept of energy poverty will help Member
States, civil society and industry to start a dialogue about the depth of energy
poverty and how to tackle it. The VCWG considers that a common understanding
of energy poverty in the form of a generic definition represents a positive step
forwards to tackle the problem of energy poverty. Such a definition should be
simple, focus on the problem of affordability, and allow sufficient flexibility to be
relevant across Member States. The VCWG proposes that such a definition can
refer to elements such as low-income; inability to afford; and adequate domestic
energy services
The options described in this impact assessment draws from the conclusions of this
paper. In particular, key elements of Option 1 are supported by the VCWG Working
Paper on Energy Poverty.
397
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0097.png
Sub-Annex 1
Table 27: Energy poverty definitions
Member
State
Definition
Energy Poverty: A person who encounters in his/her accommodation particular difficulties
France
to have enough energy supply to satisfy his/her elementary needs, this being due to the
inadequacy of resources or housing conditions.
Energy poverty is a situation whereby a household is unable to attain an acceptable level of
Ireland
energy services (including heating, lighting, etc.) in the home due to an inability to meet
these requirements at an affordable cost.
Energy poverty may relate to the situation of customers who may be in a difficult position
because of their low income as indicated by their tax statements in conjunction with their
Cyprus
professional status, marital status and specific health conditions and therefore, are unable
to respond to the costs for the reasonable needs of the supply of electricity, as these costs
represent a significant proportion of their disposable income.
Energy poverty under the law No. 250/2012 Coll. Of Laws is a status when average monthly
Slovakia
expenditures of household on consumption of electricity, gas, heating and hot water
production represent a substantial share of average monthly income of the household”
Energy poverty: A household i) income is below the poverty line (taking into account
England
energy costs); and ii) their energy costs are higher than is typical for their household type.
Fuel poverty: A household, in order to maintain a satisfactory heating regime, it would be
Scotland
required to spend more than 10% of its income (including Housing Benefit or Income
Support for Mortgage Interest) on all household fuel use.
Fuel poverty is defined as having to spend more than 10% of income (including housing
benefit) on all household fuel use to maintain a satisfactory heating regime. Where
Wales
expenditure on all household fuel exceeds 20% of income, households are defined as being
in severe fuel poverty.
A household is in fuel poverty if, in order to maintain an acceptable level of temperature
Northern
throughout the home, the occupants would have to spend more than 10% of their income
Ireland
on all household fuel use.
Source: Insight_E 2015
398
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
399
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
7.2. Phasing out regulated prices
400
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0100.png
Summary table
Objective: Removing market distortions by achieving the phase-out of supply price regulation for all customers
144
.
Option: 0
Option 1
Option 2a
Making use of existing
acquis
to continue Requiring Member States to progressively Requiring
Member
States
to
bilateral consultations and enforcement phase out price regulation for households by a progressively
phase
out
price
actions to restrict price regulation to deadline specified in new EU legislation, regulation, starting with prices below
proportionate situations justified by general starting with prices below costs, while allowing costs, for households above a certain
economic interest, accompanied by EU transitional, targeted price regulation for consumption threshold to be defined in
guidance on the interpretation of the current vulnerable customers (e. g. in the form of social new EU legislation or by Member
acquis.
States.
tariffs).
Pros:
Pros:
Pros:
-
Allows a case-by-case assessment of the
-
Removes the distortive effect of price - Limits the distortive effect of price
proportionality of price regulation, taking into regulation after the target date.
regulation.
account social and economic particularities in
-
Ensures regulatory predictability and - Would reduce the scope of price
Member States
transparency for supply activities across the regulation therefore limiting its
distortive impact on the market.
EU.
Cons:
Cons:
Cons:
- Leads to different national regimes - Difficult to take into account social and - Difficult to take into account social
following case-by-case assessments. This economic particularities in Member States in and economic particularities in
would maintain a fragmented regulatory setting up a common deadline for price Member States in defining a common
framework across the EU which translates deregulation.
consumption threshold above which
into administrative costs for entering new
prices should be deregulated..
markets.
Option 2b
Requiring Member States to progressively phase
out below cost price regulation for households by
a deadline specified in new EU legislation.
Pros:
- Limits the distortive effect of price regulation
and tackles tariff deficits where existent.
Cons:
- Defining cost coverage at EU level is
economically and legally challenging.
- Implementation implies considerable regulatory
and administrative impact.
- Price regulation even if above cost risks holding
back investments in product innovation and
service quality.
Most suitable option(s): Option 1
- Setting an end date for all price intervention would ensure the complete removal of market distortions related to end-user price regulation and help create
a level playing field for supply activities across the EU while allowing targeted protection for vulnerable customers and/or energy poor.
144
For the purpose of this annex of the impact assessment, households or household customers shall include customers in a comparable situation (e. g. SMEs, hospitals etc.)
401
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0101.png
Description of the baseline
A regulated supply price is considered as a price subject to regulation or control by public
authorities (e.g. governments, NRAs), as opposed to being determined exclusively by
supply and demand. This definition includes many different forms of price regulation, such
as setting or approving prices, standardisation of prices or combinations thereof.
The existing
acquis
only allows price regulation if strict conditions are met.
Regulated prices are unlawful under current Gas and Electricity Directives as interpreted
by the Court of Justice, unless they meet specific conditions. Accordingly, the Court of
Justice has ruled
145
that supply prices must be determined solely by supply and demand as
opposed to State intervention as from 1 July 2007. The Court based its interpretation on
the provision
146
stating that Member States must ensure that all customers are free to buy
electricity/natural gas from the supplier of their choice as from 1 July 2007 (Article 33 of
the Electricity Directive and Article 37 of the Gas Directive interpreted in light of the very
purpose and the general scheme of the directive, which is designed progressively to achieve
a total liberalisation of the market in the context of which, in particular, all suppliers may
freely deliver their products to all consumers).
Article 3(1) of Gas and Electricity Directives requires Member States to ensure, on the
basis of their institutional organisation and with due regard to the principle of subsidiarity,
that natural electricity/gas undertakings are operated in accordance with the principles of
that directive with a view to achieving, inter alia, a competitive market.
However, Gas and Electricity Directives are also designed to ensure that, in the context of
that liberalisation, high standards of public service are maintained and the final consumer
is protected.
In order to meet those latter objectives, Article 3(1) of Gas and Electricity Directives states
that it applies without prejudice to Article 3(2), which expressly permits Member States to
impose public service obligations on undertakings operating in the electricity and gas
sectors, which may in particular concern the price of supply.
In this context the conditions allowing price regulation in the form of public service
obligation imposed on undertakings are to i) be adopted in the general economic interest,
ii) be clearly defined, transparent, non-discriminatory and verifiable, guarantee equality of
access for EU companies to national customers and iii) meet a requirement for
proportionality (which refers in particular to limitation in time and as regards the scope of
beneficiaries).
145
146
Case C-265/08,
Federutility and others v Autorità per l’energia elettrica e il gas
The Court judgement was based on Article 23(1)(c) of Directive 2003/55 of the Second Energy Package
which provides that Member States must ensure that all customers are free to buy natural gas from the
supplier of their choice as from 1 July 2007; however a similar provision is contained in the Second
Package Electricity Directive and the relevant provisions has remained unchanged in the Third Package
Directives.
402
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0102.png
Price regulation for
non-households
has been systematically challenged via infringements
while price regulation for
households
has not been yet subject to infringement procedures.
Deregulating household prices may be politically unpopular in Member States where
regulation is justified by social policy objectives and/or lack of competition.
This policy choice has meant addressing through infringements the more important market
distortion created by the regulation of prices for larger and potentially most active
consumers who use most of the energy sold on the European market (more than 70% of
total electricity consumption and close to 60% of the total gas consumption)
147
. In addition,
the Commission has opted initially for an informal approach via bilateral consultations
with Member States to discuss reasonable and sustainable alternatives to price regulation
and accompanying support for vulnerable consumers. However, infringement actions
against price regulation for households are not excluded in the follow-up to informal
consultations.
Electricity and gas
price regulation refers to the ‘energy’ component of the end-user
price,
excluding costs of transport/distribution, taxes, other levies and VAT. This component is
the element which should be determined by market demand and supply in a fully liberalised
energy market. By contrast, the other elements that influence the end-use electricity price
are subject to other regulation and legislation including network regulation, taxes and
levies/support schemes for energy efficiency and renewable energy sources.
Deficiencies of the current legislation
Despite the current acquis, some form of price regulation exists in 17 Member States, as
shown in the table below.
This is problematic because evidence presented in Section 5 of the present Annex
demonstrates that regulation of electricity and gas prices limits customer choice, reduces
customer satisfaction and restricts competition. This is particularly true for markets where
supply prices are set below costs (i.e. without taking into consideration wholesale market
prices and other supply costs).
Artificially low regulated prices (even without pushing them below costs) limit market
entry and innovation, prompt customers to disengage from the switching process and
consequently hinder competition in retail markets. In addition, they may increase investor
uncertainty and impact the long-term security of supply.
Furthermore, regulated prices (even when set above costs) can act as a pricing focal point
which competing suppliers are able to cluster around and
–
at least in markets featuring
strong customer inertia
–
can also considerably dilute competition.
As shown in the Evaluation of the EU's regulatory framework for electricity market design
and consumer protection in the fields of electricity and gas, market-based energy prices
that are able to take into account the rapid changes of demand and response and cross-
147
In 2014, non-residential customers consumed 1.921.153 out of the total 2.706.310 Gigawatt-hour
electricity consumption and 1.506.185 Gigawatt-hour out of the total 2.578.779 Gigawatt-hour of gas
consumption
–
Eurostat data, 2014.
403
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
border trade are even more crucial than in 2009. The evaluation concludes that progress
towards lifting regulated prices blocking competition and consumers' choice should
continue (Evaluation Section 7.1.1).
404
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0104.png
Table 1: Energy price regulation in EU Member States
–
February 2016
148
148
Based on current state of play of the conformity checks.
405
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0105.png
Member State
Austria
Belgium
Bulgaria
Croatia
Cyprus
i
Czech Republic
Denmark
ii
Estonia
Finland
France
Germany
UK (Great Britain)
UK (Northern Ireland)
Greece
iii
Hungary
Ireland
Italy
iv
Latvia
v
Lithuania
vi
Luxembourg
Malta
vii
Netherlands
Poland
viii
Portugal
ix
Romania
x
Slovakia
Slovenia
Spain
xi
Sweden
Source: European Commission Data.
Electricity
Gas
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
406
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0106.png
i
ii
Price regulation economically justified due to natural monopoly.
Denmark
is implementing measures aimed at progressively removing regulated prices. This follows
from changes in the energy law introduced in January 2013.
iii
Discussions with
Greece
on the phase-out of regulated prices are conducted as part of the Economic
Adjustment Programme and lead to the phase-out of electricity regulated prices for households and small
enterprises as of 30 June 2013. The only exceptions are end-user prices for vulnerable customers. As
regards gas, a major reform of the Greek gas retail market is envisaged that seeks to abolish the regional
monopolies of the EPAs for gas supply and to progressively extend eligibility to all retail customers.
iv
Italy
has introduced since 2013 market based reference prices for small customers including SMEs that
according to the Italian NRA should be considered de facto non-regulated.
v
Latvia
has removed regulated prices for
electricity
for households other than vulnerable in January 2015.
As a first step towards price deregulation, a revised Energy Law, adopted on 18 September 2014,
introduced a category of vulnerable customers (underprivileged social groups and families with 3 or more
children) and set a fixed price for electricity for these customers. Regarding
gas,
the liberalization is
expected to be completed by 2017, subject to interconnections projects being realized in order to make
the transition from isolated market to an interconnected one.
vi
Lithuania
has removed
electricity
regulated prices in the beginning of 2015.
vii
Malta
regulates electricity prices for all customer segments. However, it has extensive exemptions
notably from market opening and customer eligibility provisions of the Third package.
viii
Discussions with
Poland
are ongoing regarding draft measures communicated to Commission's
services implementing the judgement delivered on 10 September 2015 concerning gas price regulation
(36/14
Commission v. Poland).
The draft measures foresee deregulation of gas prices for households by
2023.
ix
Portugal
has agreed a roadmap for phasing out regulated prices as a result of the infringement
proceedings initiated by the Commission. In August 2012, the government announced the complete
elimination of regulated tariffs with a transitory tariff in place for three years.
x
Romania
has agreed an electricity and gas price deregulation calendar as part of the Economic
Adjustment Programme.
ix
In
Spain,
on 27 December 2013, the new Electricity Act modified the last resort tariff for electricity and
introduced the PVCP (Precio Voluntario Pequeño Consumidor or Voluntary price for small customers)
for electricity households. The energy component of this price reflects the spot market during the period,
only the profit margin of the suppliers being regulated.
Presentation of the options
Option 0: Making use of existing acquis to continue bilateral consultations and
enforcement actions to restrict price regulation to proportionate situations justified by
manifest public interest
This option consists in a new round of bilateral meetings with the Member States as regards
households, relying on the existing acquis. Due to the political sensitivity attached to price
regulation for households, but also taking into account that national price regulation
regimes are characterised by a variety of rules and justifications thereof, voluntary
collaboration between Member States based on assistance by the Commission services has
not been considered as an adequate tool for achieving price deregulation, a bilateral
approach being preferred. Bilateral meetings can be followed by EU Pilots and
infringement procedures to restrict price regulation to time-limited situations justified by
the public interest.
In this context, the Commission services will:
-
offer Member States assistance on practical implementation of deregulation
including on accompanying good practice in protecting the energy poor through
social policy;
monitor Member States' adherence to adopted phase-out roadmaps and the
implementation of the principle of cost-reflectiveness of their regulated prices; and
-
407
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0107.png
-
initiate enforcement where Member States refuse to phase-out regulated prices on
a voluntary basis.
While enforcement action under this option may be effective, as repeatedly backed by
favourable judgements of the European Court of Justice, infringement actions by the
Commission against price regulation for households remain politically sensitive.
Option 1: Requiring Member States to progressively phase out price regulation for
households by a deadline specified in new EU legislation, starting with prices below costs,
while allowing transitional, targeted price regulation for vulnerable customers (e. g. in the
form of social tariffs).
The legislative measures would include:
-
introducing binding deadlines (e. g. 3-4 years from the entry into force of the
legislation) in the Electricity and Gas Directives for price-setting for households to
be free of regulatory intervention and instead subject only to supply and demand.
allowing regulated prices (e. g. in the form of social tariffs) targeted at specific
groups of vulnerable customers, notably the energy poor. This would also
contribute to ensuring universal access to affordable energy services as required
under UN-backed Sustainability Development goals.
-
These measures would be accompanied by:
-
bilateral consultations, as appropriate, to support Member States in defining and
implementing the roadmaps and in identifying vulnerable groups for special
protection.
-
technical advice, guidance and sharing of good practices on energy efficiency,
alternative financial support measures (e. g. energy cheques) or income support
through the welfare system to complement or progressively substitute the need for
social tariffs.
This option might accelerate liberalization processes in Member States by establishing a
clear target date for price deregulation while allowing regulated prices as targeted,
transitional support to vulnerable customers. However, it would not fully take into account
social and economic particularities in Member States in setting up a common deadline for
price deregulation.
Option 2a: Requiring Member States to progressively phase out price regulation, starting
with prices below costs, for households below a certain consumption threshold to be
defined in new EU legislation or by Member States, with support from Commission
services.
If the consumption threshold is defined below current levels used by Member States to
apply price regulation, this option would reduce the scope of price regulation therefore
limiting its impact on the market.
The main challenge of this option concerns the calculation of the right thresholds. Allowing
regulated prices up to certain rather low energy consumption thresholds may miss out some
poorer customers who may consume rather more energy per household, as they may spend
more time in their homes (due to unemployment, invalidity, home work), live in poorly
insulated dwellings or require to be connected to medical equipment. As a consequence
they may exceed the defined thresholds. On the other hand and contrary to the desired
408
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0108.png
effect, ordinary customers of sufficient wealth but low consumption e.g. due to a lifestyle
with a relatively limited use of appliances may profit from such thresholds. The same might
apply to secondary homes inhabited only temporarily by wealthier customers.
Maintaining regulated prices for large parts of consumption through high thresholds
prevents the development of market-based demand response and other flexibility options,
as price-based incentives cannot be created through price regulation schemes as effectively
as by the market. This option could thus limit the achievement of the full effects of the
Market Design initiative, particularly its elements aimed at end-customers.
Option 2b: Requiring Member States to phase out below cost price regulation by a deadline
specified in new EU legislation.
While this option would limit the distortive effect of price regulation and tackle tariff
deficits, maintaining regulated prices, even if above cost, would prevent the development
of market-based demand response and other flexibility options, as price-based incentives
cannot be created through price regulation schemes as effectively as by the market.
Moreover, price regulation that does not allow charging more than current costs risks
holding back investments in product innovation and service quality.
The main challenge of this option would be to define cost coverage methodologies for
price regulation at EU level. It is legally challenging as the current EU
acquis
establishes
as a general rule that prices should be set by market forces; moreover, this option could
produce weaker effects than current EU
acquis
as it would limit the requirement of
proportionality to be met by price regulation only to the cost coverage aspect (not taking
into account the limitation in time, in the scope of beneficiaries or the necessity test). It is
also economically challenging due to opaque cost structures of the companies. Moreover,
ensuring cost-reflectiveness by regulation would imply considerable regulatory and
administrative impact.
Comparison of the options
Comparison of performance of energy markets with and without price regulation
The objective of this Section is to assess the performance of energy markets where prices
are established by a governmental authority (they are regulated) with that of markets where
prices are set in market conditions, by supply and demand. The assessment is made based
on the level of competition within each group of markets, according to the conventional
structure-conduct-performance framework, which explores a range of retail market
indicators such as market structure and concentration, consumer switching activity and
consumer experience.
In order to assess the performance of markets with and without energy price regulation the
present Section carries out a comparative analysis of energy markets across all EU Member
States, grouped in two categories: markets where energy prices are set in market conditions
and markets characterised by intervention in the price setting mechanism. These two
groups are appraised using average values for each of the elements considered, weighted
by population.
Background: Energy market liberalisation and price regulation
The EU-level liberalisation of the electricity market was initiated with the First Energy
Market Directive, which was adopted in 1996. At that time, both the United Kingdom and
409
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0109.png
the Nordic countries had already started to liberalise their markets. Two additional
legislative packages have followed since then, i.e. the Second Energy Market Directive in
2003 and the Third Package, including the Third Electricity Directive, in 2009. The process
has aimed to separate the network activities, i.e. transmission and distribution, from
generation and supply activities. The rules regarding unbundling of these activities into
separate entities have become increasingly stringent over this period to properly ensure
this separation of activities. This has mainly reflected concerns about the competition, in
particular regarding an appropriate pricing of these services as well as fair access to the
networks for new entrants.
Following the separation of the different activities in the supply chain of electricity, the
price formation of the final end-user price has also changed. The electricity price now
consists of different components relating to the different parts of the supply chain, as
shown on Figure 1.
While regulated prices are unlawful under current Gas and Electricity Directives, unless
they meet specific conditions, many Member States still apply price regulation.
At the same time it is important to note, as already explained in Section 2 of the present
Annex, that electricity and gas price regulation refers only
to the ‘energy’ component of
the end-user price, excluding network charges, taxes, other levies and VAT. This
component is the element which should be determined by market demand and supply in a
fully liberalised energy market.
Figure 1: Different components of the final electricity price
Source: ECFIN
Background: Academic discussion on the merits of energy market liberalisation
A number of academic papers have presented arguments in favour of price regulation in
retail energy markets. The assumption presented is that deregulation will not lead to any
significant efficiency improvement or added value. The argument presented is that the
potential retail savings on activities such as metering, billing or customer services are
uncertain and their expected economic impact is too low to be significant for most
410
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0110.png
customers.
149
In addition, it is also argued that customers are reluctant to change
150
and in
some cases inability to make appropriate choices.
151
However, the above mentioned arguments have been refuted by a number of authors.
Littlechild argues that domestic customers are not indifferent to choice, and retailing is
precisely the activity that can lead to products that best suit customers' preferences.
152
Based on the US experience with energy market liberalisation Zarnikau and Whitworth
153
,
Rose
154
and Joskow
155
demonstrate cost-saving benefits from competition.
Moreover, introducing competition is equivalent to opening the door to innovation. The
market can create alternatives to a regulated framework. Those in favour of a regulated
retail market assume regulators will set up a pass-through tariff in which the final price of
energy will be composed of the cost of wholesale energy plus a margin to cover for the
cost of selling the energy to the final customers. However, Littlechild argues that if
customers want this option, the market will be able to deliver it. Indeed, as it is already the
case in the Nordic Member States, with the roll-out of smart meters, dynamic tariffs, which
are similar to the pass-through tariffs, will be available to customers. From this perspective,
the advantages of competition are clear.
Other arguments in favour of open retail markets refer the possibility that suppliers
introduce new billing options, improve operations of the wholesale market by raising the
number of agents involved or provide energy efficiency related services. On the other hand,
regulated prices may reduce customer engagement and, in these markets, there is a
possibility for Governments to alter electricity tariffs for political gains. More generally, it
has been argued that end-user price regulation in electricity and gas markets distorts the
functioning of the market and jeopardises both security of supply and the efforts to fight
climate change
156
.
Assessment of market structure and concentration
Measures of market structure and concentration, such as the number of main suppliers and
the market share of largest suppliers, provide an indication of the degree of competition in
a market, which is a useful first step to draw a comparison between markets with energy
price regulations and those where prices are set by supply and demand. Markets with lower
market concentration where a high number of service providers compete to gain and retain
customers are under competitive pressure to deliver better deals for consumers. This makes
market structure indicators relevant for assessing the performance of energy markets.
"Why do we need electricity retailers? Or can you get it cheaper wholesale"
(2000) Paul L. Joskow; "The
future of retail energy markets" (2008) Catherine Waddams; "The big retail ‘bust’: what will it take to
get true competition?" (2000) Theresa Flaim
150
"Consumer preference not to choose: methodological and policy implications"
(2007) Timothy J Brennan
151
"Retail competition in electricity markets"
(2009) Christophe Defeuilley
152
"Retail competition in electricity markets—expectations, outcomes and Economics"
(2009) Stephen
Littlechild
153
"Has Electric Utility Restructuring Led to Lower Electricity Prices for Residential Consumers in Texas?"
(2006) Jay Zarnikau, Whitworth
154
"The State of Retail Electricity Markets in the US"
(2004) Kenneth Rose
155
"Markets for power in the United States: an interim assessment"
(2005) Paul L Joskow
156
"Position paper on end-user price regulation"
(2007) European Regulators’ Group for Electricity and
Gas
411
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
149
 kom (2016) 0864 - Ingen titel
1730778_0111.png
Evidence shows that energy markets without price regulation show a higher number of
suppliers and less market concentration. In fact, while markets without electricity price
regulation have on average 34 nationwide suppliers, markets with regulated prices have
19, as shown on Figure 2. A similar trend can be observed within the gas market, as shown
on Figure 4. While markets without gas price regulation have on average 30 suppliers,
markets with regulated prices have 17.
Among the top ten electricity markets in terms of the number of suppliers, seven do not
use any form of price regulation, including Sweden (97 nationwide suppliers), the
Netherlands (75) and Finland (45). In contrast, among the ten electricity markets with the
lowest number of suppliers, eight are characterised by regulated prices, including Cyprus
(1 nationwide supplier), Malta (1), Lithuania (3), Bulgaria (4) and Latvia (5).
Figure 2: Overall number of suppliers and number of nationwide suppliers active in
the retail electricity market for households
AT
BE
CZ
DE
EE
FI
IE
LU
NL
SE
SI
UK
WA (non-reg)
BG
CY
DK
ES
FR
HR
HU
IT
LT
MT
PL
PT
RO
SK
EL
LV
WA (reg)
0
Source: ACER
34
390
Overall number of suppliers
Nationwide suppliers
19
100
174
200
300
400
500
600
412
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0112.png
Figure 3: Overall number of suppliers and number of nationwide suppliers active in
the retail gas market for households
AT
BE
CZ
DE
EE
FI
IE
LU
NL
SE
SI
UK
WA (non-reg)
BG
CY
DK
ES
FR
HR
HU
IT
LT
MT
PL
PT
RO
SK
EL
LV
WA (reg)
0
Source: ACER
35
300
Overall number of suppliers
Nationwide suppliers
17
80
100
200
300
400
500
600
Market concentration, measured by the share of the main suppliers in that market, is
another key indicator of competitiveness. Main suppliers (i.e. suppliers who have a market
share above 5% of the total) in markets without price regulation have a 63% market share
in the electricity market and 56% market share in the gas market. Markets with regulated
prices see main suppliers covering 74% of the market on average in electricity and gas
markets. This data further confirms the advantage of markets without price regulation in
terms of their competitive performance.
413
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0113.png
Figure 4: Cumulative market share of main suppliers
80
70
60
50
40
30
20
10
0
Non-regulated
Source: ACER
Regulated
Electricity
Gas
63
56
74
74
Assessment of market conduct
Effective retail competition is characterised by competition between suppliers over price
and non-price elements whereby suppliers undercut each other's' prices to the efficient cost
level, improve the quality of their services and develop innovative products which meet
the requirements of customers with a view to increasing market share and profits. In
competitive retail markets customers should have the freedom of choice by moving to an
alternative supplier, to change contracts or to choose new products. The freedom to choose
the energy supplier is key because customer switching activity puts competitive pressure
on market actors.
In the present Section all of the above described elements of retail market conduct are
analysed for both regulated and non-regulated energy price markets in order to complete
the relative performance assessment of these markets.
Price competition
Price competition is typically used as the basic indicator of market competitiveness. Price
competition among suppliers is limited to the energy component of the supply price which
remains the largest of the three price components
d
espite the fact that this component
has
generally diminished since 2008 mainly due to increases in the taxes/levies.
157
Data from the Agency for the Cooperation of Energy Regulators (ACER)
158
shows that
Member States without regulated prices have on average slightly higher energy prices than
those with price regulation. This is not surprising as Member States with regulated prices
can set
de facto
the final price on energy services. Price regulation by State authorities can
157
158
"Energy
prices
and
costs
in
Europe"
(2014)
European
Commission
https://ec.europa.eu/energy/sites/ener/files/publication/Energy%20Prices%20and%20costs%20in%20E
urope%20_en.pdf
"Market
Monitoring
Report
2014"
(2015)
ACER,
available
at
http://www.acer.europa.eu/Official_documents/Acts_of_the_Agency/Publication/ACER_Market_Mon
itoring_Report_2015.pdf
414
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0114.png
and in some instances does result in prices set below costs, i.e. the end consumer price does
not cover the full costs of producing and delivering energy to consumers.
Figure 5: Retail price level across EU Member States, 2014
35
Retail price level €/kWh
30
25
20
15
10
5
0
23
18
GB
EE
ES
NL
HU
PL
PT
EL
IT
FI
SI
Source: ACER
Note: Information for Latvia; Bulgaria; Bulgaria, Croatia, Cyprus; Lithuania; Malta; and Romania not available.
While lower retail prices seem to present an immediate advantage to all customers, it is
important to analyse the economic sustainability of energy prices regulated below the
actual cost and changes to consumer surplus resulting from price regulation.
Cost reflectiveness of regulated prices
Regulated prices can have negative impacts on the energy market especially if they are set
too low. First, energy prices which are set too low fail to provide the right signal to energy
customers about costs and scarcity, which risk resulting in over-consumption of a cheap
service. Second, the low level might hamper the process of market opening by
discouraging new companies from entering the market. Third, they will determine the
ability of different suppliers to make competitive offers on the wholesale market. For this
reason, if end-user prices are set too low, suppliers might not be able to recover their costs
and could face potential losses.
By contrast, if set too high, they might not reflect the production costs of the incumbent
and increase their rents, while at the same time reducing the surplus of final customers.
The result is inefficiencies in the overall energy system.
Determining the proper level of regulated prices requires full information on the cost
structure of the industry, which is becoming increasingly difficult as the electricity markets
evolve.
In fact, while ensuring cost-reflectiveness of regulated prices could be an option to address
negative effects of price regulation, the regulators' ability to set the
right
margin between
wholesale and retail prices is limited by imperfect information and rapidly changing market
conditions including a wholesale market which is affected by commodity prices, cost of
capital and the price of CO2 allowances, to quote just a few. These barriers constitute a
significant disadvantage characterising any kind of price regulation, even that which is set
"above costs", as there is a high risk that the margins set by the regulators will not be
415
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
WA (non-reg)
WA (reg)
AT
LU
IE
DK
BE
DE
FR
CZ
SK
SE
 kom (2016) 0864 - Ingen titel
1730778_0115.png
sufficient for new service providers to enter the market. The effect of such miscalculation
of the most optimum price level would be less market players and less competition and
therefore less innovation and a lower general level of services.
Issue of tariff deficits
Electricity tariff deficits have emerged as an issue for public finances. A tariff deficit
implies that a deficit or debt is built up in the electricity sector, often in the regulated
segments of transmission or distribution system operators, but in some cases also in the
competitive segments, e.g. in incumbent utilities.
A deficit is accumulated due to the fact that the regulated tariffs which should cover the
system's operating costs are either set too low or not allowed to increase at a pace that
cover rising production or service costs. As these deficits accumulate due to government
regulation of tariff or price levels, they have been recognised as contingent liabilities of
the State in a few Member States. In these cases, the debt stemming from low energy prices
need to be repaid through general taxation from present or future taxpayers.
The results of a study carried out by the Directorate General for Economic and Financial
Affairs on the issue of electricity tariff deficits indicates that 11 Member States had
accumulated electricity tariff deficits as of 2012
159
. Within that group, 10 Member States
continue to regulate their electricity prices, as shown in Figure 7.
Figure 6: Electricity tariff deficit
–
comparison between Member States
Source: DG ECFIN, European Commission
Cumulated tariff debts are substantial in some Member States. In Spain and Portugal,
where electricity prices are regulated, the tariff debt represented 3% and 2.2-2.6% of the
GDP respectively.
Link between wholesale and retail prices
159
"Electricity Tariff Deficits. Temporary or permanent problem in the EU?"
(2014) European Commission
416
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0116.png
While regulated price markets show an advantage over unregulated price markets in terms
of the final price for the consumer, research carried out by the European Parliament shows
that the relationship between wholesale and retail prices for households is weaker in
countries with price regulation.
160
Whilst retail household prices appear to be positively
related to wholesale prices for both groups of countries, the link for countries with price
regulation is less pronounced based on the estimated coefficients. This indicates that
regulated prices may weaken the link between wholesale prices and retail prices, or at least
tend to delay it. While this could delay or prevent the increase of household prices when
wholesale prices are high, it may also imply that households cannot fully benefit from a
decrease in wholesale prices.
Ensuring an effective link between wholesale and retail energy prices is key for delivering
the benefits of the wholesale energy market competition to energy consumers. To give a
sense of perspective, the European Commission 2014 report on the "Progress towards
completing the Internal Energy Market" found that wholesale electricity prices in the EU
declined by one-third and wholesale gas prices remained stable between 2008 and 2012.
161
Protection of vulnerable consumers and the energy poor
Continuous price regulation in some Member States is justified on the grounds of
protection of vulnerable consumers and the energy poor. In this context, it is argued that
energy price regulation is necessary to protect customers from the market power of energy
monopolies. This is because an unregulated monopoly could charge customers a price
much higher than its production cost. Similar arguments have been put forward with
respect to vulnerable customers.
However, evidence shows that blanket energy price regulation is not an optimal protection
measure for vulnerable consumers from the point of view of efficient allocation of public
resources. The above is based on the assumption that deficits associated with energy prices
regulated below-costs are financed from the State budget. In fact, under regulated energy
price environments public resources are often used to support all households, regardless of
their income or vulnerability. The efficiency of such approach is questionable as even the
distribution of benefits associated with low regulated energy prices results in higher
income groups receiving higher public support than lower income groups, as evidenced in
Figure 7 below, which shows that top earners in most Member States consume more
electricity than the lowest income groups. Higher energy consumption among top income
groups occurs despite the assumed higher efficiency of dwellings inhabited by these
income groups and higher energy efficiency of appliances typically used.
160
161
"The impact of oil price on EU energy prices"
(2014) European Parliament
"Communication
on progress towards completing the Internal Energy Market"
European Commission
COM(2014) 634 final
417
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0117.png
Figure 7: Electricity consumption per income group
Source: DG ENER
It can be argued that if resources previously allocated to finance below-cost price
regulation are used for targeted support of vulnerable consumers, a higher impact can be
achieved in terms of the protection of vulnerable consumers. This conclusion is supported
by evidence presented in Figure 8 which shows that consumers in unregulated price
markets feel more able to maintain an adequate level of heat during winter. This data also
shows that energy price regulation is not an effective means of addressing energy poverty.
Figure 8: Percentage of population unable to keep their homes warm during winter,
2014
Source: DG ENER
Non-price competition/innovation
Although low prices are the most commonly thought of way for firms to attract consumers,
suppliers may also seek to distinguish their products by other means. These may include
418
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0118.png
quality of service, convenience, an environmentally sustainable product, or any other non-
price aspect that adds value for consumer and brings innovation to the retail energy market.
The diversity of products available in a market is therefore also a good indication of the
health of competition.
Conversely, when prices are kept artificially low customer surplus may be reduced as some
customers are able and willing to pay higher prices for better and more innovative energy
services. In that context regulated prices might deprive those customers from accessing
more offers and more innovative and complex services such as certified green energy
offers, loyalty programmes, access to new technologies such as smart metering and mobile
apps, or non-financial benefits such as free maintenance of water boilers or home insurance
which are delivered by some retailers within the energy market.
In fact, data displayed in Figure 9 shows that customers in markets where prices are not
regulated have access to more diverse services and a wider choice of offers. Dual fuel
offers are available in 75% of the markets without price regulation and only in 44% in
those with regulated prices. Certified green energy offers are available in 92% of the
markets without price regulation and in 67% of the markets with regulated prices. Only
50% of markets with regulated prices offer energy pricing alternatives, while this option is
available in 92% of markets without price regulation.
Figure 9: Share of Member States with dual-fuel, certified green and variety of
energy pricing tariffs
Source: ACER
Markets without price regulation are also characterised by retail energy markets delivering
more financial and non-financial benefits and a greater availability of information and
communication technologies in association with energy contracts, as showed in Figure 10.
419
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0119.png
Figure 10: Retail market innovation
number of
electricity
only
offers
dual-fuel
available
certified
green
energy
offers
available
Yes
Yes
N/A
N/A
Yes
N/A
Yes
No
Yes
Yes
Yes
Yes
No
No
Yes
Yes
Yes
N/A
N/A
N/A
Yes
Yes
Yes
N/A
No
Yes
Yes
Yes
availability
of non-
price
financial
benefits
Yes
Yes
availability
of non-
financial
benefits
ICT
offer
Variety of
energy
pricing
alternatives
available to
consumers
Yes
Yes
No
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
No
No
No
Yes
Yes
Yes
No
No
No
Yes
Yes
Austria
53
Belgium
20
Bulgaria
1
Croatia
4
Czech
69
Republic
Cyprus
1
Denmark
83
Estonia
40
Finland
401
France
22
Germany
404
Great Britain
69
Greece
7
Hungary
4
Ireland
9
Italy
23
Luxembourg
18
Latvia
1
Lithuania
1
Malta
1
Netherlands
86
Poland
133
Portugal
34
Romania
1
Slovakia
23
Slovenia
5
Spain
54
Sweden
378
Source: ACER/CEER, VaasaETT
Yes
Yes
N/A
N/A
Yes
N/A
No
Yes
No
Yes
No
Yes
No
No
Yes
Yes
Yes
N/A
N/A
N/A
Yes
No
Yes
N/A
No
Yes
Yes
No
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Data presented above further confirms that markets where prices are set according to
supply and demand perform better in terms of bringing innovation to the retail energy
market– deliver greater choice and more innovative services and offers, than markets
where energy prices are regulated.
Customer switching activity
Customer switching activity puts competitive pressure on suppliers and therefore is an
important indicator of competition within the market.
ACER data presented in Figure 11 and 12 shows that markets with no price regulation
show higher customer activity both in terms of external switching (movement between
suppliers) and internal switching (movement between alternative products from the same
supplier) than markets with regulated prices.
On the other hand, electricity switching rates in markets with price regulation are
significantly lower. In Malta, Cyprus, Bulgaria, Latvia, Lithuania and Romania switching
420
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0120.png
rates remained at zero, mainly due to the lack of retail competition or very weak
competition and limited choice available to customers.
Figure 11: Customer external switching rates
16%
Rate of switching (%)
14%
12%
10%
8%
6%
4%
2%
0%
8%
6%
GB
EE
ES
NL
HU
LU
PL
PT
EL
IE
IT
Source: ACER
Customers in regulated price markets also display lower internal switching rates
–
a
phenomenon which can be explained by more restricted choice of offers in those markets.
In fact, Figure 12 shows that 75% of customers in markets with price regulation have never
switched contracts, in comparison to 32,5% in markets with no price regulation.
Figure 12: Proportion of customers who have never switched contract (internal
switching)
Source: ACER
Low switching rates in markets with price regulation represent a lost opportunity for
savings for many customers.
In fact in most markets customers can derive
substantial benefits from switching,
as illustrated in Figure 13. In markets without
price regulation customers can save on average 23% of their energy bill by switching
from the incumbent. Potential savings in markets with price regulation amount to
12% on average.
421
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
WA (non-reg)
WA (reg)
FI
DE
AT
SI
BE
SE
DK
CZ
FR
SK
 kom (2016) 0864 - Ingen titel
1730778_0121.png
Figure 13: Savings on incumbent
Savings on incumbent (%)
40%
35%
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
23%
12%
Source:
ACER
Assessment of customer experience
Customer experience is key to appraising the comparative performance of different types
of markets. Variables which compose customer experience and are analysed in this Section
include comparability of offers, trust in retails to respect the rules and regulations
protecting customers, the degree to which customer expectations are met and customer
satisfaction with the choice.
The above variables are measured by the Consumers, Health, Agriculture and Food
Executive Agency (CHAFEA) as part of the Market Monitoring Survey. The report
surveys 42 markets in the 28 Member States of the EU, as well as Norway and Iceland,
with the general aim to assess customer experiences and the perceived conditions of the
customer markets in all EU Member States. The assessment is measured through a "Market
Performance Indicator" (MPI) which is a composite index indicating how well a given
market performs, according to customers.
The overall MPI score for the market for “electricity services” across the EU is 75.3 points,
based on a maximum possible score of 100 points. Electricity services market scored 3.3
points lower than the services markets average. This makes it a low performing services
market, ranking 26th of the 29 services markets. The overall MPI score for the market for
“gas services” at EU28 level is 78.1, which is lower than the services markets average
score by 0.5 points. This makes it a middle to high performing services market, ranking
14th of the 29 services markets.
In comparison to the services markets average, the “electricity services” market has a
higher proportion of complaints and higher detriment score, measuring customers
experiencing problems with the products or services they purchased. The electricity
services market also performs worse than average in terms of the comparability of offers,
customers' trust in suppliers, the capacity to meet customers' expectations, and the ability
of the market to deliver sufficient choice. It is also characterised by a lower than average
switching activity.
At the same time, there is a 34.1 point difference in MPI between the top ranked country
and the lowest ranked country, indicating that there are considerable country differences
422
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
AT
BE
CZ
DE
EE
FI
IE
LU
NL
SE
SI
UK
WA (non-reg)
BG
CY
DK
ES
FR
HR
HU
IT
LT
MT
PL
PT
RO
SK
EL
LV
WA (reg)
 kom (2016) 0864 - Ingen titel
1730778_0122.png
to be taken into account when evaluating the electricity services market. The market scores
higher in the EU15 and lower in the EU13 compared to the EU28, while performing
especially well in the Western and Northern regions.
In comparison to the services markets average, the “gas services” market scores above the
average for the problems, detriment and expectations components. However, the
comparability and choice components are lower. The “gas services” market also has a
lower than average switching proportion.
Figure 14: Market Performance Indicator for electricity markets with and without
price regulation
82
80
78
76
WA (non-reg)
74
72
72
70
68
WA (non-reg)
Source: EC, DG JUST
162
WA (reg)
WA (reg)
80
The MPI scores for 2015 indicate a clear advantage of markets without price regulation
over those with regulated prices in terms of customer satisfaction. As shown in Figure 14,
markets without price regulation scored on average 80 points, while those with price
regulation scored 72. The advantage of markets without price regulation over those with
regulated prices was equally spread across all five components analysed, as shown in
Figure 15.
162
"Monitoring Customer Markets in the European Union 2013
–
Part III (Electricity)"(2013)
European
Commission
423
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0123.png
Figure 15: Market Performance Indicator for electricity markets per component for
electricity markets with and without price regulation
2,5
2,01,9
1,5
1,3
1,7
1,6
1,4
1,2
WA (non-reg)
WA (reg)
2,0
1,4
1,2
1,5
1,0
0,5
0,0
compare
trust
prob_det
expect
choice
Source: EC, DG JUST
The 2013 edition of EU market surveys provides an insight into general customer
satisfaction with the electricity market, as shown in Figure 15. Markets without price
regulation scored 7.6 and 7.8 on average for customer satisfaction with the offers on the
market and with the variety of suppliers, while markets with price regulation scored 6.8
and 5.8 points respectively. This data confirms a clear advantage of markets without price
regulation from the customer point of view.
Figure 16: Customer satisfaction with the electricity market
Source: European Commission (2013)
Conclusion of the assessment
In this Section we have methodically screened the performance of markets with and
without price regulation based on a number of competitiveness indicators and market
surveys which measure market competitiveness and customer satisfaction with the
electricity and gas markets. The analysis indicates that electricity and gas markets where
424
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0124.png
prices are set by supply and demand are able to deliver better and more diverse services to
the customers. In fact, despite slightly higher prices in markets without price regulation,
customers in these markets show a higher level of satisfaction as they have a wider choice
and access to better quality services which are more reflective of their preferences.
The analysis nonetheless suffers from clear limitations such as selection bias. It might well
be that the Member States in the category of non-regulated prices have lower market
concentration, higher switching rates or better customer experience for reasons different
than price regulation. However, despite the methodological weaknesses of the analysis, the
results are comparable with the results of research carried out by ACER in its Market
Monitoring Report.
In fact, in order to achieve a full picture of energy market competitiveness which is not
dependent on a single indicator ACER
produced a single composite index (‘ACER Retail
Competition Index
– ARCI’) which provides a comprehensive picture of the relative
competition performance of the retail electricity and gas household markets in each
Member State. The indicator combines several elements, including market concentration,
entry/exit activity, switching, consumer satisfaction and mark-ups (see Table 2 below). As
such the indicator covers all of the individual components used to analyse the performance
of markets with and without electricity and gas price regulation.
Table 2: Competition indicators included and the assessment framework for the
composite index
Indicator
Concentration ratio, CR3
Scope
National
Low score = 0
Market share of
three largest
suppliers 100%
Low number of
suppliers
Difficult to compare
prices
Net entry zero
High score =10
Market share of three
largest suppliers 30%
or less
High number of
suppliers
Easy to compare
prices
Net entry of five or
more nationwide
suppliers
Annual switching rate
20% or more
All have <1/3 not
switched
Five or more offers
per supplier
Market fully meets
expectations
Low mark-up
Weight
10
Number of suppliers with market
share > 5%
Ability to compare prices easily
Average net entry (2012-2014)
National
National
National
10
10
10
Switching rates (supplier + tariff
switching) over 2010-2014
Non-switchers
Number of offers per supplier
Does the market meet
expectations
Average mark-up (2012–2014)
adjusted for proportion of
consumers on non-regulated
prices
Source: ACER
National
National
Capital
city
National
National
Annual switching
rate zero
None have switched
One offer per
supplier
Market does not
meet expectations
High mark-up
10
10
10
10
10
According to the index, the most competitive markets for households are electricity
markets in Sweden, Finland, the Netherlands, Norway and Great Britain and gas markets
in Great Britain, the Netherlands, Slovenia, the Czech Republic and Spain. The index
shows weak retail market competition in electricity household markets in Latvia, Bulgaria
and Cyprus and gas household markets in Lithuania, Greece and Latvia.
425
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0125.png
The results of the ACER analysis, presented also in Figure 14, indicate that the level of
competition in markets with regulated prices for households is much lower than in
countries that do not regulate electricity and gas prices, with the exceptions of the gas
markets in Spain and Denmark. Therefore the ACER indicator confirms the overall
findings of the analysis of the performance of markets with and without price regulation
carried out in the present Section.
Figure 17: ACER Retail Competition Index (ARCI) for electricity and gas
household markets
–
2014
Source: ACER
426
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0126.png
Comparison of options for price deregulation
Table 3: General comparison of the options
0. Non legislative:
Making
use
of
existing
acquis
to
continue bilateral
consultations and
enforcement
actions,
accompanied by EU
guidance
End date to be set by
each Member State in
compliance with EU
acquis to be assessed
on
case-by-case
basis.
1. Legislative
obligation:
No
price
regulation but
social
tariffs
allowed
2a
Legislative
obligation:
Price regulation
allowed below
certain
consumption
threshold
2b.
Legislative
obligation:
Cost
covering
price regulation
allowed without
limitation as to
the amount of
energy consumed
End date set in EU
legislation for price
regulation below
costs
No end date for
price
regulation
below the defined
threshold.
Time
limitation
End date set in
EU legislation
for all price
regulation
(except social
tariffs)
Limitation as
to the scope of
beneficiaries
Methodology
for setting the
price
Scope
of
beneficiaries to be
defined by each
Member State in
compliance with EU
acquis to be assessed
on
case-by-case
basis.
Methodology to be
defined by each
Member State in
compliance with EU
acquis to be assessed
on
case-by-case
basis.
No beneficiaries
of
price
regulation.
Social
tariffs
allowed
as
transitional
measure
No provisions
as
regards
methodology
(cost coverage
etc.) necessary
as all price
regulation is to
be phased out.
End date set in EU
legislation
for
price regulation
above a certain
consumption
threshold.
No end date for
price regulation
below the defined
threshold.
Beneficiaries of
price regulation
limited
to
households below
a
certain
consumption
threshold
Methodology to
be defined by
each
Member
State
in
compliance with
EU acquis to be
assessed on case-
by-case basis.
No limitation as
regards the scope
of beneficiaries (all
households).
Allows a case-by-
Level of
harmonisation
case assessment of
the price regulation
regimes as well as of
the eventual
exemptions.
Harmonised end
date for blanket
price regulation.
Allows a case-
by-case
assessment of
the exemptions
to
price
deregulation
(targeted price
regulation for
vulnerable
consumers).
Harmonised end
date for blanket
price regulation.
Harmonised
exemptions
to
price deregulation
(based
on
a
consumption
threshold).
Principles ensuring
cost coverage (e. g.
at least positive
mark-ups or costs
of an efficient
supplier plus a
reasonable profit
margin) to be
defined in EU
legislation while
concrete
methodologies
would be
developed at
national level.
Harmonised end
date for blanket
price regulation.
Harmonised
exemptions to
price deregulation
(based on a price
threshold).
427
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
Option 0
Option 0 consists of making use of the existing
acquis
to continue bilateral consultations
and enforcement actions to restrict price regulation to proportionate situations justified by
general economic interest.
Costs
The main costs of this option are those of adapting price regulation regimes in Member
States following a case by case assessment by the Commission services via bilateral
consultations followed by infringement actions where appropriate based on the current EU
acquis. This option would result in different national regimes of price intervention (in terms
of applicability in time, to the scope of beneficiaries and definition of price regulation) or
a complete removal thereof, assessed on a case-by-case basis in terms of compliance with
the EU acquis including as regards proportionality of the measure for achieving the
pursued general interest objectives. It is therefore difficult to estimate the costs associated
with the implementation of each regime.
The resulting diversity of regimes would create/maintain uncertain prospects for
businesses which discourages cross-border supply activities.
The lack of a level playing field across the EU in terms of price setting procedures
translates into administrative costs for entering and conducting business in new markets.
Member States with no price regulation will not be affected by the implementation of this
option. Therefore no economic impacts are to be expected.
Benefits
While overall the competition on retail markets would improve compared to the existing
situation due to the limitation or complete removal of price regulation in Member States,
market distortions would continue to exist impacting national markets as well as cross-
border competition.
Consumers' benefits linked to price deregulation (more consumer choice for suppliers and
energy service providers, better services and resulting increased consumer satisfaction)
would vary according to the national price intervention regime/the lack thereof.
Option 1
Option 1 consists of requiring Member States to progressively phase out price regulation
for households by a deadline specified in new EU legislation, while having the right to
allow transitional, targeted price regulation for vulnerable customers (e. g. in the form of
social tariffs).
Social tariffs are a form of regulated prices, usually below market level, available to
specific groups of vulnerable customers, notably the energy poor, to ensure that these
customers have access to energy at affordable prices.
A social tariff can apply to electricity and/or gas (or any other fuel). The illustrative
analysis of costs and benefits for this option will focus on electricity.
428
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0128.png
Costs
The main cost components of this option are associated with the potential introduction of
a targeted price regulation for vulnerable consumers, such as through the social tariff.
Member States already applying social tariffs (BE, BG, CY, FR, DE, GR, PT, RO, ES,
UK) would not be affected by the implementation of this option.
The estimation of cost and benefits of Option 1 is made in comparison to the free market
option (with no regulated prices of any kind or social tariff) for Member States which
currently do not use "social tariffs" as a form of protection of vulnerable consumers.
The estimations provided are for illustrative purposes only. The final amount of targeted
electricity and/or gas, number of households and level of subsidies can be varied depending
on the preferences of the Member State implementing the measure.
Table 4 below shows the average annual electricity consumption and average annual
expenditure on electricity which are the two variables used to estimate the cost of
introducing social tariffs.
Table 4: Average annual household electricity consumption and expenditure, 2014
Member State
BG
CY
DK
ES
FR
GR
HR
HU
IT
LT
LV
MT
PL
PT
RO
SK
Source: INSIGHT_E
Average annual electricity
consumption
kWh/HH
3836
4935
4288
3855
5204
3953
3712
2522
2494
2025
2099
4266
2010
2935
1590
2682
Average annual expenditure
on electricity
EURO/HH
275
920
439
687
499
471
374
233
375
180
180
553
221
377
144
330
The cost of implementing a social tariff depends on the scope of beneficiaries, the
difference between the market-based price of energy and the advantageous price set for the
beneficiaries of social tariffs as well as on the amount of energy consumption to be covered
by the social tariff.
For the purpose of this analysis, the beneficiaries of the social tariff are defined as the share
of the population unable to keep warm (according to EU-SILC 2014). The level of the
social tariff is defined as 20% less than the regular electricity price (which is shown as the
average 2014 nominal price without taxes and levies). There would be no cap on the
amount of energy consumption covered by the social tariffs for the defined beneficiaries.
429
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
However, in reality Member States would be able to decide on all of the above elements
according to their national circumstances. This means that Member States would be able
to decide on a more restraint or larger group of beneficiaries, a specific discount level
defining the price level under social tariffs and/or set a cap on energy consumption beyond
which market prices apply.
Within Option 1 various sub-options can be explored with respect to financing the
implementation of the social tariffs, such as:
A- financing only by non-vulnerable households,
B- financing by all households and
C- financing by all electricity customers (including industry, commercial sectors,
and all households including vulnerable households).
However, it is important to bear in mind that a levy only on industrial customers would not
be desirable as this would make industry less competitive. The final tariff would still vary
for vulnerable (eligible households) and other household customers as the base price for
the regular tariff and the social tariff remains the same in each instance. Of course, the
social tariffs can also be financed in part or in whole through the government budgets and
this option could be explored in addition (i.e. financial transfers).
The table and figures below show the costs or savings (net benefits) of the introduction of
a tariff, with savings arising for households receiving the social tariff and costs for those
paying for the tariff measure. Costs and benefits are calculated for each of the above
defined sub-options for financing: A, B and C.
As shown in the summary table below, the costs to finance the social tariff will see an
increase in the electricity bills from 1-14% depending on electricity prices, share of
vulnerable consumers and average electricity consumption in each Member State. The
increase in the electricity bills as result of the implementation of the measure is expected
to be highest in BG, GR, CY and PT if the financing is done via all non-vulnerable
households or all households. Financing the measure across all electricity consumers
allows alleviating the increase in energy bills thus limiting the impact on individual
customers.
430
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0130.png
Table 6: Comparison of differences in tariffs to vulnerable and non-vulnerable
households for Option 1 according to different financing models
A - Financing across all non-
B - Financing across all
C - Financing across all
vulnerable households
households
electricity consumers
Vulnerable
Vulnerable
Vulnerable
Non-vulnerable
Non-vulnerable
Non-vulnerable
Households
Households
Households
Households
Households
Households
(social
(social
(social
(regular tariff)
(regular tariff)
(regular tariff)
tariff)
tariff)
tariff)
BG
CY
DK
ES
FR
GR
HR
HU
IT
LT
LV
MT
PL
PT
14%
8%
1%
2%
1%
10%
2%
3%
4%
7%
4%
6%
2%
8%
-20%
-20%
-20%
-20%
-20%
-20%
-20%
-20%
-20%
-20%
-20%
-20%
-20%
-20%
-20%
8%
6%
1%
2%
1%
7%
2%
2%
4%
5%
3%
4%
2%
6%
2%
-10%
-13%
-19%
-17%
-19%
-12%
-18%
-17%
-16%
-13%
-16%
-14%
-18%
-13%
-17%
3%
2%
0%
1%
0%
2%
1%
1%
1%
2%
1%
1%
0%
1%
1%
-16%
-18%
-20%
-19%
-19%
-17%
-19%
-19%
-19%
-18%
-19%
-18%
-19%
-18%
-19%
3%
RO
Source: INSIGHT_E
Figure 17 and 18 further explore the nominal costs and benefits per vulnerable and non-
vulnerable household.
Figure 17: Comparison of annual costs per non-vulnerable household to finance
social tariffs implemented under Option 1(EUR per household per annum)
Source: INSIGHT_E
431
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0131.png
Figure 18: Comparison of annual savings per vulnerable household benefiting from
social tariffs implemented under Option 1(EUR per household per annum)
Source: INSIGHT_E
Other costs related to the implementation of this option would be those associated with the
adoption and implementation of deregulation roadmaps in Member States applying price
regulation.
Benefits
This option delivers benefits linked to price deregulation in the form of a more competitive
retail energy market and the associated wider consumer choice of suppliers and energy
service providers and access to a larger variety of products, services and offers, thus
increasing consumer satisfaction, as demonstrated earlier in the present Section, under
subheading 5a.
At the same time the option to provide transitional and targeted price regulation to clearly
defined vulnerable consumer groups would provide the means for achieving the objective
of consumer protection during the period of market adjustment. After the period of
adjustment, transitional price regulation for targeted groups could be replaced by social
policy measures.
Moreover, suppliers would benefit from a level playing field across the EU in terms of a
regulatory environment which would encourage cross-border competition. For suppliers in
Member States applying price regulation, implementation of this option would lead to a
decrease in total costs due to the removal of compliance costs related to setting and
submitting for approval/applying regulated prices as set by the national authorities.
Allowing regulated prices (e. g. in the form of social tariffs) targeted at specific groups of
vulnerable consumers, notably the energy poor, would also contribute to ensuring universal
432
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0132.png
access to affordable energy services as required under UN-backed Sustainability
Development goals.
Summary of costs and benefits for Option 1
The table below summarises the costs and benefits associated with the implementation of
Option 1. It reveals that costs of the measure would vary depending on the chosen financing
model, leading to an increase in the electricity tariff of non-eligible customers by 1-15%.
Vulnerable households eligible for social tariff save on average 20% on their annual
electricity bills.
Table 7: Option 1 - Cost and Benefits
Costs
Measure
Targeted price
regulation for
vulnerable
customers in the
form of social
tariffs.
Description
Social tariffs in place
for a targeted
customer group
(usually less than
20% of the
population)
accompanying the
transition towards
market base prices.
Quantification
Depending on
the financing
model (the
current
examples are
cost-neutral to
government),
those on the
regular tariff
will see an
increase in
their electricity
tariff by 1-
15%.
Benefits
Description
Allowing price
regulation exclusively
for clearly defined
vulnerable customer
groups would ensure
that it is a targeted and
transitional measure.
Benefits linked to
price deregulation:
wider consumer
choice, innovation in
the retail energy
market linked to
increased competition,
better quality of
services, increased
consumer satisfaction.
Quantification
Vulnerable
households save
20% on their
annual electricity
bills.
Box 1: Impacts on different groups of consumers
The benefits of the measures contained in the preferred option (Option 1), described in detail in the
preceding pages, accrue overwhelmingly to households who would qualify for targeted social tariffs and/or
other targeted social support measures i.e. vulnerable and/or energy poor consumers. The biggest losers
from the measures in the preferred option are high-volume, often higher-income consumers who have in
the past benefitted from retail prices that have been set at artificially low levels (see Table 6 and Figures 17
and 18, above). The measures can therefore be considered progressive in nature i.e. they tend to
redistribute surplus from relatively high-income ratepayers to increase the welfare of lower-income
ratepayers.
Nevertheless, it is also important to remember that in Member States where costs of social tariffs are covered
through a tax or a levy on the electricity bill, the social tariff regime places a disproportionately high burden
on low-income consumers who are just above the threshold for qualifying for a social tariff. In contrast,
direct financial support that is financed through income taxation would avoid this and place a higher burden
on those with broader shoulders. For this reason, when it comes to the most effective means of fighting
433
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0133.png
energy poverty, well-targeted social policy measures and investments in energy efficiency, rather than social
tariffs, are essential
Option 2a
Option 2a consists of requiring Member States to progressively phase out price regulation
for households above a certain consumption threshold to be defined in new EU legislation
or by Member States, with support from Commission services.
Costs
The main costs associated with the implementation of this option are linked to the financing
of the subsidised energy amount for all beneficiaries of the measure (all households).
For the purpose of this analysis we assumed that all Member States applying price
regulation in the energy markets would deliver 30% of consumption of electricity for all
households at a reduced rate of 20% less than the average regular price
163
. This level was
selected based on the current implementation of various social tariff schemes across
Member States, which point towards a reduction in the overall annual bill of 10-30%.
However this scheme applies to all households rather than vulnerable households only.
These values are for illustrative purposes only and the final amount can be varied
depending on the preferences of the Member States implementing the measure.
Under Option 2a the electricity consumption is subsidised for all households for the first
30% and the costs are evenly spread across all consumers.
The impacts on the final consumer bill are presented per Member State in the graphs below
–
there is very little impact on the final bill of the households due to the fact that the
discount is available to all households and is also financed by all households.
However, the average final bill would be lower for households consuming less electricity
than the average and higher for households consuming more than the average. Therefore,
this option might incentivise households to lower their energy consumption but it could
also penalise lower income households which use more electricity than the average due to
poor building insulation, lower energy efficient appliances or higher than average people
per household.
163
Eurostat, 2014, Average prices excluding all taxes and levies - based on average consumption
434
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0134.png
Figure 19: Option 2a cross-country comparison of average annual electricity costs
per household before and after the introduction of a subsidised amount of electricity
500
€
400
before policy
measure
Bulgaria
300
after policy
measure
200
100
0
0
1400
€
1200
1000
800
600
400
200
0
0
500
€
400
before policy
measure
1000
2000
3000
4000
5000
Kw/h
6000
after policy
measure
1000
2000
3000
4000
5000
Kw/h
6000
Cyprus
before policy
measure
Denmark
300
after policy
measure
200
100
0
0
1000
2000
3000
4000
5000
Kw/h
6000
435
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0135.png
500
€
400
before policy
measure
Spain
300
after policy
measure
200
100
0
0
500
€
400
before policy
measure
1000
2000
3000
4000
5000
Kw/h
6000
France
300
after policy
measure
200
100
0
0
1000
2000
3000
4000
5000
Kw/h
6000
436
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0136.png
500
€
400
before policy
measure
Greece
300
after policy
measure
200
100
0
0
500
€
400
before policy
measure
1000
2000
3000
4000
5000
Kw/h
6000
Croatia
300
after policy
measure
200
100
0
0
1000
2000
3000
4000
5000
Kw/h
6000
437
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0137.png
500
€
400
before policy
measure
Hungary
300
after policy
measure
200
100
0
0
500
€
400
before policy
measure
after policy
measure
1000
2000
3000
4000
5000
Kw/h
6000
Italy
300
200
100
0
0
1000
2000
3000
4000
5000
Kw/h
6000
438
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0138.png
600
€
500
400
300
200
100
0
0
500
€
400
before policy
measure
1000
2000
after policy
measure
before policy
measure
Lithuania
3000
4000
5000
Kw/h
6000
Latvia
300
after policy
measure
200
100
0
0
500
€
400
before policy
measure
after policy
measure
1000
2000
3000
4000
5000
Kw/h
6000
Malta
300
200
100
0
0
1000
2000
3000
4000
5000
Kw/h
6000
439
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0139.png
500
€
400
before policy
measure
after policy
measure
Poland
300
200
100
0
0
500
€
400
before policy
measure
after policy
measure
1000
2000
3000
4000
5000
Kw/h
6000
Portugal
300
200
100
0
0
1000
2000
3000
4000
5000
Kw/h
6000
440
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0140.png
500
€
400
before policy
measure
after policy
measure
Romania
300
200
100
0
0
500
€
400
before policy
measure
after policy
measure
1000
2000
3000
4000
5000
Kw/h
6000
Slovakia
300
200
100
0
0
1000
2000
3000
4000
5000
Kw/h
6000
Benefits
In comparison to Option 1 the benefits linked to price deregulation under Option 2a can be
expected to be fewer as a greater share of the retail market is covered by regulated prices
under Option 2a.
However, in comparison to the current situation, if the consumption threshold beyond
which prices are de-regulated was lowered across Member States currently applying price
regulation, the net effect of the measure would be beneficial in terms of introducing more
competition in the retail energy markets.
441
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0141.png
Comparison between Option 1 and Option 2a
Option 1 specifically targets the support measures for vulnerable consumers, such that the
discounted rate for purchasing electricity is only available to vulnerable consumers. Option
1 also allows greater benefits from the energy market opening in terms of more
competition, more consumer choice, better quality of services and more innovation. On the
contrary, under Option 2a a lower amount of energy will be subsidised but the
subsidy/support will be delivered to all households, regardless of their situation. This
means lower support for vulnerable consumers under Option 2a, as shown in Table 8 which
indicates the total amounts of electricity subsidised for vulnerable consumers under Option
1 and 2a. At the same time Option 2a delivers lower degree of market opening and therefore
lower competition within the market and fewer benefits associated with market
competition.
Table 8: Comparison of residential TWh subsidised in comparison to total
residential TWh consumed
Option 1
Total
electricity
subsidised
Share of
for
vulnerable Total HH
vulnerable
households consumption consumers
TWh
BG
CY
DK
ES
FR
GR
HR
HU
IT
LT
LV
MT
PL
PT
RO
SK
41%
28%
3%
11%
6%
33%
10%
12%
18%
27%
17%
22%
9%
28%
12%
6%
10.6
1.4
10.1
70.7
149.4
17.2
5.6
10.4
64.3
2.7
1.7
0.6
28.0
11.9
11.9
4.9
401,5
TWh
4.3
0.4
0.3
7.8
8.8
5.6
0.5
1.2
11.6
0.7
0.3
0.1
2.5
3.4
1.5
0.3
49,4
Option 2a
Total
electricity
subsidised
-
vulnerable
households
TWh
1,3
0,1
0,1
2,4
2,6
1,7
0,2
0,4
3,5
0,2
0,1
0,0
0,8
1,0
0,4
0,1
14,8
Total
electricity
subsidised non-
vulnerable
households
TWh
1,9
0,3
2,9
18,8
42,2
3,5
1,5
2,8
15,8
0,6
0,4
0,1
7,6
2,6
3,1
1,4
120,4
Total
electricity
subsidised for
all households
TWh
3.2
0.4
3.0
21.2
44.8
5.2
1.7
3.1
19.3
0.8
0.5
0.2
8.4
3.6
3.6
1.5
135,2
13%
EU-16 Totals
Source: INSIGHT_E
While the total subsidised energy is much higher in the case of Option 2a, the amount of
energy subsidised for vulnerable customers is lower which indicated a lack of targeting
of the measure.
As regards administrative costs for implementing the measures, the blanket approach (lack
of identification of a targeted group of beneficiaries) used in Option 2a does not require
resources for the identification of vulnerable households. However, these administrative
442
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0142.png
costs linked to the identification of vulnerable consumers can be expected to be minimal
as authorities responsible for identifying socially vulnerable groups are already operating
in all Member States.
Finally, a comparison of costs between these two options needs to take into account that,
in the case of Option 1, costs associated with the implementation of social tariffs would be
limited in time due to the temporary nature of the measure, while in the case of Option 2a
there is no foreseen end-date for subsidising a specific amount of energy consumption.
Option 2b
Option 2b consists of requiring Member States to progressively phase out below-cost price
regulation for households by a deadline specified in new EU legislation
Costs
This option allows price regulation defined at levels that cover the costs incurred by the
energy undertakings, therefore no subsidisation is necessary. This option does not involve
financing of any new measure therefore a quantitative estimation of costs cannot be
performed.
Main costs would be linked to the adoption and implementation of roadmaps foreseeing
gradual achievement of cost-reflectiveness of price regulation in the Member States
concerned. The main and key challenge for the implementation of this option would be to
define methodologies for defining cost coverage of energy prices at EU level in a context
where cost structures of market actors are opaque. Moreover, ensuring cost-reflectiveness
by regulation would imply considerable regulatory and administrative impact.
Benefits
The main benefits of this option would be to limit the distortive effect of price regulation
and tackle tariff deficits.
However it is necessary to point to the potential risks associated with energy prices being
regulated below costs, such as the accumulation of tariff deficits.
In a study
164
carried out at the request of the European Parliament, a hypothetical case
study shows that in a country where the retail market price for electricity is 0.20 euro per
kWh for domestic customers and the regulated tariff is set at 0.18 euro per kWh, the tariff
deficit would be 0.02 euro per kWh. If there are 15 million domestic customers with an
average annual electricity consumption of 3 000 kWh, of whom 80 per cent are supplied
at the regulated tariff, the result would be a total tariff deficit of 720 million euro per year.
One may compare the size of the country in this hypothetical illustrative case (15 million
domestic customers) with a country of the size of Spain or Poland.
164
"Cost
of Non-Europe in the Single Market for Energy"
(2013) Institute for European Environmental
Policy
at
the
request
of
the
European
Parliament,
available
at:
http://www.europarl.europa.eu/RegData/etudes/etudes/join/2013/504466/IPOL-
JOIN_ET(2013)504466(SUM01)_EN.pdf
443
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0143.png
Figure 20: Tariff deficit
Source: European Parliament
165
Regulated end-user prices reflecting actual costs would ensure remuneration for the
suppliers/generators providing them some economic incentives for investment in new and
existing generation capacities and in demand reduction measures.
This option could be implemented by progressively increasing the level of regulated prices
in countries where they are not cost covering with the objective of achieving cost covering
and contestable end user prices. Provided that the level of regulated prices will ensure cost
coverage incurred by the suppliers subject to price regulation plus a reasonable profit
margin, such measure would stimulate the competition on the retail market by encouraging
new entries and allowing existing non-regulated suppliers to gain more market share by
proposing better offers to customers. Such incentives would however be limited, directly
dependent on the profit margin allowed through the chosen methodology.
It can be expected that benefits linked to enhanced competition on the retail market
resulting from the implementation of this option would be more limited compared to
Option 1 or 2a mainly due to the lack of limitation of allowed price regulation (as regards
the scope of beneficiaries or the regulated amount of energy) which would result in a more
important market distortion.
One example of above costs price regulation is through a cost-of-service regulation
166
,
under which a company is allowed to charge end customers its total incurred costs
(investment costs plus operation costs), where the investments costs include a fair return
on investment.
This example was studied by Pérez-Arriaga
167
who identified that the main advantage of
this type of regulation is that it ensures that customers do not overpay and investors are not
165
166
167
"The Cost of Non-Europe in the Single Market for Energy" (2013)
European Parliament
"
Regulation of the Power Sector"
(2013) Ignacio J. Pérez-Arriaga
"Regulation
of the Power Sector"
(2013) Ignacio J. Pérez-Arriaga
444
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0144.png
undercompensated at any given time. However there are also important risks and
disadvantages linked to such approach, as shown in the table below.
Cost-of-service regulation
Pros
Ensures a fair price at any given time (customers do
not
overpay
and
investors
are
not
undercompensated)
Ensures regulatory stability
Guarantees
cost
recovery
(via
suitable
remuneration), providing a favourable investment
climate, reducing capital costs
Guarantees high levels of security of supply for
electricity customers.
Cons/risks
Possible cost inflation due to :
- Information asymmetries: utilities have much
more precise cost and demand data than the
regulator, who needs them in the tariff review
process. Information may therefore be manipulated
by regulated companies to bring in higher revenues
that cannot subsequently be recorded as earnings,
but which can be earmarked for certain cost items
(such as higher salaries or a larger headcount).
- Lack of incentives for efficient management:
keeping costs as low as possible (for a given
amount and quality of service) calls for some effort
from company managers. Under the traditional
system of regulation, managers have no incentive
to make this effort since, if costs grow, revenues are
in principle automatically adjusted to absorb the
difference.
- Regulator capture: utilities usually have a wealth
of resources that can be deployed to influence
regulator decisions in their favour. This undue
influence on regulatory decisions, called
‘‘regulator capture’’, may be exerted in a variety of
ways, including all forms of lobbying,
communication campaigns, regulator hire by the
regulated utilities and vice versa (so-called
revolving doors).
Source: "Regulation of the Power Sector" (2013) Ignacio J. Pérez-Arriaga
It becomes clear that, while this type of price regulation might appear as keeping end
customer prices under control while allowing a fair remuneration for energy utilities, it is
not exempted from risks of abuse by utilities. Therefore, the objective of protecting
customers from possible abuse by utilities in setting the price which is sometimes invoked
as justification for maintaining some form of price regulation does not seem to be fully
ensured by implementing this option.
Subsidiarity
Different national approaches to opening of the market for electricity and gas supply to
households prevent the emergence of a genuine internal energy market for household
customers. More specifically, we observe a wide range of criteria for defining the
beneficiaries of price regulation (consumption threshold, in some cases combined with
vulnerability criteria).
Under the EU acquis (Art. 14 TFEU, Protocol on SGEI), the Commission has assumed the
role of the guardian of both free competition and general interest. The interpretation of the
Treaty by the Court of Justice has in some cases allowed a restriction on competition if
necessary for the accomplishment of special tasks. Moreover, the adopted and proposed
legislation in the field of regulated public services shows how both free competition and
445
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0145.png
restrictions on competition can have a place if required for the accomplishment of special
tasks.
The balance between both aspects is subject to the principle of proportionality, implying
that the restriction on competition should be no greater than is required to accomplish the
special tasks. In defining the proportionality principle, EU legislation can specify the scope
of beneficiaries for price regulation (consumption threshold) or the cost coverage
condition.
EU action obliging Member States to progressively adopt less restrictive measures to
achieve the objectives of general interest justifying price regulation is necessary in order
to minimize the negative effect of regulated prices which represent an important barrier to
retail competition, including cross-border. The added value of EU action with respect to
the deregulation of end-user electricity and gas prices has been highlighted by the
European Parliamentary Research Service in a study on "The Cost of Non-Europe in the
Single Market for Energy"
168
which considers the possibilities for gains and/or the
realisation of a 'public good' through common action at EU level in specific policy areas
and sectors. This study identifies regulated end-user prices among the areas that are
expected to benefit most from deeper EU integration, where the EU added value is
potentially significant.
Stakeholders' opinions
Public consultation
The outcome of a public consultation carried out by the European Commission from 22
January 2014 to 17 April 2014 has confirmed that market-based customer prices are an
important factor in helping residential customers and SMEs better control their energy
consumption and costs (129 out of 237 respondents considered that it was a very important
factor while other 66 qualified it as important for the achievement of the said objective).
Moreover, out of 121 respondents who considered that the level of competition in retail
energy markets is too little, 45 recognised regulation of customer prices as one of the
underlying drivers.
National Regulatory Authorities
ACER identifies price regulation as one of the barriers to entering retail energy markets,
in particular in Member States where regulated prices are set below cost levels, which
hampers the development of a competitive retail market. It shows that even in other
Member States where end-user prices are set with reference to wholesale prices, which is
the preferred approach, they may negatively impact the customers’ propensity to switch.
Therefore, ACER recommends that, where justified, regulated prices should be set at levels
which avoid stifling the development of a competitive retail market. They must be
consistent with the provisions of the Third Package, and should be removed as soon as a
sufficient level of retail competition is achieved.
168
http://www.europarl.europa.eu/RegData/etudes/etudes/join/2013/504466/IPOL-
JOIN_ET(2013)504466(SUM01)_EN.pdf
446
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0146.png
The body representing the EU's national regulatory authorities in Brussels,
CEER
(
The
Council of European Energy Regulators), identifies as well regulated end-user prices
among the barriers to entry for energy suppliers into retail gas and electricity markets
across the EU. It shows that in the situation where regulated prices are set below cost, or
with a too limited margin to cover the risk of activity, they discourage investments and the
emergence of newcomers.
In their reply to the question
“Do you consider regulated end-user
prices as a significant
barrier to entry for energy suppliers in your MS and have you taken initiatives to remove
it?”
included in a questionnaire
169
addressed by CEER to NRAs in 2016, NRAs from
countries with price regulation considered them as a significant barrier to entry for
alternative suppliers. All Member States, where NRAs consider regulated prices as a
significant barrier, are planning to remove them, at least for non-household customers.
In general, NRAs emphasised the need to
“facilitate the phasing out of regulated
end user
prices, as soon as practicable, whilst ensuring that customers are properly protected
where competition is not yet effective”,
as expressed in the conclusions of the ACER /
CEER Bridge to 2025.
As part of a roadmap for phasing-out regulated prices, most of the concerned NRAs state
that regulated prices should first be aligned with supply costs. They also point out the role
of the NRA to define the appropriate methodology and to control end-user prices evolution.
Some NRAs suggest that the final decision for end-user prices withdrawal should depend
on the level of competition in the market, which could be assessed by the NRA, like the
number of market participants and their market share, the transparency of structure and
rules of market functioning, a non-discriminatory treatment on the market.
Eventually, some NRAs note the need to protect vulnerable and low income household
customers.
Suppliers
EUROGAS
170
supports the distinction between regulated end-user prices and social
tariffs. It states that specific, time-limited and appropriate regulated end-user prices may
be necessary in circumstances where market forces are not yet in place (in pre-competitive
markets notably to ensure headroom for new entrants and to protect customers from market
abuse). They should then be generally widely available for customers in those Member
States, irrespective of their economic position and should not be set below market price or
below cost, to minimise distortions and barriers to entry. Social tariffs where they exist can
and should also be organized without market distortions. Member States should not be able
to use energy poverty definitions in such a way as to block market development.
169
"Benchmarking report on removing barriers to entry for energy suppliers in EU retail energy markets"
(2016) CEER, available at
http://www.ceer.eu/portal/page/portal/EER_HOME/EER_PUBLICATIONS/CEER_PAPERS/Custom
ers/Tab6/C15-RMF-70-03_BR_barriers_to_entry_for_suppliers_1-Apr-2016.pdf
170
Eurogas press release available at:
http://www.eurogas.org/uploads/media/2015-June_-
_15PP282__Eurogas_Position_Paper_on_Vulnerable_Customers.pdf
447
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
In their contribution to the discussions within the workshop on the issue of electricity and
gas price (de)regulation organised by the European Commission in the context of the on-
going work on the future Electricity Market Design on 3 June 2016,
EURELECTRIC
agreed that regulated prices represent a barrier to entry to new suppliers and that they
discourage competition on services.
The European Parliament
In its April 2016 opinion on the Commission's Communication on Delivering a New Deal
for Energy Customers, the Parliament's
Committee on Industry, Research and Energy
(ITRE):
" Considers that phasing out regulated energy prices for customers should take
into account the real level of market competition in the Energy Union Strategy context,
which should ensure that customers have access to safe energy prices"
In its April 2016 opinion on the Commission's Communication on Delivering a New Deal
for Energy Customers, the Parliament's
Committee on the Internal Market and
Customer Protection (IMCO)
" Urges the Commission to take concrete action to better
link wholesale and retail energy markets, so as to better reflect falling wholesale costs in
retail prices and to achieve a gradual phasing-out of regulated prices, and to promote
responsible customer behaviour, by encouraging Member States to seek other means to
prevent energy poverty; recalls that prices set by the market benefit customers; ".
Consumer Groups
In their contribution to the discussions within the workshop on the issue of electricity and
gas price (de)regulation organised by the European Commission in the context of the on-
going work on the future Electricity Market Design,
BEUC
has argued that price regulation
should be a transitional tool before a certain level of competition is achieved on the retail
market. In any case, it stated that prices should be fixed at contestable levels to allow
alternative suppliers to compete. Moreover, an adequate market design should be the
prerequisite for price deregulation.
448
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
449
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
7.3. Creating a level playing field for access to data
450
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0150.png
Summary table
Objective: Creating a level playing field for access to data.
Option: 0
Option 1
BAU
-
Define responsibilities in data handling based on appropriate definitions in the
Member
States
are
primarily
EU legislation.
responsible on deciding roles and
-
Define criteria and set principles in order to ensure the impartiality and non-
responsibilities in data handling.
discriminatory behaviour of entities involved in data handling, as well as timely
and transparent access to data.
-
Ensure that Member States implement a standardised data format at national
level...
Pro
Pro
Existing framework gives more The above measures can be applied independently of the data management model
flexibility to Member States and NRAs that each Member State has chosen.
to accommodate local conditions in The measures will increase transparency, guarantee non-discriminatory access and
their national measures.
improve competition, while ensuring data protection.
Con
The current EU framework is too
general
when
it
comes
to
responsibilities and principles. It is not
fit for developments which result from
the deployment of smart metering
systems.
Con
Option 2
-
Impose a specific EU data management model (e.g. an
independent central data hub)
-
Define specific procedures and roles for the operation of
such model.
Pro
Possible simplification of models across EU and easier
enforcement of standardized rules.
Con
High adaptation costs for Member States who have already
decided and implementing specific data management models.
Such a measure would disproportionally affect those Member
States that have chosen a different model without necessarily
improving performance.
A specific model would not necessarily fit to all Member
States, where solutions which take into account local
conditions may prove to be more cost-efficient and effective.
Most suitable option(s): Option 1
is the preferred option as it will improve current framework and set principles for transparent and non-discriminatory data access from eligible market
parties. This option is expected to have a high net benefit for service providers and consumers and increase competition in the retail market.
451
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0151.png
Description of the baseline
Legal Framework
Annex I (paragraph 1(h)) of the Electricity Directive set some basic requirements regarding
data access from consumers and suppliers, and for the party responsible for data
management. It also provides that data should be shared by explicit agreement and free of
charge.
Article 41 of the Electricity Directive provides that Member States shall be responsible for
setting responsibilities of TSOs, DSOs, suppliers, customers and other market participants
with respect to contractual arrangements, commitments to customers, data exchange and
settlement rules, data ownership and metering responsibility.
Assessment of current situation
Access to consumption data will support the deployment of distributed energy resources
and the development of new flexibility services. This is true not only in relation to
flexibility that system operators may use when planning and operating their networks, but
also to flexibility that will be used in the wholesale markets for achieving wider system
benefits.
Currently different models for the management of data have been developed or are under
development across the EU (e.g. data handled by DSO, TSO, or an Independent Data Hub).
The activity of handling metering data is closely linked to the traditional metering activity.
In the majority of Member States DSOs are responsible for installing and operating the
smart metering infrastructure and they are also responsible for collecting consumption data
and consequently being involved in the handling process of these data. From a European
policy perspective it is important to ensure the impartiality of the entity which handles data
and to ensure uniform rules under which data can be shared.
Table 2 presents the responsible entity in each Member State for the metering activity
(market regulated/non-regulated), and the responsible entity for the roll-out of smart
metering infrastructure, as well as for access to data
171
.
171
"Benchmarking smart metering deployment in the EU-27 with a focus on electricity".
COM(2014) 356
final
452
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0152.png
Table 2: Data handling model in Member States with smart metering systems
(implemented or planned)
Source: COM(2014) 356 final
According to the above data in the majority of Member States the DSO is the responsible
party for metering activity and smart meters, as well as for data access. However, regarding
data access more recent information indicates that some Member States such as Finland
and Sweden are planning a central data hub under the responsibility of the TSO.
In general it is observed, that in countries with a high number of DSOs (e.g. SE, FI) it
seems to be more effective to introduce a central hub which will collect information from
several DSOs and provide access to these data to third parties. In such cases it is expected
that transparency and efficiency in the market will increase, while data will be easily
available to retailers and consumers.
However, different data handling models do not exclude responsibility and involvement of
DSOs, in most of the cases they are responsible for smart meters and participate in the data
handling process. This means that even if they are not assuming a central role in data
handling (e.g. the case of France or Italy), they will collect consumption data and
communicate these data to a central hub.
453
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0153.png
Requirements of Article 1(h) of Annex I have been subject to formal actions against several
Member States.
Deficiencies of the current legislation
The Evaluation illustrates how one of the main objectives of the Electricity Directive was
to improve competition through better regulation, unbundling and reducing asymmetric
information. In general, unbundling measures contribute to the contestability of the retail
market and thus facilitate market entry by third party suppliers.
The implementation of smart metering systems in 17 Member States will generate more
granular consumption data and new business opportunities in the retail market. Data
management models for handling those data are accompanied by procedures which
facilitate the retail market and improve processes such as switching, billing, settlements
etc.
The existing provisions of the Electricity Directive provide a general framework under
which each Member State can decide its data management model and procedures of data
handling. This framework however needs to be enhanced and updated in terms for instance
of eligible market parties who should be allowed to access consumers' data, authorization
of parties which handle data, simple procedures and interoperable data format. Indeed,
Section 7.3.6 and Annex IX of the Evaluation show that the current legislation was not
designed to address currently known challenges in managing large, commercially valuable
consumption data flows.
Presentation of the options
Under
Option 0
(BAU) Member States are responsible to develop their own data handling
model in line with rules of the Third Package and the related data protection legislation.
Member States are responsible for developing their own data handling models in line with
rules of the Third Package and the related data protection legislation.
A stronger enforcement and/or voluntary cooperation (Option 0+) has not been considered
as the existing EU framework provide only minimum requirements which need to be
updated in line with the developments in the retail market and the introduction of smart
metering systems, while voluntary cooperation would only deliver a set of best practices
that Member States could share, but it would not be adequate for setting the necessary
principle for a transparent and non-discriminatory exchange of data.
Under
Option 1
Member States will continue to be responsible for the development of the
data management model; however, more explicit requirements will be introduced
regarding responsibilities in data handling based on appropriate definitions and principles.
Also, criteria and measures will be introduced to ensure the impartiality and non-
discriminatory behaviour of entities involved in data handling, as well as timely and
transparent access to data. Member States will also have to implement a standardised data
format in order to simplify retail market procedures and enhance competition. Measures
under this option will also ensure data protection in line with the requirements of
Regulation (EU) 2016/679 on the protection of personal data and Recommendation
2014/724/EU on the Data Protection Impact Assessment Template for smart grids and
smart metering systems.
Under
Option 2
each Member State will have to implement a specific data management
model and procedures described in EU legislation.
454
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0154.png
Comparison of the options
a.
The extent to which they would achieve the objectives (effectiveness);
The main objective is to ensure that data handling models support equal data access and
facilitate retail market competition.
Option 0
would mean no further measures from the existing framework set in the
Electricity Directive. Member States would be practically completely responsible for
setting the general framework and the detailed regulation on data management models,
access rules and principles, roles and responsibilities of market actors etc.
Data access is highly important for supporting new services and for facilitating
competition, especially where smart metering systems exist. Option 0 would not guarantee
that national frameworks will accommodate all necessary elements in order for instance to
allow data access to a minimum of service providers besides suppliers.
Moreover, the current framework does not include any measures in order to avoid
privileged access to information from service providers which are affiliated to operators
which collect and store data (e.g. DSOs).
Option 1
seeks to address deficiencies of Option 0 by enhancing the existing framework
and set minimum requirements in terms of eligible market parties which should have
access to data, specific principles, and ensuring consumers' privacy. Moreover, this option
will set some minimum safeguards in order to avoid privileged access to data of
commercial value. The level of effectiveness of this option will depend on the specific
implementation in each Member State and the detailed national rules, as measures under
this option will set the basic EU framework.
Option 2
is considered to be less effective compared with the other two options as it will
entail full harmonisation of data management models and rules across EU Member States.
As in many Member States (e.g. UK, IT, FR, FI, NL, AT etc.) the data management models
have been already implemented or planned, the imposition of a different model (e.g.
independent data hub), would entail a restructuring of the existing models.
The above policy options were developed in the context of the Digital Single Market
172
and the Energy Union which include the strong and efficient protection of fundamental
rights in a developing digital environment. One of the objectives should be to ensure
widespread access and use of digital technologies while at the same time guaranteeing a
high level of the right to private life and to the protection of personal data as enshrined in
Articles 7 and 8 of the Charter of Fundamental Rights of the EU.
The policy options proposed (from compliance with data protection legislation and the
Third Package - Option 0; to further introduction of specific requirements on data handling
172
In the context of the Digital Single Market the Commission will propose a European free flow of data
initiative with the aim to promote free movement of data in the European Union. The initiative will
tackle restrictions to data location and access to encourage innovation. The Commission will also launch
a European Cloud initiative, covering certification, switching of cloud service providers and a research
cloud (https://ec.europa.eu/digital-single-market/en/economy-society-digital-single-market).
455
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0155.png
responsibilities based on principles of transparency and non-discrimination - Option 1; and
implementation of a specific data management model to be described in EU legislation -
Option 2) seek to ensure the impartiality of the entity which handles data and to ensure
uniform rules under which data can be shared. Access to a consumer's metering or billing
details can only happen when authorised by that consumer and under the condition that the
personal data protection and privacy are guaranteed.
The policy options are fully aligned and further substantiate the fundamental rights to
privacy and protection of personal data of Articles 7 and 8 of the Charter of Fundamental
Rights of the EU, as well as with the General Data Protection Regulation (EU Regulation
2016/679 modifying Directive 95/46/EC) and with Commission Recommendation
2014/724/EC on the Data Protection Impact Assessment Template for Smart Grid and
Smart Metering Environments.
b. Key economic impacts and benefit/cost ratio, cost-effectiveness (efficiency) &
Economic impacts
Option 1
is expected to yield higher net benefits in comparison with option 0, as it will set
principles for an open and more competitive retail market. Moreover, specific procedures
of the market such as switching are expected to improve with stricter requirements on the
data format.
An overall positive effect on the energy market can be expected. Active and well-aware
consumers are more likely to make informed decisions, from choosing their energy
supplier to consumption decisions. More consumers might switch their supplier, which
will foster competition in the retail market. Active consumers might also consider third
party services such as applications to reduce or optimise their energy consumption, which
would amplify the market for third party activities. Different initiatives and business
models could simplify the interaction between consumers and third parties, and therewith
further increase the market potential of third party services
173
.
Moreover, direct feedback for example on real time consumption data and energy prices,
could have a substantial impact on energy savings. Evidence from Ireland and the UK
show that energy savings can reach up to 2.5% and 8.8% in peak hours
174
.
A main benefit of ensuring interoperability between different data systems is the easy
access to new markets for commercial actors such as energy suppliers or aggregators.
Ensuring for instance uniform formats for consumption data reduces entry barriers for
commercial actors seeking to establish in other Member States. This could enhance
competition in the supplier and aggregator market. Ensuring interoperability would imply
173
174
Like for instance the Green Button initiative in US where consumers can easily give access to their
consumption data to third parties who automatically receive a standardized data-package for that
consumer; the initiative positively affected the overall business case of third parties ("Green
Button:
One Year Later"
(2012) IEE Edison Foundation). Another example of such initiative is the Midata
initiative in UK (http://www.gocompare.com/money/midata/) which concerns energy and other sectors;
as energy firms are increasingly taking on board the need to provide customers with downloadable data
to better understand their gas and electricity usage, Midata initiative aims to further encourage this
practice across all energy suppliers and to make it easier to upload this data to comparison sites.
Intelligent Energy Europe (2012): "European
Smart Metering Landscape Report 2012";
Ofgem (2011):
"Energy
Demand Research Project: Final Analysis"
(study conducted by AECOM for Ofgem).
456
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
agreeing to a common standard at national level, which would induce some costs such as
administrative costs for defining and concurring on the new format, especially to data
administrators (DSOs or data hubs) who will have to adapt their system to a new common
format. Depending on the case such costs might be significant, as a number of existing data
handling systems and the involved entities would have to adjust to the new standards
(suppliers, DSOs, third parties, data administrators). However, it is expected that on an
aggregated level these costs will not exceed benefits.
The implementation of
Option 2
would entail high administrative costs. Determining a
mandatory data handling model will imply administrative costs of defining and designing
such a model, and more importantly high sunk costs for existing data handling models and
additional costs for establishing a new one, both in terms of personnel costs and IT
infrastructure. Designing and building a new data handling model is a complex procedure
and may well take several years of planning and implementation. In Denmark, the central
data hub took more than 4 years to design and develop in its simple form, and 7 years in
its enhanced form, and is estimated to a cost of approximately 165 million euros, where
approximately 65 million euros accrued to the data hub administrator (the TSO), and
around 100 million euros accrued to DSOs and energy suppliers. Therefore, the costs of
redesigning already implemented data handling models across the EU are therefore likely
to be substantial.
c. Simplification and/or administrative impact for companies and consumers
Option 2
for data management would result in high administrative costs affecting existing
structures as well as possibly energy companies and consumers.
d. Impacts on public administrations
Impacts on public administration are summarized in Section 7 below.
e. Trade-offs and synergies associated with each option with other foreseen measures
Options 1 and 2
for data management are clearly also associated with demand response
and smart metering. Smart meters will provide granular data which should be accessible
from service providers for settlement or support of services. A well-functioning data
management model is therefore crucial for the provision of demand response services.
f. Likely uncertainty in the key findings and conclusions
There is a medium risk associated with the uncertainty of the assessment of costs and
benefits of the presented options. However, it is considered that this risk cannot influence
the decision on the preferred option as there is a high differentiation among the presented
options in terms of qualitative and quantitative characteristics.
g. Which Option is preferred and why
Option 1
is the preferred option as it will improve current framework and set principles
for transparent and non-discriminatory data access from eligible market parties. This
option is expected to have a high net benefit for service providers and consumers and
increase competition in the retail market.
457
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0157.png
Box 1: Impacts on different groups of consumers
The benefits of the measures contained in the preferred option (Option 1), described in detail in the preceding
pages, accrue evenly to all consumers. The measures can therefore be considered neutral in nature i.e. they
do not redistribute surplus between higher- and lower-income ratepayers.
Subsidiarity
The EU has a shared competence with Member States in the field of energy pursuant to
Article 4(1) of the Treaty on the Functioning of the European Union (TFEU). In line with
Article 194 of the TFEU, the EU is competent to establish measures to ensure the
functioning of the energy market, ensure security of supply and promote energy efficiency.
Uncoordinated, fragmented national policies in the electricity sector may have direct
negative effects on neighbouring Member States, and distort the internal market. EU action
therefore has significant added value by ensuring a coherent approach in all Member
States.
An effective EU framework for data management which puts in place rules and principles
will give to electricity consumers more choices, better access to information and will
facilitate competition in the electricity market. Moreover, through effective data
management models and efficient procedures consumers will have access to more energy
service providers and actively participate in the electricity market. Active participation of
consumers and facilitation of demand response and energy efficiency service will
contribute to the completion of the internal energy market and support security of supply.
Envisaged measures do not aim to alter the structure of existing or planned national data
management models, but to set requirements which will enhance fundamental consumer
rights and support a competitive internal energy market.
Stakeholders' opinions
3.2.7.1.
Results of the consultation on the new Energy Market Design
According to the results of the public consultation on a new Energy Market Design
175
the
respondents view active distribution system operation, neutral market facilitation and data
hub management as possible functions for DSOs. Some stakeholders pointed at a potential
conflict of interests for DSOs in their new role in case they are also active in the supply
business and emphasized that the neutrality of DSOs should be ensured. A large number
of the stakeholders stressed the importance of data protection and privacy, and consumer's
ownership of data. Furthermore, a high number of respondents stressed the need of specific
rules regarding access to data.
Governance rules for DSOs and Models of data handling
Question:
"How should governance rules for distribution system operators and access to
metering data be adapted (data handling and ensuring data privacy etc.) in light of market
and technological developments? Are additional provisions on management of and access
by the relevant parties (end-customers, distribution system operators, transmission system
175
https://ec.europa.eu/energy/en/consultations/public-consultation-new-energy-market-design
458
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
operators, suppliers, third party service providers and regulators) to the metering data
required?"
Summary of findings:
The majority of stakeholders consider access to data by consumers and relevant third
parties under specific rules as an important element for the development of an open and
competitive retail market. Moreover, it is crucial to ensure data privacy and ownership of
data by consumers.
Regarding the data handling models, regulators and the majority of stakeholders from the
electricity industry believe that DSOs should act as neutral market facilitator. Some
stakeholders from the electricity industry suggest that the DSOs should undertake the role
of the data hub, providing an effective way to govern the data generated by smart meters.
On the other hand, IFIEC and few other stakeholders do not see favourably the role of
DSOs as market facilitator, the involvement of a third party is perceived to better support
neutrality and a level playing field.
National governments are divided on the best suitable model for data access and data
handling, around half of them advocate as the most favourable solution central data hubs.
Most of the Member States consider that the role of DSO and the model for data handling
should be best decided at national level.
Member States:
Given the central role of DSOs in metering and handling of data, Member States point out
the necessity for neutrality and independence of the DSO vis-à-vis other energy
stakeholders, while they consider that coordination between DSOs and TSOs should be
enhanced. Data need to be accessible in real-time or close to real-time for consumers and
relevant third parties, while data security and privacy is one of the most important aspects
for the acceptance of smart meters and the successful roll-out.
Some Member States promote central data hubs to collect and handle data (e.g. Denmark,
Estonia, Finland, Germany, Slovakia, and Sweden).
Some Member States (Czech Republic, France, Netherlands, and Slovakia) believe that
due to different local conditions in terms of available technologies and national regulatory
frameworks, detailed arrangements regarding data handling should be defined at member
State level through national legislation, and no further legislation is required at EU level
regarding the role of DSOs and the responsibilities for data handling.
On the other hand the Danish government considers that EU regulation should more
specifically define a minimum level of privacy and issues such as consumers' control over
their own data and non-discriminatory access to data by market players, while harmonising
the roles of market players and the kind of data they have access to. The Finnish
government also calls for a clarification of the role of DSOs in the operation of storage
facilities and questions whether there is a need to revise unbundling rules.
Regulators:
Regulators stress the importance of neutrality in the role of the DSOs as market facilitators.
To achieve this will require to:
-
-
Set out exactly what a neutral market facilitator entails;
When a DSO should be involved in an activity and when it should not;
459
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
NRAs to provide careful governance, with a focus on driving a convergent
approach across Europe.
Regulators consider that consumers must be guaranteed the ownership and control of their
data. The DSOs, or other data handlers, must ensure the
protection of consumers’ data.
-
Electricity consumers:
The majority of stakeholders (BEUC, CEFIC, CEPI) agree that consumers should have
access to real time information, historical information, accurate billing and easy switch of
provider. Some of them (CEFIC, EURACOAL) believe that the DSOs should play a
central role in providing end-users with the necessary information. All electricity consumer
stakeholders agree that data protection must be assured.
IFIEC considers that DSOs should not play the role of market facilitator, the involvement
of a third party is perceived to better support neutrality and a level playing field. Moreover,
coordination of TSOs and DSOs and potentially extended role of DSOs with respect to
congestion management, forecasting, balancing, etc. would require a separate regulatory
framework. However, IFIEC express concerns that some smaller DSOs might be
overstrained by this. Extended roles for DSO should be in the interest of consumers and
only be implemented when it is economically efficient.
EUROCHAMBERS believes that due to different regional and local conditions a one size
fits all approach for governance rules for distribution system operators is not appropriate.
The EU could support Member States by developing guidelines (e.g. on grid infrastructures
and incentive systems).
Energy industry:
Most stakeholders (CEDEC, EDSO, ESMIG, ETP, EUROBAT, EWEA, GEODE) believe
that the role of DSOs should focus on active grid management and neutral market
facilitation. Some respondents state that the current regulatory framework prevents DSOs
from taking on some roles, such as procurer of system flexibility services and to procure
balancing services from third parties, and such barriers should be eliminated.
All stakeholders agree that the provision of data management services should be carried
out in a neutral and non-discriminatory manner with all appropriate protections for data
security, data privacy and the right of the consumers to control third party access to their
data. On this regard, GEODE highlights the need to have a clear distinction between
personal data (which belongs to the customer) and non-personal data which should be
provided to any relevant party who requests it, on a non-discriminatory basis.
According to Eurelectric, EWEA, ETP and GEODE, DSOs operating as data hub could
provide an effective way to govern the data generated by smart meters.
Eureletric believes that the need for guaranteeing security of information and preventing
cyber-attacks could also be better ensured when there is only one entity in charge of
managing information flow. Mindful of the different unbundling situations in place in the
EU, DSOs should be responsible for data handling up to the metering point in a fully
unbundled context. Moreover, regulatory authorities should make sure that data
management beyond the meter takes place in a condition that ensures customer privacy
and it should be up to the consumers whether to receive their data through an intermediary
(a market party) or retrieve it from a web platform linked to the data hub. Costs connected
with data management should be recovered via network tariffs.
460
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0160.png
According to RGI, for privacy reasons most data should remain in the meter itself. Data
should be stored in and regulated by a public server in an aggregated and formatted way
only dealing with the strictly necessary information. TSOs should have access to relevant
data, reflecting the actual energy portfolio and installed capacity per source at any given
time.
Also SEDC envisages that DSOs should be neutral market facilitators where unbundling
is fully implemented. However, in this scenario DSOs should not be active in markets such
as for demand response, as this would undermine their neutrality.
In relation to a possible EU intervention on the topic, GEODE suggests that Commission
should lay down generic principles rather than specific provisions, taking into account that
different Member States implement different models on the treatment of smart metering
data.
3.2.7.2.
Public consultation on the Retail Energy Market
According to the results of the 2014 public consultation on the Retail Energy Market
176
the
majority of the respondents consider that DSOs should carry out tasks such as data
management, balancing of the local grid, including distributed generation and demand
response, and connection of new generation/capacity (e.g. solar panels).
81% of the respondents agreed that allowing other parties to have access to consumption
data in an appropriate and secure manner, subject to the consumer's explicit agreement, is
a key enabler for the development of new energy services for consumers.
3.2.7.3.
Electricity Regulatory Forum - European Parliament
Relevant conclusions of the 31
st
EU Electricity Regulatory Forum:
-
"The Forum supports the cooperation of TSOs and DSOs on data management,
considering it an important step in finding common solutions to system operation
and system planning. It acknowledges the need to identify at EU-level a set of
common principles, roles, responsibilities and tasks concerning data management,
which will enable the development of new services and the active participation of
consumers in the future energy system while ensuring data protection and leaving
room for implementation at national level."
European Parliament resolution of 26 May 2016 on delivering a new deal for energy
consumers (2015/2323(INI)):
"29. Believes that consumers should have easy and timely access to their consumption
data and related costs, to help them make informed decisions; notes that only 16 Member
States have committed to a large-scale roll-out of smart meters by 2020; believes that
where smart meters are rolled out Member States should ensure a solid legal framework
to guarantee an end to unjustified back-billing and a rollout that is efficient and
affordable for all consumers, particularly for energy-poor consumers; insists that the
176
https://ec.europa.eu/energy/en/consultations/consultation-retail-energy-market
461
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
benefits from smart meters should be shared on a fair basis between grid operators and
users;"
"33. Underlines that the collection, processing and storage of citizens’
energy-related
data should be managed by entities managing data access in a non-discriminatory
manner and should comply with the existing EU privacy and data protection framework
which lays down that consumers should always remain in control of their personal data
and that these should only be provided to third parties with the consumers’ explicit
consent; considers, in addition, that citizens should be able to exercise their rights to
correct and erase personal data;"
462
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
463
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
7.4. Facilitating supplier switching
464
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0164.png
Summary table
Objective: Facilitating supplier switching by limiting the scope of switching and exit fees, and making them more visible and easier to understand in the event that they are used.
Option 0
Option 0+
Option 1
Option 2
BAU/Stronger enforcement
Stronger enforcement, following the
Legislation to define and outlaw all fees to
Legislation to define and outlaw all fees to
clarification of certain concrete requirements EU household consumers associated with
EU household consumers associated with
in the current legislation through an
switching suppliers, apart from: 1) exit fees
switching suppliers.
interpretative note.
for fixed-term supply contracts; 2) fees
associated with energy efficiency or other
bundled energy services or investments. For
both exceptions, exit fees must be cost-
reflective.
Pros:
Pros:
Pros:
Pros:
- Evidence may suggest a degree of non-
- Non-enforcement may be due to complex
- Considerably reduces the prevalence of
- Completely eliminates one
enforcement of existing legislation by
existing legislation.
fees associated with switching suppliers, and financial/psychological barrier to switching.
national authorities.
- No new legislative intervention necessary.
hence financial/psychological barriers to
- Simple measure removes doubt amongst
- No new legislative intervention necessary.
consumers.
switching.
- The clearest, most enforceable requirement
without exceptions.
Cons:
Cons:
Cons:
Cons:
- Continued ambiguity in existing legislation - The vast majority of switching-related fees - Marginally reduces the range of contracts
- Would further restrict innovation and
may impede enforcement.
faced by consumers are permitted under
available to consumers, thereby limiting
consumer choice, notably regarding
- The vast majority of switching-related fees current EU legislation.
financing options for beneficial investments
innovation.
faced by consumers are permitted under
- Certain Member States might ignore the
in energy equipment as part of innovative
- An element of interpretation remains
current EU legislation.
interpretative note.
supply products e.g. self-generation, energy
around exceptions to the ban on fees
associated with switching suppliers.
efficiency, etc.
- Impedes the EU's decarbonisation
objectives, albeit marginally.
Most suitable option(s): Option 1
is the preferred option, as it represents the most favourable balance between probable benefits and costs.
465
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0165.png
Description of the baseline
The evidence presented in this annex draws extensively on survey data, as well as data
from a mystery shopping exercise. The aim of the mystery shopping exercise was to
replicate, as closely as possible, real consumers’ experiences across 10 Member States
177
selected to cover North, West, South and East Europe countries. A total of 4,000
evaluations were completed between 11 December 2014 and 18 March 2015
178
. Whilst
data from the mystery shopping exercise is non-exhaustive, the methodology enables the
controlled sampling of a very large topic area
179
, as well as providing insights that would
not be apparent in a desktop evaluation of legislation and contractual terms. Using a
behavioural research approach rather than a traditional survey allowed us to identify what
people actually do, rather than what they say they do.
Switching rates
180
for energy
–
a proxy for consumer engagement in the market
–
vary
considerably between Member States (0-15%), with electricity and gas comparing
unfavourably with many other consumer sectors such as vehicle insurance and mobile
telephony.
Switching provider by
Figure 1: Switching provider by market - EU28
market - EU28
Have you switched your <provider>?
Switching markets
Diff
2015-
2013
+1.8*
Diff
2013-
2012
-0.3*
Diff
2012-
2011
-0.4*
Diff
2011-
2010
-0.5*
11%
Vehicle insurance
Commercial sport services
Mobile telephone services
16%
16%
15%
14%
13%
10%
10%
+2.6*
+3.8*
+3.1*
-1.4*
-0.4
+0.1
+1.0*
-0.5
0.0
+0.5
+1.3*
+0.6
Investment products, private pensions and securities
Internet provision
Electricity services
Fixed telephone services
Loans, credit and credit cards
Private life insurance
Bank accounts
+2.2*
+1.6*
+2.4*
+1.6*
+1.3*
+1.3*
-0.6
-0.7
+0.1
-0.4
-0.7*
-0.2
-0.4
-0.3
-0.2
-0.1
-0.2
-0.5
+0.1
-0.3
-0.6
-3.6*
+0.2
+1.8*
+0.2
10%
9%
9%
9%
9%
8%
7%
Yes
+0.2
TV-subscriptions
Gas services
Home insurance
Mortgages
+2.3*
+1.0*
+0.6
+2.2*
-0.8*
+1.2*
+0.2
-0.3
-2.2*
-0.9*
+0.4
-1.2*
+0.3
-0.6
Source: Market Monitoring Survey, 2015
177
178
179
180
The Czech Republic, France, Germany, Italy, Lithuania, Poland, Slovenia, Spain, Sweden and the UK.
"Second Consumer Market Study on the functioning of retail electricity markets for consumers in the
EU" (2016) European Commission.
For example, there were over 400 electricity and gas supply offers in Berlin alone in 2014 (source:
ACER Database), making a comprehensive examination of all supply offers in the EU28 impracticable.
The percentage of consumers changing suppliers in any given year.
466
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0166.png
Figure 2: Factors preventing electricity and gas consumers from switching
–
2014 (1
–
not at all important)
Source: ACER Questionnaire, February–April 2015
Consumer associations and NRAs report that insufficient monetary gain is the prime
obstacle to switching (Figure 2 above). An ACER questionnaire suggests that the perceived
minimum annual savings required by electricity consumers to switch in Belgium,
Germany, Italy, Latvia, Poland and Slovenia lie in the range of 0–100 euros, whilst in the
United Kingdom, the Netherlands, Portugal and Sweden, this was estimated be 100–200
euros. The switching trigger ranges were the same for gas consumers, with the exception
of Italy, where switching trigger is estimated to be in the range of 100–200 euros.
Given that the difference in price between most offers in the market lie within comparable
ranges to switching triggers (Figure 3 below), switching suppliers is a marginal decision
for many household consumers. This highlights the importance of the broad variety of fees
that consumers may be charged when they switch, as these diminish the (perceived)
financial gains of moving to a cheaper tariff in what is already a marginal decision for
many consumers.
467
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0167.png
Figure 3: Dispersion in the energy component of retail prices for households in
capitals
–
December 2014
Source: ACER Retail Database (November–December 2014) and ACER calculations
Whilst the data indicates that switching is free for most EU consumers, a minority still face
switching-related charges. First of all, exit (termination) fees may apply when leaving a
fixed-term or fixed-price contract early
181
. The legitimacy of such fees are acknowledged
in EU legislation (see Section 7.4.3 below), and they are often put in place to recoup the
costs of equipment, discounts and/or other incentives provided at the beginning of the
contract. A mystery shopping exercise in ten Member States revealed that whilst 77% of
electricity suppliers stated that consumers would face no charges for switching, 17% were
warned that they may be charged an exit fee (Table 1), a figure corroborated by ACER
data suggesting that exit fees are still common in at least 11 Member States for electricity
and 3 Member States for gas (Figure 4).
181
As sometimes occurs in Member States including NL and UK.
468
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0168.png
Table 1: Electricity providers’ response when asked if there are any charges when
switching electricity provider
CZ
You will not be
charged for the change
A fee for cancelling
your current energy
deal (e.g. exit fee for
fixed rates)
Another extra charge
No response
60%
DE
94%
ES
83%
FR
89%
UK
59%
IT
86%
LT
80%
PL
67%
SE
66%
SI
80%
Total
77%
40%
5%
11%
5%
38%
1%
0%
28%
32%
14%
17%
0%
0%
0%
1%
7%
0%
4%
1%
3%
0%
11%
1%
8%
12%
4%
1%
2%
0%
2%
4%
4%
2%
Source: "Second Consumer Market Study on the functioning of retail electricity markets for consumers in
the EU" (2016) European Commission
Figure 4: Existence of exit fees imposed by suppliers when switching offers - 2014
Aside from exit fees, however, the same mystery shopping exercise revealed that 4% of
mystery shoppers were told they may be charged other fees related to switching, including
administrative costs, start-up costs for a new or short-term service, or security deposits
(Box 1 below). This finding is notable because EU legislation ensures that consumers "are
not charged for changing supplier"
182
. As checks by the Commission indicate that this
legislation has been correctly transposed into Member State law, the finding suggests either
legal failures in the EU legislative text that prevent it from fulfilling its intention and/or
non-enforcement by national authorities.
182
This reading was recently supported by the body representing the EU's national regulatory authorities
–
the Council of European Energy Regulators
–
who write:
"The 3rd Energy Package Directives clearly
state that switching should be completely free for the customer."
"Position
on early termination fees"
(2016) CEER, Ref: C16-CEM-90-06.
469
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0169.png
Box 1: Examples of “extra charges” when switching mentioned by electricity
providers (when being contacted by phone)
- Administration cost (EUR 35)
–
France
- A service fee (EUR 27.90)
–
France
- A fee for starting up the service (EUR 27.16)
–
France
- An administration cost added on the first electricity bill (EUR 27.59)
–
Italy
- An activation fee
–
Italy, Poland
- An extra charge of EUR 20.54 on the first bill; no explanation was provided for this charge
–
Italy
- A security deposit (EUR 70)
–
Italy
- A deposit (EUR 77)
–
Italy
- A fee for contracts of less than one year
–
Spain
- A yearly charge of 300 SEK/year (or 25 SEK/month) for each new contract
–
Sweden
Source: "Second Consumer Market Study on the functioning of retail electricity markets
for consumers in the EU" (2016) European Commission
In total, therefore, the results from these ten representative Member States suggest that
around one fifth of electricity consumers in the EU would face some sort of fee associated
with switching suppliers. As for the magnitude of switching-related charges, Figure 5
under indicates that average exit fees fall between 5 and 90 euros, depending on the capital
city sampled. Electricity and gas consumers on fixed-price and fixed-term contracts in
Amsterdam were the most affected by exit fees, and these could significantly reduce their
saving potential from 16% (without exit fees) to 6% (with first-year exit fees included)
with respect to the average incumbent standard offer for electricity consumers, and from
13% to 6% with respect to the average gas standard incumbent price. Exit fees could also
considerably reduce potential savings for electricity consumers in Ljubljana, Dublin,
Copenhagen, London and Warsaw.
470
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0170.png
Figure 5: Potential effect of exit fees on annual savings to be made from switching
away from the incumbent in Europe - 2014 (% and euros)
183
Source: ACER.
While the possibility of charging exit fees may provide suppliers with more flexibility in
the tariffs they are able to offer, they make comparisons more difficult for consumers and
reduce the incentive for switching. Furthermore, behavioural economic theory suggests
that all fees associated with switching can disproportionately discourage consumer action
because of a decision making bias called 'loss aversion'
–
a tendency to strongly prefer
avoiding losses (one-time switching fees) to acquiring gains (the long-term savings of
moving to a cheaper tariff)
184
. This means the reduced incentives presented in Figure 5 will
appear much more significant in the eyes of most household consumers
–
twice as large if
findings from benchmark behavioural studies carry over into this real-world context
185
. As
a result, three Member States (Belgium, France and Italy) have outlawed altogether
contract exit fees for household consumers in the energy sector.
183
184
185
Calculated on the basis of offer data for capital cities from the ACER Retail Database and the
information from the consumer organisations. For those countries where standard offers are variable and
where consumers typically incur exit fees while on fixed-term, fixed-price contracts, the above figure
should be considered illustrative. ‘Net’ savings equal the difference between the incumbent price and
the lowest offer, minus average exit fees typically imposed on fixed-term offers (i.e. savings for
consumers after exit fees have been paid for). ‘Gross’ savings equal the difference between the
incumbent price and the lowest offer. The data presented include information from the questionnaire
(i.e. an assessment of the existence and the level of exit fees in Member States and the information
collected on the basis of offer data in the ACER database to show the potential effect of exit fees in those
MSs where these exist. The exit fees shown in the above figure are the averages of all exit fees incurred
by consumers breaking away from contracts in the first year, and might be higher than those incurred
when breaking away in the 2nd or 3rd year. In the case of electricity offers in Oslo and Warsaw, exit
fees are estimated at 5% of the final standard offer.
"Choices,
Values and Frames"
(1984) Kahneman, D., and A. Tversky, American Psychologist, 39, 341-
350.
“Loss
Aversion in Riskless Choice: A Reference-Dependent Model”
(1991) Tversky, A., and D.
Kahneman, Quarterly Journal of Economics, 106 (4), 1039–1061.
471
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0171.png
Box 2: Switching energy suppliers in Belgium
As from 13 September 2012, the Belgian Electricity Act was amended (see Article 18, Section 2 and 3 of the
Electricity Act) and suppliers were no longer permitted to charge households and SMEs (non-residential
users with a maximum annual usage of 100,000 kWh in natural gas and 50,000 kWh in electricity) a fee for
the early termination of a contract, provided that a one-month notice period is observed.
The abolition of early termination, or exit fees seems to have had a positive impact on the market with regard
to the number of users switching to a different electricity and gas provider. Switching jumped markedly in
all Belgian regions for bot electricity and gas around the time of the legislative change. This has led NEON
–
the Europe-wide network of energy ombudsmen and mediation services
–
to suggest that the ban on
switching fees may have been to credit for this.
2011
4,1%
8,2%
8,6%
4,7%
9,2%
11,0%
2012
8,3%
16,5%
11,6%
9,3%
18,9%
15,0%
2013
14,3%
15,4%
13,6%
18,3%
18,7%
21,2%
2014
9,6%
11,9%
12,7%
10,5%
13,9%
15,9%
Brussel - elektriciteit
Vlaanderen - elektriciteit
Wallonië - elektriciteit
Brussel - aardgas
Vlaanderen - aardgas
Wallonië - aardgas
The Belgian Ombudsman also found that the number of complaints with regard to switching providers has
significantly fallen since the amendment of the act on 25 August 2012, from 14% (1,854 complaints) in 2014
to 8% in 2012 (1,250 complaints), 3% in 2013 (347 complaints) and 3.5% in 2014 (318 complaints).
Source: NEON, The National energy Ombudsman Network
One final factor to take into account is a high level of uncertainty amongst consumers over
whether they
could
be charged for switching
–
a fact that may be discouraging many from
looking into the possibility of switching because of the perceived complexity of it. Whereas
the evidence suggests only around 20% of consumers in the EU would actually face some
sort of fee associated with switching suppliers, 39% of consumers surveyed
186
did not
know whether or not they would be charged. This does not include 17% that responded
with certainty that they could be charged a fee for switching.
186
29,119 interviews were conducted across 30 countries (EU28, Iceland and Norway). "Second
Consumer
Market Study on the functioning of retail electricity markets for consumers in the EU"
(2016) European
Commission.
472
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0172.png
Figure 6: Knowledge of switching rules
–
no charge when changing electricity
company, by country
187
Source: "Second Consumer Market Study on the functioning of retail electricity markets for consumers in
the EU" (2016) European Commission
A lack of information relevant to switching in bills is one explanation for this. Whereas
customers in the majority of Member States are currently provided with information on the
consumption period, actual and/or estimated consumption, and a breakdown of the price,
there is a greater diversity of national practices with regards to other information, including
switching information, and the duration of the contract
188
.
Another explanation is incomplete information from suppliers themselves. Table 2 below
shows that mystery shoppers in ten representative Member States were often unable to find
any information on switching rules whatsoever on electricity companies’ websites.
187
188
Question: "The following are statements regarding consumer rights in the energy sector. Please indicate
whether each statement is true or false: "If you decide to change your electricity company, you will not
be charged for the change“".
For more details, see the Thematic Evaluation on Metering and Billing.
473
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0173.png
Table 2: Switching rules found on electricity
companies’ websites
189
SI
50
DE UK FR PL CZ IT
100 75
75
100 50
75
LT SE ES Total
50
50
75
700
You will not be charged for the change
82% 57% 21% 52% 50% 36% 45% 30% 10% 24% 42%
The new provider must make the change within
three weeks (or less), provided you respect the 10% 13% 26% 13% 6% 8% 1% 10% 12% 3% 10%
terms and conditions of the original contract
Within six weeks (or less) after you switch, you
should receive the final closure account from 10% 11% 24% 4% 7% 2% 0% 2% 2% 4% 7%
your previous provider
It might be that you'll incur a fee for cancelling
10% 5% 17% 0% 6% 8% 1% 0% 16% 5% 7%
your current energy deal
None of the above
14% 38% 42% 43% 47% 52% 54% 66% 66% 69% 49%
Source: "Second Consumer Market Study on the functioning of retail electricity markets for consumers in
the EU" (2016) European Commission
High uncertainty levels indicate that the current prevalence of switching-related charges
may be having a much broader impact on switching rates than would be expected if only
consumers directly affected by such charges were considered. Whereas only 3% of survey
respondents stated that one of the main reasons they had not tried to switch was that they
would incur an exit fee from their electricity company, 16% stated that the savings would
not justify the trouble linked to changing electricity companies, 14% that it is difficult to
compare offers, and 12% that they perceive switching as being too complicated
–
each a
response that could have been influenced by the uncertain prospect of switching-related
charges.
Figure 7: Main reasons for not trying to switch electricity company
190
You are satisfied with your current electricity company
No difference between providers to make switching worthwhile
You never thought about the issue
Savings don't justify the trouble of changing provider
It is difficult to compare offers of different electricity companies
Switching is complicated
You dislike/distrust alternative electricity companies
There is no alternative local electricity company
You cannot find information on how to switch
You did not know that you can switch
Due to the length of the switching process
You will incur exit fees from your current electricity company
5%
4%
3%
2%
1%
6%
7%
5%
16%
14%
12%
12%
24%
23%
42%
Main reasons for not trying to switch electricity company
Other electricity companies are not as environmentally-friendly
In debt with current electricity company, so you you can't switch
Other reason specified
Source: "Second Consumer Market Study on the functioning of retail electricity markets for consumers in
the EU" (2016) European Commission
Q32. What are the main reasons for not trying to switch your electricity company? (up to three responses)
%, EU28, Base: Those who have not switched electricity company in the last three years (Q27 code 2)
Question not a ed in Cyprus, Latvia and Cypru
Given the persistently low levels of switching and consumer engagement in the energy
sector (Figure 1), there may therefore be scope to further restrict the use of fees charged to
consumers for changing suppliers. This would remove a key monetary barrier to greater
consumer engagement. It would make it easier for consumers to control their bills and
harder for suppliers to lock consumers into disadvantageous contracts. Such action would
therefore be consistent with other provisions in the Electricity and Gas Directives which
189
190
Question: "Which of the following statements about the switching process were found on the website?
(multiple answers allowed)".
Question: "What are the main reasons for not trying to switch your electricity company? (up to three
responses)".
474
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0174.png
state: “Member States shall ensure that the eligible customer is in fact easily able to switch
to a new supplier”.
Without intervention, switching-related fees in the range of 5 to 90 euros would likely
continue to affect an estimated 20% of electricity consumers in the EU, with uncertainty
over their applicability influencing the decision-making of well over half of all EU
electricity consumers. A lack of action to limit these fees would amount to ignoring a key
barrier to consumer engagement.
Although there is less evidence on switching-related fees in the gas sector, Figures 4 and
5 suggest they are prevalent in fewer Member States, and that their magnitude is similar.
Deficiencies of the current legislation
The consumer protection provisions in the Electricity and Gas Directives regulate
switching fees. Largely unchanged since their 2001/2003 introduction, these provisions
state that “customers are not to be charged for changing supplier”.
The following text regarding contract exit fees was added in 2007: contracts must specify
“whether withdrawal from the contract without charge is permitted”. It weakened the initial
provision by affirming the permissibility of certain switching-related charges without
explicitly addressing whether the legislation addressed all switching-related charges in
categorically exhaustive manner.
As addressed in Section 7.1.1 and Annex IV of the Evaluation, the current framework
therefore remains both complex and open to interpretation with regard to the nature and
scope of certain key obligations.
Presentation of the options
Option 0: Stronger enforcement
Stronger enforcement to tackle the switching fees currently imposed contrary to EU legal
requirements.
Option 0+: Clarifying certain concrete requirements in the current legislation through an
interpretative note, coupled with stronger enforcement
This option involves making it explicit that the existing Third Package provision stating
that consumers "are not charged for changing supplier" applies to contract switching fees.
This would seek to remove any legal uncertainty and improve Member State compliance.
Option 1: Legislation to outlaw the use of switching fees and to limit the use of exit fees
in electricity and gas supply contracts in the EU
In concrete terms, the preferred measures will include the following:
i. Define switching fees and contract exit fees in the legislation.
ii. Ban all switching fees, and ban exit fees in open-ended supply contracts and
fixed term contracts that have come to the end of the agreed term.
iii. For fixed-term contracts, permit exit fees if the contract has not ended, but
ensure the cost-reflectiveness and proportionality of these fees to avoid undue
consumer detriment. Clarify that consumers should always have the possibility to
exit the contract, if they are prepared to pay the exit fee.
475
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0175.png
iv. Define exceptions to accommodate certain on-bill repayment of upfront
investments in,
inter alia,
energy efficiency financed by suppliers or energy service
providers.
v. Introduce transparency provisions so that fees are presented in an easily
understandable manner (e.g. amortisation schedule) in contracts and pre-
contractual information.
vi. Clarify that commercial and industrial supply contracts would not be affected.
Option 2: Legislation to categorically outlaw the use of all switching and exit fees in
electricity and gas supply contracts to EU household consumers
In concrete terms, the preferred measures will include the following:
i. Define switching fees and contract exit fees in the legislation.
ii. Ban all fees defined in i).
Comparison of the options
This section compares the costs and benefits of each of the Options presented above in a
semi-quantitative manner.
In general, the costs of implementing each of the above measures can be estimated to a
reasonably certain degree using tools such as the standard cost model for estimating
administrative costs. However, no data or methodology exists to accurately quantify all
the benefits of the measures in terms of direct benefits to consumer (consumer surplus) or
general competition. As such, this Section aims to illustrate the possible direct benefit to
consumers assuming certain conditions. It also highlights important qualitative evidence
from stakeholders that policymakers should also incorporate into their analysis of costs
and benefits.
Option 0: Stronger enforcement
An estimated 4% of EU consumers face switching-related charges that may be illegal under
EU law. Stronger enforcement would see these increasingly phased out. Whilst we cannot
measure the economic benefits of this option, we can estimate its benefit to consumers
given some simple assumptions.
If we assume that:
-
One in fifty of the households currently affected by illegal electricity
switching fees make a switch as a direct result of an enforcement drive
191
;
-
Gas household consumers see no benefits
192
;
191
192
This is a highly uncertain figure, affected by several variables that have not been studied in depth,
including the speed and effectiveness of EU enforcement action, and public awareness of consumer
rights.
This is a conservative estimate. Whilst the evidence suggests they may be less prevalent, and Figure
Figures X and Y indicate they are certainly present.
476
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0176.png
-
-
-
-
The annual financial benefit of switching for these households amounts to 82
euros, which is the average difference in price between the incumbent's
standard offer and the cheapest offer in the capital city in the EU
193
;
The financial advantage of switching as a result of these measures persists for
four years
194
;
All EU households within each Member State are able to benefit from these
changes equally in relative terms
195
;
A discount rate of 4% for the consumer benefits year on year;
then Option 0 would result in an increase in consumer surplus
of between 13.7 million
euros and 48.4 million euros annually
(depending on the year of implementation), and
415 million euros in total for the period 2020-2030.
In spite of these considerations, it is unlikely that Option 0 would most effectively address
the problem of poor consumer engagement. First, a great degree of uncertainty surrounds
the estimation above associated with the speed and effectiveness of EU enforcement
action.
In addition, the effectiveness of Option 0 is significantly limited by the fact that the
provisions of the Electricity and Gas Directives state that consumer supply contracts must
specify "whether withdrawal from the contract without charge is permitted". A further 17%
of consumers will therefore continue to be directly affected by contract exit fees that are
legal under current legislation.
There are
no implementation costs
associated with Option 0.
Option 0+: Clarifying certain concrete requirements in the current legislation through an
interpretative note, coupled with stronger enforcement
This option would make it easier for suppliers and national authorities to interpret current
switching rules and to determine whether certain fees are compatible or incompatible with
the Third Package. Consumers would also have access to more and clearer information
regarding the legal situation surrounding such fees and could become better aware of the
types of fees used in their contracts. This option would make it easier for suppliers and
national authorities to interpret current switching rules and to determine whether certain
fees are compatible or incompatible with the Third Package. Consumers would also have
access to more and clearer information regarding the legal situation surrounding such fees
and could become more aware of the types of fees used in their contracts.
Whilst the economic benefits of this measure cannot be estimated, we can expect its
benefits to consumers to be similar to Option 0 (415
million euros in total for the period
193
194
195
The weighted average was not used because the large potential savings available to DE consumers
skewed this figure to over EUR 150. "Market
Monitoring report 2014"
(2015) ACER,
http://www.acer.europa.eu/Official_documentsreality,
/Acts_of_the_Agency/Publication/ACER_Market_Monitoring_Report_2015,
p.59.
A conservative assumption given the implied average time between switches is upwards of 15.5 years
for electricity consumers and 18 years for gas consumers.
In reality, households will react differently depending on consumers’ needs, skills, motivations,
interests, lifestyle, and access to resources such as accurate online comparison tools. However, we have
no reliable data to quantify these differences in this specific context.
477
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0177.png
2020-2030)
or higher, reflecting the greater legal certainty engendered by the EU guidance
issued compared with Option 0.
However, as with Option 0, a further 17% of consumers are directly affected by contract
exit fees that are legal under current legislation.
It is unlikely that voluntary cooperation between Member States would address this
problem, as it is domestic in nature with no common gains to be had through supra-national
coordination.
There are
no implementation costs
associated with Option 0+.
Several
stakeholders
support the principle of better implementation of the existing
switching fee provisions in the Electricity and Gas Directives, including the European
Parliament's ITRE Committee and NRAs. Others, such as consumer groups and
ombudsmen, argue that there should be no fees associated with switching.
Option 1: Legislation to outlaw the use of switching fees and to limit the use of exit fees
in electricity and gas supply contracts in the EU
This option may considerably reduce the prevalence of both switching and exit fees for the
category of consumers most likely to be confused by such fees
–
household consumers.
If we assume that:
-
One in one-hundred of the 17% of households currently affected by exit fees
in their electricity supply contracts make a switch as a direct result of this
intervention
196
;
-
The annual financial benefit of switching for these households amounts to 82
euros, which is the average difference in price between the incumbent's
standard offer and the cheapest offer in the capital city in the EU
197
;
-
Gas household consumers see no benefits
198
;
-
The financial advantage of switching as a result of these measures persists for
four years
199
;
196
197
198
199
This is a highly uncertain figure as we have no clear and comprehensive picture as to: i) the proportion
of consumers who may be charged exit fees even though they are on indefinite contracts; ii) the
proportion of consumers whose exit fees would be considered disproportionate, and therefore not
permitted under this option; iii) the extent to which consumers benefitting from this measure would be
aware of it; iv) how those aware of the legislative change would respond to the increased financial
incentive to switch.
The weighted average was not used because the large potential savings available to DE consumers
skewed this figure to over EUR 150. "Market
Monitoring report 2014"
(2015) ACER,
http://www.acer.europa.eu/Official_documentsreality,
/Acts_of_the_Agency/Publication/ACER_Market_Monitoring_Report_2015,
p.59.
This is a conservative estimate. Whilst the evidence suggests they may be less prevalent, Figures 4 and
5 indicate they are certainly present.
A conservative assumption given the implied average time between switches is upwards of 15.5 years
for electricity consumers and 18 years for gas consumers.
478
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0178.png
-
-
All EU households within each Member State are able to benefit from these
changes equally in relative terms
200
;
A discount rate of 4% for the consumer benefits year on year;
then Option 1 would result in an increase in consumer surplus
of between 29 million euros
and 102.8 million euros annually
(depending on the year of implementation), and
881
million euros in total for the period 2020-2030
on top of any gains brought by improved
enforcement (estimated at 415 million euros for options 1 and 2).
Whilst these consumer benefits are subject to great uncertainty due to the unknown extent
to which they would increase consumer switching, Belgium's experience (See Box) would
seem to indicate that restricting contract exit fees has a significant potential to increase
consumer engagement
–
in the short-term at least.
In terms of
implementation costs,
Option 1 would most notably limit innovation and
consumer choice around certain elements of consumer supply contracts, most notably by
preventing exit fees from being charged in indefinite contracts. Whilst unquantifiable,
these implementation costs would likely be limited. Consumers wishing to benefit from
lower prices in exchange for greater consumer loyalty could still opt for fixed-term
contracts.
In addition, Option 1 would permit the on-bill repayment of upfront investments in energy
efficiency. Such financing through, for instance, energy performance contracting
201
will
play an important part in meeting the EU's ambitious energy efficiency targets, and is a
priority under Commission plans.
Apart from consumer groups and ombudsmen,
most stakeholders would seem to support
this option,
including suppliers and NRAs. This is because it incrementally builds upon
the existing provisions of the Electricity and Gas Directives, helping to achieve the
legislators' intention more effectively.
This option would best clarify the legal situation and be the most enforceable measure.
Given the very significant effect on switching rates similar measures have had in Belgium
(See Box 2), this measure would also lead to a sizeable increase in consumer engagement
in many Member States in which contract exit fees are common.
200
201
In reality, households will react differently depending on consumers’ needs, skills, motivations,
interests, lifestyle, and access to resources such as accurate online comparison tools. However, we have
no reliable data to quantify these differences in this specific context.
"Energy performance contracting" means a contractual arrangement between the beneficiary and the
provider of an energy efficiency improvement measure, verified and monitored during the whole term
of the contract, where investments (work, supply or service) in that measure are paid for in relation to a
contractually agreed level of energy efficiency improvement or other agreed energy performance
criterion, such as financial savings.
479
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0179.png
If we assume that:
-
One in four of the estimated 3% of household consumers who report that they
have not tried to switch because they would be charged a fee actually make a
switch as a result of a complete ban on such fees
202
;
-
The annual financial benefit of switching for these households amounts to 41
euros, which is half of the average difference in price between the
incumbent's standard offer and the cheapest offer in the capital city in the
EU
203
;
-
Gas household consumers see no benefits
204
;
-
The financial advantage of switching as a result of these measures persists for
four years
205
;
-
All EU households within each Member State are able to benefit from these
changes equally in relative terms
206
;
-
A discount rate of 4% for the consumer benefits year on year;
then Option 2 would result in an increase in consumer surplus
of between 64 million euros
and 227 million euros annually
(depending on the year of implementation), and
1.9
billion euros in total for the period 2020-2030
on top of any gains brought by improved
enforcement (estimated at 415 million euros for options 1 and 2).
Whereas
the implementation costs of Option 2 are unquantifiable, they may be
significant.
This is because Option 2 would strongly restrict the range of contracts
available to consumers, which may impede competition, as well as the provision of a
legitimate class of products.
If implemented poorly, Option 2 could also impede the development of innovative
financing options for beneficial investments in energy assets for households. Such products
may require certain forms of termination fees in order to allow companies to recoup upfront
investment costs provided as part of an integrated energy service product e.g. solar panels
or energy efficiency upgrades. This option could therefore be in significant tension with
other EU policy priorities, including its energy efficiency, renewable deployment, and self-
consumption policies. For example, one of the objectives of the EED was to identify and
remove regulatory and non-regulatory barriers to the use of energy performance
contracting and other third-party financing arrangements for energy savings.
Whereas several
stakeholders
support an outright ban on switching fees
–
notably
consumer groups and energy ombudsmen
–
NRAs believe the decision on whether or not
202
See Figure 7. This estimate is based on survey responses, and has been discounted to conservatively
reflect possible unreliability in what consumers report.
203
We conservatively assume that the savings to consumers available in this option are significantly
reduced because the cheapest option available in the market
–
the benchmark price used in the other
options
–
is usually a fixed term contract, which may require the consumer to accept a contract exit or
termination fee in return for consumer loyalty. As this option entails banning all exit fees, it is unlikely
that suppliers would be able to offer consumers the same level of financial savings in such contracts.
204
This is a conservative estimate. Whilst the evidence suggests they may be less prevalent,
Figure 4 and Figure indicate they are certainly present.
205
A conservative assumption given the implied average time between switches is upwards of 15.5 years
for electricity consumers and 18 years for gas consumers.
206
In reality, households will react differently depending on consumers’ needs, skills, motivations,
interests, lifestyle, and access to resources such as accurate online comparison tools. However, we have
no reliable data to quantify these differences in this specific context.
480
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0180.png
to completely ban them should be taken at the national level. ACER and electricity
suppliers support the legitimacy of termination fees for fixed term contracts.
Conclusion
The analysis indicated that each of the Options above is likely to result in a net benefit.
However, Option 1 is the preferred option, as it represents the most favourable balance
between probable benefits and costs. Whereas the potential benefits of Option 2 are greater,
so are the potential implementation costs in terms of both reduced competition and tension
with the EU's sustainable energy policies.
Subsidiarity
Consumers are not taking full advantage of competition on energy markets due, in part, to
obstacles to switching. Well designed and implemented consumer policies with a European
dimension can enable consumers to make informed choices that reward competition, and
support the goal of sustainable and resource-efficient growth, whilst taking account of the
needs of all consumers. Increasing confidence and ensuring that unfair trading practices
do not bring a competitive advantage will also have a positive impact in terms of
stimulating growth.
As a result of current EU provisions, national legal regimes remain fragmented as regards
switching-related fees. Further restricting such fees would diminish an important barrier to
customer mobility. The possibility of easy and free-of-charge switching would exert more
competitive pressure on energy suppliers to improve quality and reduce prices.
The options here envisage clarifying the legislation and further limiting the use of exit fees
across different kinds of consumer contracts (fixed-term, indefinite, supply contracts
bundled with energy services) and to different degrees.
The legal basis for the legislative options proposed (Options 1 and 2) is therefore likely to
be Article 114 TFEU. This allows for the adoption of "measures for the approximation of
the provisions laid down by law, regulation or administrative action in Member States
which have as their object the establishment and functioning of the internal market". In
doing this, in accordance with Article 169 TFEU, the Commission will aim at ensuring a
high level of consumer protection.
Without EU action, the identified problems related to the lack of an EU-wide market will
continue to lead to consumer detriment.
Option 0+
The guidance option does not significantly change the legal
status quo.
Member State
authorities would continue, to have a significant degree of discretion in deciding if a
termination/switching fee is allowed or not.
From a subsidiarity perspective, this option allows member States to decide on the extent
to which they wish creating an environment where customers are encouraged to switch
more freely, as this
–
in theory, at least
–
may not always result in lower overall prices
depending on the national situation.
481
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0181.png
From the perspective of proportionality, however, this option would not achieve the
objective of the Article of the Treaty taken as their legal basis
–
the establishment and
functioning of the internal market.
Option 1
The principles of subsidiarity and proportionality are best met through this Option, as it is
not overly prescriptive and will concretely reduce levels of consumer detriment that are, at
present, not addressed at a national level by Member State authorities.
This option aims primarily at clarifying and not strengthening existing legislation. As
switching and exit fees are already addressed in EU provisions, the subsidiarity and
proportionality principles have clearly been assessed previously and deemed as met.
Box 1: Impacts on different groups of consumers
The benefits of the measures contained in the preferred option (Option 1), described in detail in the preceding
pages, accrue predominantly to consumers who are engaged in the market
–
those who compare offers and
are likely to change suppliers if they find a better deal. Whilst facilitating switch will also increase consumer
engagement levels, and whilst the increased competition engendered by easier switching will lead to more
competitive offers on the market, disengaged consumers, including consumers who may be vulnerable, will
not reap as many direct benefits from this policy intervention
Option 2
Banning exit fees in EU legislation would help to create a level playing field for consumers
within Member States and between Member States. At this point, however, it would be
disproportionate to impose a complete ban on exit fees as it would have a limiting effect
on innovation and choice. It would limit the range and number of offers available to
consumers, for example, fixed-term, fixed-price contracts that offer a lower cost per kWh.
Stakeholders' opinions
Public Consultation
222 out of 237 respondents to the Commission's Consultation on the Retail Energy
Market
207
believed that transparent contracts and bills were either important or very
important for helping residential consumers and SMEs to better control their energy
consumption and costs.
When asked to identify key factors influencing switching rates, 89 respondents out of 237
stated that consumers were not aware of their switching rights, 110 stated that prices and
tariffs were too difficult to compare due to a lack of tools and/or due to contractual
conditions, and 128 cited insufficient benefits from switching.
Only 32 out of 237 respondents agreed with the statement: "There is no need to encourage
switching". 98 disagreed and 90 were neutral.
National Regulatory Authorities
ACER
identifies exit fees as a potential barrier to switching, since they tend to increase
the threshold for consumers to switch due to the perceived diminished potential savings
207
Held from 22 to 17 April 2014.
https://ec.europa.eu/energy/en/consultations/consultation-retail-energy-
market
482
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0182.png
available. However, ACER highlights that exit fees in fully competitive retail markets are
applied to cover the costs incurred by suppliers due to early contract termination. ACER
argues that offers which include exit fees should be made fully transparent (including on
price comparison tools) and that exit fees need to be objectively justified.
The body representing the EU's national regulatory authorities in Brussels,
CEER
208
,
supports the distinction between exit fees, which it deems to be a contractual matter, and
all other switching-related fees. CEER has stated that it should not be possible for energy
suppliers to charge an exit fee to customers who respect the end date of their fixed term
energy contract. It also deems that other switching-related fees are not permissible under
EU law. However, it argues that any decision on whether to abolish exit fees needs to be
taken at the national level, as creating an environment where customers are encouraged to
switch more freely may not always result in lower overall prices.
Ombudsmen
According to
NEON,
the National Energy Ombudsmen Network, EU regulations and
directives already provide that supplier switching should be easy and quick, without extra
charges. However, mistrust in the market, indecision and the perceived lack of benefits
remain the main obstacles to more switching. As it is the case in France and Belgium,
NEON believes that consumers should be allowed the right to change supplier whenever
they want, without paying termination or exit fees.
Consumer Groups
BEUC
has argued for greater transparency on exit fees, stating that a summary of the key
contractual conditions, including conditions for switching, should be provided to
consumers in concise and simple language alongside with the contract
209
. BEUC has also
stated that it is: "concerned about the application of termination fees representing a lock in
situation of the consumer and an anti-competitive measure as these fees often prevent
consumers from changing the supplier. Switching should not be subject to any termination
fee or penalty"
210
.
BEUC, EURELECTRIC
and
Eurogas
recently released joint statement on improved
comparability of energy offers
211
. In it, they call for the following key information is
provided to customers by suppliers in one place in a short, easily understandable,
prominent and accessible manner:
-
Product name and main features including, where relevant, information on
environmental impact, clear description of promotions (e.g. temporary discounts) and
additional services (e.g. maintenance, insurance, etc.)
-
Total Price (fixed/variable) - which includes all cost components - and conditions for
price changes
-
Contract duration, notice period (renewal/withdrawal - where relevant) and conditions
for termination, including, where relevant, fees and penalties
208
209
210
211
The Council of European Energy Regulators.
http://www.beuc.eu/publications/beuc-x-2015-
102_mst_beuc_response_to_public_consultation_on_a_new_energy_market_design.pdf
http://www.beuc.eu/publications/beuc-x-2015-068_mst_building_a_consumer-
centric_energy_union.pdf
http://www.eurelectric.org/media/263669/joint_statement_-
_improved_comparability_of_energy_offers_-2016-030-0116-01-e.pdf
483
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
-
-
Payment frequency and method options (e.g. cash/ cheque/ direct debit/ standing order/
prepayment)
Supplier’s contact details (e.g. customer service’s address, telephone number and/or
email, including, where relevant, identification of any intermediary)
Suppliers
In their contribution to the discussions within the Citizens' Energy Forum in 2016,
EURELECTRIC
and its members welcomed the intention of the Commission and NRAs
to work towards removing barriers to switching supplier. EURELECTRIC believes that all
barriers should be considered, including non-commercial barriers, i.e. technical and
regulatory. In terms of commercial barriers, a distinction should be drawn between fixed
term contracts and variable contracts. Many customers are on variable tariffs with no end
date and these do not have exit fees. In contrast, according to EURELECTRIC, exit fees
need to be allowed to for fixed term deals
– provided they’re proportionate to the costs
incurred by the supplier
–
as they help cover the costs suppliers face when customers leave
early, much like for broadband or mobile phone contracts. Such contracts can be cheaper
because suppliers have more certainty about how many customers they have and how much
energy to buy in advance. If exit fees were banned for such contracts, the prices of fixed
term deals would be likely to go up to the detriment of customers. EURELECTRIC
believes that in any case where exit fees do apply to fixed term contracts, they must be
clearly communicated to customers up-front.
BEUC, EURELECTRIC
and
Eurogas
also recently released joint statement on improved
comparability of energy offers, which can be read above. It notably includes the
recommendation that termination fees be provided along with other key information on the
offer "in one place in a short, easily understandable, prominent and accessible manner".
The European Parliament
In its April 2016 opinion on the Commission's Communication on Delivering a New Deal
for Energy Consumers, the Parliament's
Committee on Industry, Research and Energy
(ITRE):
"Insists that the provisions on switching, as set out in the Third Package, should
be fully implemented by Member States, and that national legislation must guarantee
consumers the right to change suppliers in a quick, easy and free-of-charge way, and that
their ability to switch should not be hindered by termination fees or penalties".
Furthermore, ITRE calls for better information to consumers about their rights, and for
further measures to make switching between providers easier.
In its April 2016 opinion on the Commission's Communication on Delivering a New Deal
for Energy Consumers, the Parliament's
Committee on the Internal Market and
Consumer Protection (IMCO)
called for: "the full implementation of the third energy
package, including the right to change suppliers free of charge and better information to
consumers about their rights, and for further measures to make switching between
providers easier and faster, including a shortened switching period and effective and secure
data portability in order to prevent the lock-in of consumers".
The Committee of the Regions
In its April 2016 opinion on the Commission's Communication on Delivering a New Deal
for Energy Consumers, the
Committee of the Regions
suggests that information
campaigns for switching suppliers should be launched by energy regulators, local
authorities and consumer organisations. The Committee also encourages the EU to adopt
an ambitious regulation on reducing the transfer time for customers switching from one
provider to another, and making the transfer procedure automatic.
484
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
7.5. Comparison tools
485
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0185.png
Summary table
Objective: Facilitating supplier switching by improving consumer access to reliable comparison tools.
Option 0+
Option 1
Cross-sectorial Commission guidance addressing the applicability of the
Unfair Commercial Practices Directive to comparison tools
Option 2
Legislation to ensure every Member State has at
Legislation to ensure every Member State appoints
an independent body to provide a comparison tool
least one 'certified' comparison tool that complies
with pre-specified criteria on reliability and
that serves the consumer interest
impartiality
Pros:
Pros:
Pros:
- Facilitates coherent enforcement of existing legislation.
- Fills gaps in existing legislation vis-à-vis energy
- NRAs able to censure suppliers by removing their
- Light intervention and administrative impact.
comparison tools.
offers from the comparison tool.
- Cross-sectorial consumer legislation already requires comparison tools to be - Limited intervention in the market, in most cases.
- No obligation on private sector.
transparent towards consumers in their functioning so as not to mislead
- Allows certifying all existing energy comparison
- Reduces risks of favouritism in certification
consumers (e.g. ensure that advertising and sponsored results are properly
tools regardless of ownership.
process.
identifiable etc.).
- Proactively increases levels of consumer trust.
- Proactively increases levels of consumer trust.
- Cross-sectorial approach addresses shortcomings in commercial comparison - Ensures EU wide access.
tools of all varieties.
- The certified comparison websites can become
market benchmarks, foster best practices among
- Cross-sectorial approach minimizes proliferation of sector-specific
competitors
legislation.
Cons:
Cons:
Cons:
- Does not apply to non-profit comparison tools.
- Existing legislation already requires commercial
- To be effective, Member States must provide
comparison tools to abide by certain of the criteria
- Does not proactively increase levels of consumer trust.
sufficient resources for the development of such
- The existing legislation does not oblige comparison tools to be fully
addressed by certification.
tools to match the quality of offerings from the
impartial, comprehensive, effective or useful to the consumer.
- Requires resources for verification and/or
private sector.
certification.
- Well-performing for-profit tools could be side-
- Significant public intervention necessary if no
lined by less effective ones run by national
comparison tools in a given Member State meet
authorities.
standards.
Most suitable option(s): Option 1
is the preferred option because it strikes the best balance between consumer welfare and administrative impact. It also gives Member States control over
whether they feel a certification scheme or a publicly-run comparison tool best ensures consumer engagement in their markets.
486
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0186.png
Description of the baseline
Online comparison tools
–
websites that compare different energy offers
–
play an
important role in helping consumers to make an informed decision about switching
suppliers. Comparison tools (CTs) have become increasingly widespread, and can now be
found in almost every MEMBER STATE (Table 1).
487
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0187.png
Table 1: Estimated number of energy comparison tools in Member States
212
212
Excluding CY and MT. Source: CEER, "Study
on the coverage, functioning and consumer use of
comparison tools and third-party verification schemes for such tools",
(2014) European Commission,
http://ec.europa.eu/consumers/consumer_evidence/market_studies/comparison_tools/index_en.htm.
488
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0188.png
Number
Of which Comment
of energy Govt.
CTs
Operated
* denotes estimate based on weighted average of figures from NRAs who reported data, or desktop
research
AT
2*
1
BE
11
3
Accreditation under review.
BG
0
0
CZ
2*
0*
DE
10
0
German consumer organisations under the umbrella of a market
watchdog have conducted a survey about CT's in February 2016
and provided a test report and ranking, which can be found
here.
DK
2
2
EE
0
0
EL
3*
0*
ES
7
1
The NRA is legally entitled to run a CT. All suppliers are obliged
to send the commercial offers to the CT. The NRA CT would meet
accreditation standards.
The consumer organization also has a CT, but only for its affiliates.
The NRA has no powers to monitor the functioning of private CTs.
It can be estimated than very few of them would meet accreditation
standards, perhaps between 0 and 3, depending on the requirements
for the accreditation.
No specific accreditation standards are applied. The CT
(www.sahkonhinta.fi) operated by the NRA, however, is free of
charge, neutral, easy to access and comprehensive (all suppliers are
obliged to report their public offers there). One of the commercial
CTs uses the price data that is published by the NRA.
There are several running service provider businesses
concentrating exclusively on businesses. In addition Hungary is
considering implementing a comparison tool - taking into account
the level of price competition - would primarily focus on businesses
and would be run by the Hungarian NRA.
Accreditation scheme in place
Member
State
FI
4
1
FR
HU
8
3
2
0
HR
IE
IT
LV
LT
LU
NL
1*
2*
9
0
0
1
14
0*
0
2
0
0
1
0
ACER reports no price comparison tools in this Member State.
No accreditation scheme. ACM developed a ‘guidance’ document
for all companies offering electricity and/or gas contracts,
including price comparison websites. The guideline is based on
general consumer law and sector specific energy legislation. The
goal of the guideline is to ensure that consumers are offered energy
products that are tailored made to their situation, contains
information they can easily understand, and compare with other
offers. ACM can intervene whenever a price comparison website
does not comply with the aforementioned legislation.
Offers available on CT, are updated by NRA on the basis of
information from suppliers. Suppliers are obliged to send NRA new
offers immediately after deciding on the introducing their offer into
the market (but not later than 2 days before the offer starts).
However data concerning distribution is entered by particular DSO
on the basis of distribution tariffs and their changes.
PL
1
1
PT
RO
2
0
1
0
489
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0189.png
Number
Of which Comment
of energy Govt.
CTs
Operated
* denotes estimate based on weighted average of figures from NRAs who reported data, or desktop
research
SE
4
1
The regulated CT is under supervision and checked regularly. The
other CTs are not regulated, supervised nor does the regulator
control the prices or how the prices are published. There is no
specific legislation for these CTs.
SI
1*
1
SK
1*
0*
UK
34
1
33 comparison tools make up over 90% of the market in GB, with
the remaining proportion of the market made up of 100’s of smaller
switching services.
122*
18*
Total
Source: CEER and DG ENER research
Member
State
A recent study found that 64% of consumers who had compared the tariffs of different
electricity companies said they had used a comparison tool to do so, compared to 38% who
had visited company websites, and 8% who had contacted companies by phone
213
. It also
showed that comparison tools significantly increased the number of cheaper offers
consumers were able to identify compared with contacting individual providers directly
214
.
Overall, 23% of consumers surveyed in the EU have used a comparison tool to compare
energy offers in the last 12 months
215
.
Comparison tools are likely to become even more important as the retail market for energy
matures. Between 2012 and 2014, ‘choice’ for consumers in European capitals widened,
with a greater variety of offers being available. However, the ability of consumers to
compare prices can be hampered by the complexity of pricing and the range of energy
products, as well as by an increasing number of offers and their bundling with additional
charge free or payable services
216
.
In a retail market characterized by persistently low levels of consumer engagement,
comparison tools are an effective means of reducing search costs for consumers, and
presenting them with accurate market information in a manner that is clear and
comprehensive.
However, the majority of comparison tools are operated for profit, leading to situations
where their impartiality and the consumer interest may not be ensured. Most comparison
tools do not charge consumers for access to their sites and therefore the bulk of their
products are obtained via commercial relationships with the vendors they list. They get
paid via subscription fees, click-through fees, or commission fees. Some comparison sites
213
214
215
216
Non-exclusive figures i.e. respondents could choose more than one means of comparison.
From twice to twenty times, depending on the Member State. "Second
Consumer Market Study on the
functioning of retail electricity markets for consumers in the EU"
(2016) European Commission.
However, this figure varies widely across the EU with up to 45% of UK consumers using comparison
tools to compare energy offers compared to only 2% of consumers from Luxembourg. "Study
on the
coverage, functioning and consumer use of comparison tools and third-party verification schemes for
such
tools"
(2013)
European
Commission,,
http://ec.europa.eu/consumers/consumer_evidence/market_studies/comparison_tools/index_en.htm
"Market
Monitoring
report
2014"
(2015)
ACER,
http://www.acer.europa.eu/Official_documents/Acts_of_the_Agency/Publication/ACER_Market_Mon
itoring_Report_2015 p.40,
100.
490
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0190.png
list sellers at no cost and get their revenue from sponsored links or sponsored ads. A lesser
used model is where some Comparison Tools charge consumers to obtain access to its
information, while firms do not pay any fees (Figure 1).
Figure 1: Business models of EU comparison tools (including non-energy)
Source: "Study on the coverage, functioning and consumer use of comparison tools and third-party
verification schemes for such tools" (2013) European Commission, pp. 99, 102
Recent reports of unscrupulous practices have damaged consumer trust in both comparison
tools and the switching process more generally (Box 1). Indeed, a third of respondents to
a recent EU survey somewhat or strongly agreed that they did not trust price comparison
websites because they were not independent and impartial and thus questioned the
independence of such tools. Perhaps for this reason, the same study found: "Comparison
tools did not appear keen to divulge details on how they generated income"
217
.
Identified issues include:
i) the default presentation of deals by some websites;
ii) the misleading language used to provide consumers with a choice of which
presentation to pick;
iii) the lack of transparency about commission arrangements; and
iv) inadequate arrangements for regulatory oversight.
217
Less than half of Comparison Tools were willing to disclose details on their supplier relationship,
description of business model or the sourcing of their price and product data. "Study
on the coverage,
functioning and consumer use of comparison tools and third-party verification schemes for such tools"
(2013) European Commission, pp. xix, 191.
491
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0191.png
Box 1: UK House of Commons report into energy comparison tools
218
The UK has the largest number of energy comparison websites of any Member State, with 34 such tools
controlling a 90% share of the market. In 2015, the House of Commons Energy and Climate Change
Committee published a report criticising energy comparison tools for "hiding the best deals from consumers
by concealing tariffs from suppliers that do not pay the website a commission." The report concluded that
"all deals should be made available by default to the consumer" and strongly objected to "any attempt to lure
consumers into choosing particular deals by the use of misleading language." In addition it highlighted "the
lack of transparency about commission arrangements between the websites and suppliers" as a shortcoming
in the UK energy comparison tool market.
Source: UK House of Commons, Energy and Climate Change Committee
The existing consumer
acquis
could be made to work better (see Section below), and is an
ex-post
safety net that is enforced on a case-by-case basis by relevant national courts and
authorities. There may therefore be benefit in putting in place a specific
ex-ante
quality
assurance mechanism to guarantee a high level of quality information and transparency to
consumers, to spread the uptake of best practices, and to boost consumer confidence in
these tools. In addition, while comparison tools are indeed widespread, there is the need to
ensure a more universal coverage of reliable comparison tools throughout the internal
market.
Deficiencies of the current legislation
Section 7.3.5 and Annex V of the Evaluation show that the relevance of the existing
legislation is challenged by the fact that it is not adapted to reflect new ways of consumer-
market interaction, such as through comparison tools.
The 2005 Unfair Commercial Practices Directive
219
(UCPD) addresses comparison tools
in so far as it requires them to provide enough information to ensure that consumers are
not misled. As such, comparison tools qualifying as traders under the UCPD must ensure
that they carry out comparisons in a transparent way. They must not provide false or
deceiving statements, nor must they omit information about products if this causes the
average consumer to take a decision they might not have taken otherwise. The UCPD
particularly requires all traders to clearly distinguish a natural search result from
advertising.
Indeed, the full implementation of the UCPD would help address two of the issues with
energy comparison tools identified in the Section above, namely: The misleading language
used to provide consumers with a choice of which presentation to pick; and the lack of
transparency about commission arrangements.
In spite of this legislation, however, there may be scope for further EU action to address
this area.
Firstly, because the UCPD is a cross-sectorial and principle-based piece of legislation, its
provisions may not address all of the problems we observe in comparison tools. For
example, whilst the UCPD states that comparison tools should not mislead consumers, it
218
219
In one such case, some comparison websites were found to be hiding the best deals from consumers by
concealing tariffs from suppliers that did not pay these websites
a commission. “Protecting
consumers:
Making energy price comparison websites transparent”
(2015) UK House of Commons, Energy and
Climate
Change
Committee,
http://www.publications.parliament.uk/pa/cm201415/cmselect/cmenergy/899/899.pdf.
Articles 6 and 7, in particular.
492
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0192.png
does not oblige them to be effective, impartial or useful to the consumer, nor does it require
comparison tools to cover an entire market. A comparison tool that only displayed biased
rankings would be in compliance with the UCPD as long as it clearly stated that this was
the case.
Secondly, Member States may have difficulties in interpreting the provisions of the UCPD
–
as well as the 13 other pieces of legislation and official guidance that may apply (Box 2)
–
and relating this body of legislation to energy comparison tools in particular. Clearer
provisions could therefore improve implementation.
Box 2: List of applicable legislation and official guidance documents
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Directive 2005/29/EC (Unfair Commercial Practices Directive)
SEC(2009) 1666 (Guidance on Unfair Commercial Practices Directive)
Directive 2011/83/EU (Consumer Rights Directive)
Guidance Document concerning Directive 2011/83/EU (Guidance on Consumer Rights Directive)
Directive 2006/114/EC (Misleading and Comparative Advertising Directive)
Directive 2000/31/EC (E-Commerce Directive)
Directive 98/6/EC (Price Indication Directive)
Council Directive 93/13/EEC (Unfair Contract Terms Directive)
Directive 2002/22/EC (Citizens' Rights Directive)
Directive 2014/92/EU (Payment Accounts Directive)
Regulation (EC) No 1008/2008 (Air Services Regulation)
Directive 2009/72/EC (Electricity Directive)
Directive 2009/73/EC (Gas Directive)
Directive 2008/48/EC (Consumer Credit Directive)
Directive 2007/64/EC (Payment Services Directive)
Directive 2002/65/EC (Distance Marketing of Consumer Financial Services Directive)
Finally, whereas the UCPD and most other applicable consumer protection legislation only
applies to commercial comparison tools, there is also a need to ensure the quality of
comparison tools operated by national authorities and non-profit organizations.
As for the Third Package, consumer bills and pre-contractual information formed the basis
of consumer comparability at the time of its drafting, as consumers would manually
measure up individual offers against their current supply contract. The legislation therefore
addressed these points in order to promote consumer interests. Since then, the use of online
websites for comparison as well as marketing purposes has risen significantly across the
EU, challenging the relevance of the sector-specific energy
acquis,
which does not address
comparison tools at all.
Presentation of the options
Option 0+ (Non-regulatory approach): Cross-sectorial Commission guidance addressing
the applicability of the Unfair Commercial Practices Directive to commercially operated
comparison tools
The Unfair Commercial Practices Directive expressly prohibits activities that materially
distort the consumer’s economic behaviour to the point where their ability to make an
informed decision is impaired. This has implications for the following issues relevant to
energy comparison tools,
inter alia:
-
-
-
-
Identification of advertising and sponsored results;
Criteria for ranking;
The disclosure of relationship with suppliers (assessed on a case-by-case basis);
Displaying the same information for all products.
493
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0193.png
Building on the principles of reliability and impartiality endorsed by the Multi-Stakeholder
Dialogue on Comparison Tools, the Commission has therefore very recently published
updated guidance on how to apply the Directive to comparison tools in all sectors
220
.
In addition, various other cross-sectorial consumer protection Directives require the
disclosure of price and product data sourcing
221
. Stronger enforcement of the existing
acquis
therefore has significant potential to address the shortcomings addressed above.
Accordingly, a 2013 Commission study on comparison tools found that the
"[e]nforcement
of existing legal instruments appears to be first a priority"
222
.
14 different EU legal instruments and guidance documents may currently apply to
comparison tools, depending on their ownership characteristics and which consumer sector
they operate in. This means that both consumers and comparison tool operators are unlikely
to be fully familiar with their respective rights and obligations. Further consolidated
guidance can be considered here, too.
Option 1: Legislation to ensure every Member State has at least one 'certified' comparison
tool that complies with pre-specified criteria on reliability and impartiality
Under this option, a designated national authority would certify energy comparison tool
websites that meet certain criteria for reliability with some form of 'trustmark' as part of a
voluntary scheme.
These criteria would include: impartiality; quality and accuracy of information; type of
information/characteristics to be compared; transparency on the criteria used for
comparisons; transparency on ranking methodologies; transparency on funding; and (near)
complete coverage of the market. As these criteria would be based on recommendations
contained in the Council of European Energy Regulator’s ‘Guidelines of Good Practice on
Price Comparison Tools’, they would be a product of the
expert opinion of EU NRAs, as
well as an extensive public consultation process
223
.This sector-specific approach would
plug gaps in the existing legislation, and was recently also taken to improve comparison
tools in the banking sector with the 2014 Payment Account Directive.
Box 3: Fourteen CEER recommendations for comparison tools
Independence: Comparison Tools in the energy sector should be independent from energy supply companies
(1), National Regulatory Authorities (NRAs) should maintain a role by assisting self-regulation, establishing
accreditation/regulation or by creating Comparison Tools (2).
Transparency: Comparison Tools should disclose the way they operate, their funding and their
owners/shareholders (3).
220
221
222
223
See updated Guidance on the UCPD,
http://ec.europa.eu/consumers/consumer_rights/unfair-
trade/comparison-tools/index_en.htm.
"Study
on the coverage, functioning and consumer use of comparison tools and third-party verification
schemes for such tools"
(2013) European Commission, pp. 289.
"Study on the coverage, functioning and consumer use of comparison tools and third-party verification
schemes for such tools"
(2013) European Commission, pp. 287.
"Guidelines
of Good Practice on Price Comparison Tools",(2012)
CEER, Ref: C12-CEM-54-03,
http://www.energy-
regulators.eu/portal/page/portal/EER_HOME/EER_PUBLICATIONS/CEER_PAPERS/Customers/Ta
b3/C12-CEM-54-03_GGP-PCT_09Jul2012.pdf.
494
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0194.png
Exhaustiveness: All prices and products available for the totality of customers should be shown as a first
step. If not possible, the Comparison Tool should clearly state this before showing results. After the initial
search, the option to filter results should be offered to the customer (4)
Clarity and Comprehensibility: Costs should always be presented in a way that is clearly understood by the
majority of customers, such as total cost on a yearly basis or unit kWh-price including amount and duration
of discounts and whether prices are an estimation based on historic or estimated consumption (5).
Fundamental characteristics of all products, for example fixed price products, floating price products or
regulated end user prices, should be presented on the first page of the result screen. This differentiation
should be easily visible to the customer. Explanations of the different types of offers should be available to
help the customer understand their options (6). The price Comparison Tool should offer information on
additional products and services, if the customer wishes to use that information to help choose the best offer
for them (7).
Correctness and Accuracy: Price information used in the comparison should be updated as often as necessary
to correctly reflect prices available on the market (8).
User Friendliness: The user should be offered help through default consumption patterns or, preferably, a
tool that calculates the approximate consumption, based on the amount of the last bill or on the basis of other
information available to the user (9).
Accessibility: To ensure an inclusive service at least one additional communication channel (other than the
Internet) for getting a price comparison should be provided free of charge or at minimal cost (10). Online
Comparison Tools should be implemented in line with the Web Accessibility Guidelines (WCAG) and
should ensure that there are no barriers to overcome to access the comparison (11).
Customer Empowerment: Where the Comparison Tool is run by an NRA/public body they should promote
the service to customers. Where the NRA/public body is regulating/accrediting/actively monitoring privately
run Comparison Tools they should consider establishing a marker or logo (12). Comparison Tool providers
should provide background information on market functioning and market issues if the customer wants this
information or provide links to useful independent sources of information (13). Information provided to
customers should be clearly written and presented using consistent or standardised terms and language (14).
The main administrative costs would fall upon national competent authorities who would
be charged with developing accreditation systems, monitoring compliance, and imposing
sanctions. However, the legislation would allow costs to be charged to website operators
seeking accreditation under this scheme. Such costs may be covered by, for example,
increased sales at the level of an accredited (and thus trustworthy) comparison tool.
In Member States where comparison tools are not widely used, it may be difficult to find
one that meets the criteria for certification. The legislation would therefore allow a public
authority such as the NRA to establish a comparison tool conforming to the certification
criteria.
However in more mature markets, existing providers are likely to be willing and able to
fulfil accreditation requirements in order to gain further recognition in the market and
strengthen their reputation with consumers.
Option 2: Legislation to ensure every Member State appoints an independent body to
provide a comparison tool that serves the consumer interest
Examples of such independent bodies could include NRAs, consumer authorities, or
independent consumer groups. The establishment and funding of such comparison tools
would be left to the discretion of the Member State, however the comparison tool must
conform to the same certification criteria put forward in Option 1 to ensure its reliability.
495
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0195.png
Comparison of the options
This Section compares the costs and benefits of each of the Options presented above in a
semi-quantitative manner.
In general, the costs of implementing each of the above measures can be estimated to a
reasonably certain degree using tools such as the standard cost model for estimating
administrative costs
224
. However, no data or methodology exists to accurately quantify all
the benefits of the measures in terms of direct benefits to consumer (consumer surplus) or
general competition. As such, this Section draws on behavioural experiments from a
controlled environment to evaluate the impact of some policy options on consumer
decision-making. Where appropriate, it aims to illustrate the possible direct benefit to
consumers assuming certain conditions. It also highlights important qualitative evidence
from stakeholders that policymakers should also incorporate into their analysis of costs
and benefits.
Option 0+: Cross-sectorial Commission guidance addressing the applicability of the Unfair
Commercial Practices Directive to commercially operated comparison tools
The cross-sectorial approach addresses shortcomings in commercial comparison tools of
all varieties, and minimizes the proliferation of sector-specific legislation. It helps national
authorities and comparison tool operators understand the relevant EU legislation,
addressing any possible cases of non-compliance. It also leads to a lighter administrative
impact in the Member States.
In spite of these considerations,
it is unlikely that Option 0+ would most effectively
address the problem of poor consumer engagement.
Whereas stronger enforcement of the existing
acquis
has significant potential to address
the shortcomings identified above, the existing
acquis
does not oblige comparison tools to
be fully impartial, nor does it oblige existing comparison tools to cover (almost) the whole
market in a given Member State. It does not apply to non-profit comparison tools, and
better enforcement alone would not be as effective in boosting consumer confidence as a
proactive accreditation scheme. Moreover, this option would not ensure that all EU
consumers have access to a certified comparison tool
–
an aspect that is highly desirable
given the important role comparison tools play in engaging energy consumers and the
current disparity in the coverage of energy by comparison tools in various Member States
(Table 1).
It is unlikely that voluntary cooperation between Member States would address this
problem, as it is domestic in nature with no common gains to be had through supra-national
coordination.
Accordingly, NRAs, ombudsmen, consumer groups, and even industry associations
representing electricity and gas suppliers all support firmer action than Option 0+ proposes.
Indeed, the only major stakeholder that partially supports the soft-law approach embodied
in Option 0+ appears to be the European Parliament's Committee on the Internal Market
224
http://ec.europa.eu/smart-regulation/guidelines/tool_53_en.htm
496
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0196.png
and Consumer Protection. But even here, the Committee also calls for EU-wide access to
an energy comparison tool
–
something that cannot be ensure without legislative changes.
There are
no implementation costs
associated with Option 0+.
Option 1: Legislation to ensure every Member State has at least one 'certified' comparison
tool that complies with pre-specified criteria on reliability and impartiality
The
economic benefits
of Option 1 will primarily be indirect, and come in terms of greater
competition (lower prices, higher standards of service and a broader variety of products on
the market). Comparison tools reduce the cost of comparing the market for consumers and
help to lower information asymmetries
225
. Indeed, a behavioural experiment showed that
comparison tools increased the number of cheaper offers consumers were able to identify
by between two and twenty times (depending on the Member State) compared with
contacting individual providers directly. Given that insufficient financial gain is the main
consideration for not switching, this option should therefore help to reduce consumer
'stickiness' and create a more level playing field for suppliers.
Figure 2: Number of cheaper offers found (mean)
–
Contacting providers vs. using
comparison tools
Online and phone enquiries
49.7
46.3
36.6
32.5
27.6
20.7
12.7
9.2
7.0
6.8
6.1
12.3
12.7
7.7
3.9
3.6
3.2
29.9
Comparison tools
4.5
4.2
DE
Total
PL
IT
UK
ES
SE
SI
Mean number
found
Source:
of chepaer offers
of offers found; Total number of cheaper offers
"Second
Q17a-d & Q18a-b. Total number
Consumer Market Study on the functioning of retail electricity markets for consumers in
Base: all mystery shoppers (except Lithuania)
the EU" (2016) European Commission.
In addition, Option 1 will directly result in
greater consumer surplus.
Consumer
protection will be strengthened as suppliers and companies managing comparison tools
will be required to improve levels of transparency. For example, tools will not be restricted
to displaying the offers that are of greatest financial interest to either party. Customer
mobility through transparent publication of all offers will be improved, as will customer
trust through certification.
For this reason, the vast majority of consumers prefer comparison tools with third party
verification. In a behavioural test carried out within the recent study on price comparison
225
Comparison tool users surveyed for a recent EU study reported that they used these tools because they
offered them a quick way to compare prices (mentioned by 69%) and allowed them to find the cheapest
price (68%). Vast majorities of consumers agreed that price comparison websites are the quickest way
to compare prices (in total, 90% agreed), are easy to use (87%), and are useful to find out information
about specific products/prices (84%). "Study
on the coverage, functioning and consumer use of
comparison tools and third-party verification schemes for such tools"
(2013) European Commission,
497
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
CZ
FR
 kom (2016) 0864 - Ingen titel
1730778_0197.png
tools 78% of respondents chose an energy comparison tool that included third party
verification over 22% that chose tools with no verification
226
.
226
12,000 respondents from 15 Member States: CZ, DE, DK, FR, GR, HR, HU, IT, LV, NL, PL, UK, RO,
SE, SI. The experiment tested (a) consumer choice of a comparison tool at the initial online search stage
using a mock search engine; (b) consumer choice of a comparison tool from a short list; and, (c)
consumer choice of a product or service on an individual comparison tool. The experiment was framed
for the electricity sector and travel sector (hotels). "Study
on the coverage, functioning and consumer
use of comparison tools and third-party verification schemes for such tools"
(2013) European
Commission, p. 205.
498
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0198.png
Figure 3: POTP price spread and annual savings available from switching from the
incumbent standard offer
Source: ACER Retail Database (November–December 2014) and ACER calculations
Whilst the economic benefits of Option 1 in terms of increased competition cannot be
quantified
227
, one dimension of consumer surplus
–
the direct financial benefits to
227
EU retail markets differ on too many dimensions to make a comparative approach reliable. And too
many factors affect key retail indicators to make the results of a longitudinal study into comparison tools
reliable.
499
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0199.png
consumers of easier and more effective switching as a result of this measure
–
can be
estimated using the following assumptions.
If we assume that:
-
The 14 Member States that already have accreditation schemes or at least one
government-operated comparison tool (AT, BE, DK, ES, FI, FR, IE, IT, LU,
PL, PT, SE, SI, UK) would see no additional benefits from this intervention
because they already fulfil its requirements
228
;
-
The average switching rates for electricity and gas in each of the other
Member States (BG, CZ, DE, EE, EL, HR, HU, LT, LV, NL, RO, SK)
229
increased by 0.1% as a result of the intervention
230
;
-
The annual financial benefit of switching in these Member States amounts to the
difference in price between the incumbent's standard offer and the cheapest offer
in the capital city (Figure 3 above).
231
;
-
The financial advantage of switching as a result of these measures persists for
four years
232
;
-
Apart from increasing the switching rate, there were no other benefits of this
intervention in term of improving the ability of switching customers to
identify a better offer
233
;
-
All EU households within each Member State are able to benefit from these
changes equally in relative terms
234
;
-
A discount rate of 4% for the consumer benefits year on year;
then Option 1 would result in an increase in consumer surplus
of between 27.8 million
euros and 98.3 million euros annually
(depending on the year of implementation), and
843 million euros in total for the period 2020-2030.
The main
implementation costs
would fall upon national competent authorities who would be charged with developing
228
229
230
231
232
233
234
This is a conservative assumption, as it may be that the certification criteria put in place by Option 1
could improve the functioning of some existing certification schemes and government-run comparison
tools.
CY and MT were not included in this analysis.
Reflecting the increased consumer confidence in comparison tools, which greatly reduce the costs of
comparing the market. 27% of consumers surveyed strongly agreed, and 48% somewhat agreed, that
they trusted comparison tools more when they were affiliated with a third-party verification scheme.
And when respondents in a behavioural experiment were offered the choice between energy comparison
tools that carried no verification and ones that did, the sites that carried verification schemes were
selected 3.5 times more often than the ones that did not. "Study
on the coverage, functioning and
consumer use of comparison tools and third-party verification schemes for such tools"
(2013) European
Commission, pp. 191, 205.
This proxy correlates well with the results of a mystery shopping exercise in which respondents were
asked to report the actual annual savings they would benefit from if they moved to the cheapest
electricity tariff they were able to find. "Second
Consumer Market Study on the functioning of retail
electricity markets for consumers in the EU"
(2016) European Commission.
A conservative assumption given the implied average time between switches is upwards of 15.5 years
for electricity consumers and 18 years for gas consumers.
A conservative assumption in light of Figure 2.
In reality, households will react differently depending on consumers’ needs, skills, motivations,
interests, lifestyle, and access to resources such as accurate online comparison tools. However, we have
no reliable data to quantify these differences in this specific context.
500
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0200.png
accreditation systems or comparison websites, monitoring compliance, and imposing
sanctions.
Box 4: The costs of Elpriskollen.se - the Swedish NRA's comparison tool
235
Initial investment (2008): 1,000,000 SEK (EUR 107,000)
IT system upgrade (2014): 280,000 SEK (EUR 29,400)
Website upgrade (2015): 600,000 SEK (EUR 63,600)
Annual running costs:
License: 28,000 SEK (EUR 2,996)
Servers and storage: 72,000 SEK (EUR 7704)
Application support and CGI: 150,000 SEK (EUR 16,050)
1 to 1.7 fulltime positions, depending on the year: EUR 66,768 - EUR 113,506
This equates to c. EUR 110,000 in start-up costs and EUR 105,143 - EUR 151,881 in running costs, factoring
in the annualized costs of periodic website and IT system upgrades.
Box 5: The costs of operating Ofgem's confidence code for comparison tools
236
The UK currently has 12 websites that are accredited by a full-time, 3-person team at Ofgem. This small
team deals with ad hoc stakeholder engagements associated with the day-to-day operation of the confidence
code, as well as performing continuous internal audits of accredited websites throughout the year.
In addition, each accredited website undergoes an external audit every year by an external consultant (19
hours per site), and every new site registered undergoes a substantial external audit (70 hours per site).
This equates to around EUR 214,335 in annual running costs, assuming one new site is accredited each year
Assuming:
-
All Member States currently without any comparison tools (EE, BG, LV, LT, and
RO) set up a state-run comparison tool to fulfil their obligations under Option 1;
-
The costs of each of these comparison websites for electricity and gas is 50% higher
than the cost of the Swedish NRA's electricity price comparison website, which
deals with electricity alone (Box 4)
237
;
235
Labour costs assume 2,080 work hours per man-year at EUR 32.10 for professionals, as per the standard
cost model.
236
Labour costs assume 2,080 work hours per man-year at EUR 41.50 for managers, EUR 32.10 for
professionals and EUR 23.50 for technicians or associate professionals, as per the standard cost model.
Calculations assume that Ofgem's confidence code team consists of one of each of the aforementioned
categories, and that external consultants charge at the rate of managers.
237
This is a conservative estimate given the significant labour cost differences between SE and these Member
States that would make setting up and operating a comparison website cheaper in other Member States.
501
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0201.png
-
-
-
-
-
All other Member States that would have to make changes under this option (CZ,
DE, EL, HR, HU, NL, SK) set up an accreditation scheme to fulfil their
obligations;
The costs of the UK's accreditation scheme for energy comparison tools (Box 5)
can help us estimate the cost of accreditation schemes in these Member States;
The costs of administering accreditation schemes is directly proportional to the
size of the market in terms of households
238
;
The cost of voluntary accreditation schemes to comparison tools is zero
239
;
A discount rate of 4% for the consumer benefits year on year;
then Option 1 would result in
start-up costs of 802,500
euros
running costs of between
1 million euros and 1.63 million euros annually
(depending on the year of
implementation), and a
total cost of between 13.3 euros and 16.5 million euros for the
period 2020-2030.
As regards stakeholder views, Option 1 would likely enjoy broad support amongst all
stakeholder groups. Whilst many stakeholders support the principle that comparison tools
should be independent and accurate without explicitly addressing the means of achieving
this, some
–
notably including industry groups and the European Parliament's ITRE
Committee, and the Committee of the Regions
–
explicitly call for certification.
Option 2: Legislation to ensure every Member State appoints an independent body to
provide a comparison tool that serves the consumer interest
As with Option 1, Option 2 would likely result in indirect and unquantifiable
economic
benefits
in terms of greater competition. It would also result in
greater consumer surplus.
It would ensure EU-wide access to comparison tools free from any commercial interest
that could affect their impartiality. It would also have the additional benefits that national
authorities would be able to censure suppliers by removing their offers from the
comparison tool, there would be no obligation on the private sector, and no risk of claims
of favouritism in a certification process.
When asked which organizations would be the most appropriate to run comparison tools,
51% of comparison tool users thought that they should be run by consumer organisations.
13% selected a national authority or regulator as the most suitable organisation, and 8%
preferred to entrust this task to a private organisation
240
. Given these results, one might
expect Option 2 to lead to greater levels of consumer trust than Option 1.
238
239
240
A conservative estimate, given that the UK appears to have a disproportionately large number of
comparison tools for the size of its market (Table 1).
As the scheme is voluntary, comparison tools can be expected to only to make the changes necessary to
qualify for accreditation if they judged this would be in their long-term financial interest anyway.
"Study on the coverage, functioning and consumer use of comparison tools and third-party verification
schemes for such tools"
(2013) European Commission, p. 203.
502
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0202.png
Figure 4: Most appropriate organisation to run comparison tools (by country)
241
"Study
on the coverage, functioning and consumer use of comparison tools and third-party
verification schemes for such tools"
(2013) European Commission
If we assume that:
-
The average switching rates for electricity and gas in each of the 13 Member
States at least one government-operated comparison tool (BG, CZ, DE, EE,
EL, HR, HU, IE LT, LV, NL, RO, SK)
242
increased by 0.13% as a result of
the intervention
–
30% more than option one
243
;
-
The annual financial benefit of switching in these Member States amounts to
the difference in price between the incumbent's standard offer and the
cheapest offer in the capital city (Figure 3 above)
244
;
-
The financial advantage of switching as a result of these measures persists for
four years
245
;
-
Apart from increasing the switching rate, there were no other benefits of this
intervention in term of improving the ability of switching customers to
identify a better offer
246
;
-
All EU households within each Member State are able to benefit from these
changes equally in relative terms
247
;
-
A discount rate of 4% for the consumer benefits year on year;
241
242
243
244
245
246
247
Question: "Comparison tools can be run by different types of organisations. Among the following
organisations, which one do you think is the most appropriate?" '.
CY and MT were not included in this analysis.
Reflecting Figure 4. However, this estimate is highly uncertain in light of the fact that it assumes that
Member States would provide sufficient resources for the development of publicly run comparison tools
to match the quality of offerings from the private sector.
This proxy correlates well with the results of a mystery shopping exercise in which respondents were
asked to report the actual annual savings they would benefit from if they moved to the cheapest
electricity tariff they were able to find. "Second
Consumer Market Study on the functioning of retail
electricity markets for consumers in the EU"
(2016) European Commission.
A conservative assumption given the implied average time between switches is upwards of 15.5 years
for electricity consumers and 18 years for gas consumers.
A conservative assumption in light of Figure 2.
In reality, households will react differently depending on consumers’ needs, skills, motivations,
interests, lifestyle, and access to resources such as accurate online comparison tools. However, we have
no reliable data to quantify these differences in this specific context.
503
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0203.png
then Option 2 would result in an increase in consumer surplus
of between 56 million euros
and 128 million euros annually
(depending on the year of implementation), and
1.1
billion euro in total for the period 2020-2030.
However, there is a
greater degree of
uncertainty in these figures
when compared with the workings for Options 1, in light of
possible variance in the effectiveness of such publicly-run comparison tools.
The main
implementation costs
would fall upon national authorities who would be
charged with developing and managing energy comparison websites
248
. Privately-run
comparison sites may also lose market share to comparison tools run by a government-
funded body, although these impacts are impossible to estimate.
Assuming:
-
All 13 Member States without a state-run comparison tool (BG, CZ, DE, EE,
EL, HR, HU, IE LT, LV, NL, RO, SK) set one up to fulfil their obligations
under Option 2;
-
The costs of each of these comparison websites for electricity and gas is 50%
higher than the cost of the Swedish NRA's electricity price comparison website,
which deals with electricity alone (Box 5)
249
;
-
A discount rate of 4% year on year;
then Option 2 would result in
start-up costs of 2.09 million euros, running costs of
between EUR 1.36 million and EUR 2.96 million euros annually
(depending on the
year of implementation), and a
total cost of between 20.6 million euros and 28.9
million euros for the period 2020-2030.
As regards stakeholder views, Option 2 may not enjoy broad support amongst all
stakeholder groups and Member States. Whilst all stakeholders emphasize the
independence of comparison tools, and some explicitly support certification (Option 1),
none have voiced their exclusive support for a publicly run and funded energy comparison
tools.
Conclusion
Option 1 is the preferred option. By proportionately updating the existing acquis,
establishing a mechanism to proactively build consumer trust, and ensuring all EU
consumers have access to a comparison tool, it strikes the best balance between consumer
welfare and administrative impact. It also gives Member States control over whether they
feel a certification scheme or a publicly-run comparison tool best ensures consumer
engagement in their markets.
Box 1: Impacts on different groups of consumers
The benefits of the measures contained in the preferred option (Option 1), described in detail in the preceding
pages, accrue predominantly to consumers who are engaged in the market, and in particular those who
compare offers using the Internet. Whilst reliable comparison tools will also increase consumer engagement
levels, and whilst the increased competition engendered by comparison tools will lead to more competitive
offers on the market, disengaged consumers and consumers who do not use the Internet, including consumers
who may be vulnerable, will not reap as many direct benefits from this policy intervention.
248
249
The costs to suppliers in terms of notifying such sites of their is not considered significant.
This is a conservative estimate given the significant labour cost differences between SE and these
Member States that would make setting up and operating a comparison website cheaper in other Member
States.
504
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0204.png
Subsidiarity
Consumers are not taking full advantage of competition on energy markets due, in part, to
obstacles to switching. Well designed and implemented consumer policies with a European
dimension can enable consumers to make informed choices that reward competition, and
support the goal of sustainable and resource-efficient growth, whilst taking account of the
needs of all consumers. Increasing confidence and ensuring that unfair trading practices
do not bring a competitive advantage will also have a positive impact in terms of
stimulating growth.
Comparison websites are an effective means of reducing search costs for consumers and
presenting them with accurate price and market information. Although they have become
increasingly important in recent years, the majority of comparison websites are operated
for profit, leading to situations where their impartiality and the consumer interest may not
be ensured. Recent reports of unscrupulous practices have damaged consumer trust in
comparison websites, suggesting the need to boost consumer confidence in such tools.
The options here revolve around improving the accessibility and reliability of comparison
websites, both commercial and not-for-profit, through improved legislative guidance,
certification schemes and/or differing obligations on Member States to ensure the
availability of such websites. Similar legislative provisions on comparison tools already
exist in other sectorial legislation (i.e. financial sector with the 2014 Payment Accounts
Directive
250
).
The legal basis for the legislative options proposed (Options 1 and 2) is therefore likely to
be Article 114 TFEU. This allows for the adoption of
"measures for the approximation of
the provisions laid down by law, regulation or administrative action in Member States
which have as their object the establishment and functioning of the internal market".
In
doing this, in accordance with Article 169 TFEU, the Commission will aim at ensuring a
high level of consumer protection.
Without EU action, the identified problems related to the lack of an EU-wide market will
continue to lead to consumer detriment.
Option 0+
These options would fulfil the subsidiarity principle as they do not involve legislative
change and the subsidiarity of the existing legislation has been assessed previously.
However, consumer protection will continue to be compromised as consumers will not
have the assurance of comparison tool independence or of full transparency of all offers
available on the market. This is because of shortcomings inherent in the existing
legislation.
250
Directive 2014/92/EU of the European Parliament and of the Council of 23 July 2014 on the
comparability of fees related to payment accounts, payment account switching and access to payment
accounts with basic features. Text with EEA relevance.
505
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0205.png
Option 0+ would therefore not meet the proportionality principle as it would not achieve
the objective of the Article of the Treaty taken as their legal basis
–
the establishment and
functioning of the internal market.
Option 1
The principles of subsidiarity and proportionality would be best met through this Option
as it would concretely improve the functioning of the internal market and reduce levels of
consumer detriment, whilst leaving national authorities broad flexibility to tailor measures
to the characteristics of their markets and their available resources.
Option 2
The principles of subsidiarity and proportionality may not be respected in this Option as it
may be excessive in terms of the implied impact on certain Member State authorities who
would need to establish an independent body to provide a comparison tool service.
Moreover, it is not clear that customer mobility or consumer protection would improve
with the introduction of such a body in all Member States as the reliability and user-
friendliness of at least some private sector comparison tools may already be of a high
standard.
Stakeholders' opinions
Public Consultation
When asked to identify key factors influencing switching rates, 110 out of 237 respondents
to the Commission's Consultation on the Retail Energy Market
251
stated that prices and
tariffs were too difficult to compare due to a lack of tools and/or due to contractual
conditions.
178 out of 237 agreed that ensuring the availability of web-based price comparison tools
would increase consumers' interest in comparing offers and switching to a different energy
supplier. 40 were neutral and 4 disagreed.
Only 32 out of 237 respondents agreed with the statement:
"There is no need to encourage
switching".
98 disagreed and 90 were neutral.
National Regulatory Authorities
ACER
has argued that having reliable web comparison tools in place (allowing
comprehensive and easy ways to compare suppliers) can facilitate consumer choice and
consumer engagement by addressing the perceived complexity of the switching process. It
has therefore recommended that:
"To improve consumer switching behaviour and
awareness further, National Regulatory Authorities (NRAs) could become more actively
involved in ensuring that the prerequisites for switching, such as transparent and reliable
online price comparison tools and transparent energy invoices, are properly
implemented."
CEER
252
sees price comparison tools as a crucial instrument to provide information to
251
252
Held from 22 to 17 April 2014.
https://ec.europa.eu/energy/en/consultations/consultation-retail-energy-
market
The Council of European Energy Regulators.
506
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0206.png
electricity and gas customers. There are a range of routes to setting standards for
comparison tools. NRAs or another public body may establish their own comparison tools
or they may regulate private comparison tools. Alternatively, self-regulation by
comparison tools providers may be appropriate. Whatever the route, CEER's position is
that it is important that comparison tools are independent from energy supply companies,
that they are accurate and that they ideally present the full range of offers available.
In 2012, following an extensive consultation process, CEER published 14
recommendations covering the following aspects of comparison tools in the energy sector:
Independence; transparency; exhaustiveness; clarity and comprehensibility; correctness
and accuracy; user-friendliness; accessibility; and empowering customers
253
.
Ombudsmen
According to
NEON,
the National Energy Ombudsmen Network, regulators are best
placed to define the criteria of transparency and reliability of price comparisons tools and
to assess them. NEON insisted on referring to the 2012 CEER Guidelines of Good Practice
on Price Comparison Tools and the 15 recommendations they contain
254
.
Bodies in charge of providing information to consumers (single point of contact) and
organisations in charge of alternative dispute resolution (or an independent ombudsman),
as well as consumer associations (i.e. impartial bodies with no advertising or consumer
champion role, thanks to their independence from suppliers) are according to NEON best
placed to develop neutral and reliable tools. This may also be the case of private
companies, as long as they do not favour certain suppliers that would fund them or with
which they have special agreements. For all tools implemented, an annual auditing of the
regulator would be necessary: the list of approved comparison tools and a summary of the
auditing may be published and accessible online.
If the regulator sets up a price comparison tool, another authority should be responsible for
carrying out auditing, even from another Member State (peer review).
Consumer Groups
BEUC
believes it is essential that the consumer gets clear and independent information on
different offers. Regardless of who is running the comparison website, it must be ensured
that the information consumers get is impartial, up to date, accurate and provided in a user
friendly way and free of charge. The comparison tool should also enable consumers to
compare their current contract with new offers in an easy way.
At the same time, BEUC strongly believes there should be at least one independent
comparison tool for electricity and gas services in every Member State. In order to secure
the success of such a comparison tool, it is paramount to secure also a legal basis for
collection of price data. In addition, whilst comparison tools are increasingly used by
253
254
http://www.energy-
regulators.eu/portal/page/portal/EER_HOME/EER_PUBLICATIONS/CEER_PAPERS/Customers/Ta
b3/C12-CEM-54-03_GGP-PCT_09Jul2012.pdf
http://www.energy-
regulators.eu/portal/page/portal/EER_HOME/EER_PUBLICATIONS/CEER_PAPERS/Customers/Ta
b3/C12-CEM-54-03_GGP-PCT_09Jul2012.pdf
507
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0207.png
consumers, the proliferation of comparison tools and the influence they can have on
consumers’ decisions have given rise to concerns about their trustworthiness.
According to BEUC, if the transparency and reliability of comparison tools is not
guaranteed, if the full scale and high quality of the information they provide is not ensured
or if they do not comply with existing legislation, comparison tools can become a source
of consumer detriment and risk misleading and thereby undermining consumers’ trust in
the market
255
.
According to
Citizens' Advice
(UK) comparison tools can be operated by a regulator, a
consumer body or a private business that is appropriately regulated. The focus should
rather be on the establishment of key principles to the effect that the sites display
information in a way that is accurate, consistent, transparent, comprehensive and unbiased.
The tool must have all tariff data available from all suppliers in the market and include
information about termination fees, etc. The comparison should be based on the customer's
actual usage.
Suppliers
In their contribution to the discussions within the Citizens' Energy Forum in 2016,
EURELECTRIC
considered that it is the task of regulators to make sure that comparison
tools are neutral, do not limit innovation and do not favour any specific supplier, either
directly (for example, if they collect different fees from different suppliers) or indirectly
(for example, if their IT systems are not able to process all offers). EURELECTRIC and
its members have repeatedly argued in favour of certifying comparison tool with e.g. a
trust mark from the regulator, and stressed their full support for the Commission’s
initiatives to work with NRAs to develop transparency and reliability criteria for
comparison tools where these do not exist yet.
Eurogas
also welcomed the role that price comparison websites can play in national
energy markets, and argued that consumers should have access to such price comparison
services. For Eurogas, both price comparison websites operated by commercial entities as
well as non-commercial bodies operated by the NRA can provide "independent" services
to consumers. In order to ensure that this is the case, Eurogas supports an accreditation
system for such websites. According to Eurogas, experience in Member-States such as the
UK and the Netherlands suggests that price comparison websites develop over time, with
private companies establishing comparison services.
Whatever approach is adopted, Eurogas states that the funding of these sites should be
transparent. Regulation should be proportionate and would benefit from referring to the
2012 CEER Guidelines of Good Practice on Price Comparison Tools
256
. Moreover, for
recommendations and best practices on price comparison tools, reference should be made
255
256
http://www.beuc.eu/publications/beuc-x-2015-068_mst_building_a_consumer-
centric_energy_union.pdf
http://www.energy-
regulators.eu/portal/page/portal/EER_HOME/EER_PUBLICATIONS/CEER_PAPERS/Customers/Ta
b3/C12-CEM-54-03_GGP-PCT_09Jul2012.pdf
508
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0208.png
to the 2012 Report of the CEF Working Group on Transparency in EU Retail Energy
Markets
257
.
The European Parliament
In its April 2016 opinion on the Commission's Communication on Delivering a New Deal
for Energy Consumers, the Parliament's
Committee on Industry, Research and Energy
(ITRE):
"Recommends developing guidelines for price comparison tools to ensure that
consumers can access independent, up-to-date and understandable comparison tools;
believes Member States should consider developing accreditation schemes covering all
price comparison tools, in line with CEER guidelines."
In addition, ITRE: "Recommends
the creation of new platforms to serve as independent
[comparison tools]
to provide greater clarity to consumers on billing; recommends that
such independent platforms provide consumers with information on the percentage share
of energy sources used and the different taxes, levies and add-ons contained in energy
tariffs in a comparable way to empower the consumer to easily seek more suitable offers
in terms of price, quality and sustainability; suggests that this role could be assumed by
existing bodies such as national energy departments, regulators or consumer
organisations; recommends the development of at least one such independent price
comparison tool per Member State."
In its April 2016 opinion on the Commission's Communication on Delivering a New Deal
for Energy Consumers, the Parliament's
Committee on the Internal Market and
Consumer Protection (IMCO)
called on the Commission:
"to ensure the implementation
of the Unfair Commercial Practices Directive and for better cooperation between national
authorities of Member States investigating such practices".
It also welcomed "the
Commission’s intention to consider incorporating laws specifically concerning energy into
the Annex to the Regulation on Consumer Protection Cooperation",
although this measure
was not eventually pursued by the Commission.
IMCO also called for: "European
Union guidelines on independent, up-to-date and easy-
to-use price comparison tools, in particular to improve transparency, reliability, and
competition between all market players and to make it accessible and easier for consumers
to compare offers including types of contracts, prices and types of energy sources."
It
finally supported:
"access for all consumers to at least one price comparison tool for
energy services."
The Committee of the Regions
In its April 2016 opinion on the Commission's Communication on Delivering a New Deal
for Energy Consumers, the
Committee of the Regions
supports the idea of ensuring that
each consumer has access to at least one independent and verified comparison tool.
According to the Committee, these comparators must be clear, comprehensive, trustworthy
and independent, easy to use and free of charge. They should allow existing contracts to
be compared with offers available on the market. Whereas suppliers tend to diversify their
offers by including services in energy supply contracts, comparison tools must make it
257
https://ec.europa.eu/energy/sites/ener/files/documents/2012111314_citizen_forum_meeting_working_gr
oup_report.pdf
509
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
possible to compare the different "packages" on offer, while at the same time enabling the
"supply" element of the various packages to be compared on its own.
510
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
7.6. Improving billing information
511
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0211.png
Summary table
Objective: Ensuring that all consumer bills prominently display a minimum set of information that is essential to actively participating in the market.
Option: 0
Option 0+
Option 1
Option 2
BAU/Stronger enforcement
Commission recommendation on billing More detailed legal requirements on the key A fully standardized 'comparability box' in
information
bills
information to be included in bills
Pros:
Pros:
Pros:
Pros:
- 77% of energy consumers agree or strongly
- Low administrative impact
- Ensures that the minimum baseline of
- Highest legal clarity and comparability of
agree that bills are "easy and clear to
- Gives Member State significant
existing practices is clarified and raised.
offers and bills.
understand".
flexibility to adapt their requirements to
- Allows best practices to further develop,
- A level playing field for all consumers and
- Allows 'natural experiments' and other
national conditions.
albeit less than Option 0.
suppliers across the EU.
innovation on the design of billing information
- Allows best practices to further
- Improves comparability and portability of
- Very little leeway for suppliers to differently
information.
to be developed by Member State.
develop.
interpret the legislation with regards to the
- Recent (2014) transposition of the EED means
- Ensures consumers can easily find the
presentation of information.
premature to address information on energy
information elements needed to facilitate
- Ensures consumers can easily find the
consumption and costs.
switching.
information elements needed to facilitate
switching.
- Bill design left free to innovation.
Cons:
Cons:
Cons:
Cons:
- Limits innovation around certain bill
- Poor consumer awareness of market-relevant
- A recommendation is unenforceable
- Challenging to devise standard presentation
elements.
information can be expected to continue.
and may be ignored by Member
which can accommodate differences between
- Remaining leeway in interpreting legal
- Does not respond to stakeholder feedback on
State/utilities.
national markets.
articles may lead to implementation and
need to ensure minimum standards.
- Poor consumer awareness of market-
- Highest administrative impact.
enforcement difficulties.
relevant information can be expected to
- Prescriptive approach prevents beneficial
continue.
innovation.
- Does not respond to stakeholder
- Difficult to adapt bills to evolving
feedback on need to ensure minimum
technologies and consumer preferences.
standards.
Most suitable option(s): Option 1
is the preferred option as it likely to leads to significant economic benefits and increased consumer surplus without significant administrative costs or the
risk of overly-prescriptive legislation at the EU level.
512
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0212.png
Description of the baseline
The evidence presented in this Annex draws extensively on survey data, as well as data
from a mystery shopping exercise. The aim of the mystery shopping exercise was to
replicate, as closely as possible, real consumers’ experiences across 10 Member States
258
selected to cover North, West, South and East Europe countries. A total of 4,000
evaluations were completed between 11 December 2014 and 18 March 2015
259
. Whilst
data from the mystery shopping exercise is non-exhaustive, the methodology enables the
controlled sampling of a very large topic area
260
, as well as providing insights that would
not be apparent in a desktop evaluation of legislation and bills. Using a behavioural
research approach rather than a traditional survey allowed us to identify what people
actually do, rather than what they say they do.
Energy bills and annual statements be they paper or digital, are the most likely regular
communications from suppliers to be noticed and read by consumers. They are therefore
an important means through which consumers get information on their interaction with the
market. As well as data on consumption and costs, they can also convey a host of other
material which helps consumers to compare their current deal with other offers
–
the name
and duration of their contract, for example.
The Electricity and Gas Directives contain the following key provisions related to metering
and billing:
-
Article 3 Billing and promotional material
-
3(3) Access to comparable and transparent supply options (Electricity only)
-
3(5)/3(6) Access to consumption data
-
3(9) Disclosure of the overall fuel mix and environmental impact of the
supplier (Electricity only)
-
Annex I Consumer protection
-
1.c) The transparency of applicable prices and tariffs
-
1.d) Consumer payment methods
-
1.i) Frequency of information on consumption and costs
-
2. Intelligent metering systems (smart meter roll-out)
In addition, The Energy Efficiency Directive contains the following key provisions:
-
Article10 Billing information (in conjunction with Annex VII)
-
10(1) Consumption based billing (information) requirement in general
(incl. as regards minimum frequency)
-
10(2) Requirements on consumption information from smart meters
-
10(3) General information and billing requirements pertinent to costs,
consumption and payment
-
Article 11 Cost of metering and billing information
-
11(1) Metering and billing generally free of charges
258
259
260
The Czech Republic, France, Germany, Italy, Lithuania, Poland, Slovenia, Spain, Sweden and the UK.
"Second Consumer Market Study on the functioning of retail electricity markets for consumers in the
EU"
(2016) European Commission.
For example, there were over 400 electricity and gas supply offers in Berlin alone in 2014 (source:
ACER Database), making a comprehensive examination of all supply offers in the EU28 impracticable.
513
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0213.png
Whereas the EU
acquis
contains a relatively small number of general measures on energy
billing, all Member States have legislation with further billing requirements. For example,
UK electricity and gas suppliers must follow over 70 pages of rules on the information in
bills as part of their current licensing requirements. In recognition of the likelihood of being
overly prescriptive at present, the UK NRA is undertaking a pilot project to improve billing
in the interest of consumers.
Box 1: Select requirements for UK domestic energy bills
261
The following information must be grouped together, in a box, distinct from other information and included
on page one of the Bill:
-
The standardised title “Could you pay less?”
-
Information on cheaper tariffs offered by the supplier and the savings available if the consumer were to
switch.
-
A Personal Projection* for the consumer's current tariff.
-
A signpost to further tariff information.
-
A standardised switching reminder “Remember –
it might be worth thinking about switching your tariff
or supplier”.
The following information must be grouped together and included on page two of the Bill, in a box, distinct
from other information, in the following order:
-
The standardised title “About Your Tariff”.
-
The name of the customer's fuel, current tariff, payment method, any applicable tariff end date, exit fees
and the customer's personalised usage in the last 12 months.
The following information must be provided anywhere on a bill:
-
The standardised title “About Your TCR”**.
-
The TCR for the customer's current tariff.
-
A signpost to where to find independent advice on switching supplier.
* The Personal Projection is a standardised methodology that uses a consumer's actual or estimated
consumption to estimate their projected cost for a particular tariff for the next year.
** The TCR or 'Tariff Comparison Rate' is used to assist consumers to make an initial comparison of
alternative tariffs. It is similar in nature to the Annual Percentage Rate used to describe savings, loan and
credit agreements.
Table 1 under presents an overview of billing practices and regulation per country. There
is a large variation in how countries choose to approach the subject, in particular with
regards to the extent to which the content of bills is specifically defined in national
legislation. Three broad approaches can be identified:
261
"The
Retail Market Review
–
Final domestic proposals Consultation on policy effect and draft licence
conditions",
(2013)
Ofgem,
pp.
71-108,
130-163
https://www.ofgem.gov.uk/sites/default/files/docs/2013/03/the-retail-market-review---final-domestic-
proposals.pdf.
See also Gas and Electricity Markets Authority, 'Standard conditions of electricity supply
licence'
https://epr.ofgem.gov.uk//Content/Documents/Electricity%20Supply%20Standard%20Licence%20Co
nditions%20Consolidated%20-%20Current%20Version.pdf
514
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0214.png
-
-
-
Highly prescriptive (HP) approaches relying on legal instruments or resolutions,
which request a large amount of detail and/or give very specific instructions on
what information to provide in electricity bills.
Legislation which specifies the main information (MI) that must be included in
bills, which is subsequently reinforced by guidance from the regulator (in terms of
mandatory information and format, or best practice guidance).
Legislation that specifies the main information, but leaves electricity providers
broad freedom (BF) to communicate this within their own format.
In the following table, billing practices in each country are described, noting what are
considered to be a highly prescriptive approach (HP), an approach enforcing
communication of main information (MI) and, finally, an approach that allows broad
freedom (BF).
Table 1: Billing practices and regulation per country
262
Austria (MI)
Article 81 of EIWOG specifies which information should be presented on the electricity
bill. This provision is further detailed by ordinances from the regulator, in which
suggestions are given as to how to present the mandatory information, including the energy
sources breakdown and the price components. The contents of the documents (e.g.
electricity bill, contract, etc.) are detailed not only in the Electricity Act, but also in the
Renewable Energy Act, the System Charges Order, the Electricity Duty Act, as well as in
individual Federal states legislation. The ‘DAVID-VO’ Ordinance (Articles 1-5)
specifies
the information that electricity suppliers must give to customers.
Belgium (HP)
Law April, 29th 1999 ‘Loi relative à l'organisation du marché de l'électricite’ details the
mandatory information to be present in a consumer’s bill. The information to be presented
in the bill is highly regulated, with 10 mandatory headings and many mandatory sub-
headings which detail the information to be provided.
Bulgaria (BF) The Bulgarian Consumer Protection Act (Art. 4, Par. 1) outlines a minimum set of
requirements for information to be provided to the customer such as: (1) information on the
composition, (2) the supplier’s contact details, (3) the trader’s complaint handling process,
and 4) arrangements for payment.
Croatia (MI) Articles 49 and 63 of the Act on Electricity Market (Official Gazette, no. 22/13, 95/15 and
102/15) regulate billing. In Croatia, regulations specify that the supplier needs to deliver an
electricity bill that contains the following elements: the share of the price that is freely
negotiated, the share that is regulated and fees and other charges prescribed by special
regulations.
Cyprus (MI) Article
91 (1)(d)(iv) and Article 93 (1)(j) of the Electricity Law 206(Ι)/2015 regulate how
the consumption of electricity should be communicated to consumers. The tariffs of the
main energy provider are regulated by the Cyprus Energy Regulatory Authority (CERA)
and they can be found on the website of the Electricity Authority of Cyprus (EAC).
Czech
Bills for electricity, gas, heat supply and related services are governed by Act nr. 458/2000
Republic
Coll. in articles 11(a) and 98a. Electricity suppliers are to publish the conditions and price
(DF)
of electricity supply for households and residential customers in a way that can be accessed
remotely. If increasing the prices for the supply of electricity, the supplier is obliged to
notify the consumer in advance. In the case of electricity and gas, outstanding charges are
billed at least once a year.
Denmark
Regulation of billing information is implemented in Executive Order no.486 of 2007 on
(MI)
electricity billing. However, the Danish Energy Regulatory Authority has presented an
executive order which gives consumers the possibility to receive a simplified bill. The
purpose of this order is to give consumers a better understanding of the price elements and
262
"Second Consumer Market Study on the functioning of retail electricity markets for consumers in the
EU"
(2016) European Commission.
515
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0215.png
an incentive to be active on the energy market. This order was implemented in Danish law
in October 2015.
Estonia (MI) Electricity Market Act §75 stipulates the
following: “the seller shall submit an invoice for
the electricity consumed to the customer once a month, unless agreed otherwise with the
customer”. It is mandatory for suppliers to include information not just on consumption but
also on emissions and waste (nuclear and oil shale) as well as dispute resolution options.
Finland (MI) Part III, Ch. 9, 69 § of the Electricity Market Act (588/2013) outlines the legal requirements
with regards to billing imposed by the electricity provider. In the bill, the provider is to
include details on how the price is broken down, information on the contract’s duration and
which dispute-solving tools consumers have at their disposal.
France (HP) Article 4 of the Regulation 18 April 2012 covers electricity or natural gas bills, their
payment modalities and reimbursement of overpayment (i.e. bill based on an estimation of
the consumption). The bill must include information on over 16 different headings. The
website ‘Energie info’, made available by the National Energy Ombudsman,
illustrates and
explains this mandatory content to consumers.
Germany
The right to receive clear information on one’s energy contract before signing, and to be
(MI)
informed in advance if any changes are made to the contract, are provided for within
German law (article 41 EnWG). The EnWG (Section IV art. 40) specifies the content that
should be provided to consumers on their electricity bills. The German Institute for
Transparency on Energy (DIFET) produces certificates for those suppliers that provide
consumer-friendly bills.
Greece (BF) The new Code of Electricity Supply regulates the tariffs of electricity suppliers.
Specifically, this code describes what must be included in the bill and how the bill must be
broken down into three different elements: (1) regulated charges; (2) competitive charges
or supply charges; and (2) other charges.
Hungary (HP)
Law 2013. évi CLXXXVIII. törvény az egységes közszolgáltatói számlaképről
regulates the
content of bills. The law gives actual examples of the minimal information necessary on
each bill and also gives examples as to which elements may be changed or added without
infraction. The law also imposes such details as fonts and font sizes and provides in its
annexes a detailed example of the respective bill in its actual detail. Additionally to the law,
the electricity suppliers also regularly provide a dedicated Section on how to read the
electricity bill.
Ireland (MI) Statutory instruments S.I. No. 426/2014 Part 4, Art. 6, Art. 7 and S.I. No. 463/2011, Art. 9,
regulate the communication of charges and consumption information to electricity
consumers in Ireland. Under Irish law, suppliers must also inform customers of upcoming
price changes at least one month before a price change comes into effect.
Italy (MI)
D.Lgs 93/11 Art. 43(2); L 125/07 Art. 1(6) and Art. 1(5) legislate the communication of
charges and consumption information. Consumers should be informed of the components
relating to supply cost (servizi
di vendita),
network cost (servizi
di rete),
general system
charges (oneri
generali di sistema),
and taxes (VAT and other consumption taxes). The
regulator has set up several tools in order to help the consumer understand his bill, most
notably a dedicated webpage ”Your Bill Explained” (la
bolletta spiegata)
and a consumer
help-desk (lo
Sportello per il Consumatore).
Latvia (MI)
According to Art. 31 3° of Electricity Market Law, the Public Utilities Commission (PUC)
shall determine what kind of information and to what extent electricity supplier shall
include in their bills and informative materials that are issued to the consumer. The
regulations of the PUC determines that a bill shall include at least the electricity amount in
kWh supplied in billing period, the amount charged for consumed electricity in euros and
the average electricity price in euro per kWh during the billing period and fees for
electricity distribution system services, other additional services and the mandatory
procurements components and total fees for the billing period for consumers and other end-
users to whom shall be issued invoices regarding electricity service supply.
Lithuania
Law on Energy of the Republic of Lithuania No. IX-884 and Law on Electricity of the
(BF)
Republic of Lithuania No VIII-1881. Article 31 regulate the communication of charges and
consumption information to electricity consumers in Lithuania, as well as contractual
conditions and changes to contracts. The consumer is entitled to receive information on
conditions of service and electricity prices and tariffs, reports on prices, contract terms,
conclusion and termination conditions.
Luxembourg Article 2(5) of the Law of 1 August 2007 regulates the communication of charges and
(BF)
consumption information to electricity consumers in Luxembourg, as well as contractual
516
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0216.png
Malta (MI)
Netherlands
(MI)
Poland (MI)
Portugal (BF)
Romania (HP)
Slovakia (MI)
Slovenia (MI)
Spain (HP)
Sweden (BF)
terms. With respect to billing, the law states that electricity providers must transmit to
residential customers transparent information on tariffs and prices.
Electricity Market Regulations (S.L. 545.16), Art. 8(3) regulates billing. Bills issued by
Enemalta Corporation, Malta’s electricity supplier, must include contact details of its
subcontractor, ARMS Ltd, which is the company responsible for meter reading, billing,
debt collections and customer care services. Households should receive bills calculated on
actual consumption at least every six months. For households with a smart meter, these
bills based on actual readings are more frequent. All bills show a breakdown of the price
calculation, the total electricity consumption for that period as well as the average daily
energy consumption, relevant tariffs and CO
2
emissions.
The Electricity Act, article 95, details the mandatory information to be provided on an
energy bill and some associations provide recommendations for data presentation. The
breakdown of an energy bill concerns supply costs (“leveringskosten”), network
costs and
metering costs, and then taxes (“Belasting”). While using green energy, some taxes are
refunded (“Belastingvermindering”).
The Energy Law, Art. 5. 6a - 6c. regulates the communication of charges and consumption
information to electricity consumers in Poland. Electricity suppliers are to inform
consumers about the fuel supply mix used in the previous calendar year and about a place
where information is available about the impact of the production of energy on the
environment (at a minimum in terms of carbon dioxide emissions and radioactive waste
created). Electricity suppliers must also inform consumers about the amount consumed in
the previous year and the place where information is available about the average electricity
consumption for each connection group of recipients, energy efficiency improvement
measures and the technical characteristics of energy-efficient appliances.
Art. 54 d) and Art.55 c) and d) of Decree Law of 15 February 2006 regulate the
communication of charges and consumption information to electricity consumers in
Portugal. Under the law, consumers are entitled full and adequate information to enable
their participation in the electricity market, access information in a transparent and non-
discriminatory manner on applicable prices and tariffs, as well as complete and adequate
information in order to promote energy efficiency and the rational use of resources.
Law 123/2012 (modified in 2014) ART.62 (1) h
9
) and art. 145 (4) p) and Law 123/2012
(modified in 2014) ART. 66 (1),(2) regulate the content of bills. The Energy Authority
ANRE has made available to the consumer an explanatory sample of the components that
have to be included in the bill. This model has been adopted by electricity suppliers, who
can also opt to display the same document at their websites, in order to inform consumers
about the contents of their bill.
The supplier of electricity and gas is, according to the § 17 article 14 of the Law 251/2012,
obliged to inform the customer on the invoice or attached material about the particular
components of the energy supply including the unit price. Information about the
composition of the price component has to include the unit price especially for electricity
purchase including the commercial activity of the supplier, distribution, losses during
distribution, system services, system operation and taxes.
Beside standard items that must be included in every invoice issued in Slovenia that are
stipulated by
the Value Added Tax Act (invoice date, number, invoice issuer’s contact
details, amounts billed, VAT rate,…), consumers also have to receive certain information
in their electricity bills, stipulated within Article 42 of the Energy Act, including the
proportion of energy source that supplier used in preceding year in a way comparison
between different suppliers can be made, the reference source where publicly available data
on environmental impacts, expressed in CO
2
emissions and amounts of radioactive waste
resulting from the electricity production in the preceding year, and consumers’ rights
related to dispute resolution.
Law 24/2013 establishes the type of information that should be included in an electricity
bill. This format is mandatory for the suppliers of last resort. The details of the information
are formally listed in the resolution N.5655 of 23 May 2014 of the Ministry for the Industry,
Energy and Tourism. The resolution illustrates in its annex a template to be followed when
producing electricity bills, showing in explanatory graphs and in detailed tables the
mandatory information and its granularity.
The Electricity Act chapter 8, §14-16
specifies that an electricity supplier’s billing shall be
clear. It shall contain information on the measured consumption and current electricity
prices that the billing shall be based on. The Swedish Energy Markets Inspectorate specifies
in detail what shall be contained in electricity bills. The electricity cost consists of two
517
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0217.png
UK (MI)
parts: (1) a payment to the grid operator to stay connected and (2) payment for the actual
electricity consumption and the electricity cost.
The consumers’ right to accurate consumption information is captured in Condition 31A of
the Standard Licence which makes it incumbent on suppliers to provide customers with
electricity consumption information in each bill (or, within the space of 30 days from a
notice of increase in charges in cases where the latter is issued). In addition, suppliers must
send an annual statement to all customers in a pre-defined format. Schedule 2ZB to the
Electricity Act stipulates that licence-exempt suppliers must also provide consumption data
to customers on an annual basis. Under Condition 12 of the Standard Licence, suppliers
must take meter readings at least once every two years. Condition 21B of the Standard
Licence allows customers to read their own meters as often as they choose. Suppliers are
to reflect that reading in the subsequent bill. The structure of the bill is not fixed by any
legislation.
In addition to EU and national legislative requirements, suppliers communicate and present
information in different ways as a part of their non-price competition with other suppliers.
For example, information may be presented in a certain format for branding purposes, or
to target different customers with different kinds and levels of information to increase
consumer satisfaction.
As a result of these three different factors
–
EU legislation, national legislation and
commercial competition
–
there is therefore currently a broad divergence in Member States
with regards to the individual elements in electricity and gas consumer bills and the total
amount of information in these bills.
Figure 1 below from ACER summarizes the information provided to household customers
on their bills. It includes general billing requirements put forward in Article 3 and Annex
I of the Electricity and Gas Directives (for example, information on the single point of
contact), as well as items not covered by EU law (price comparison tools). Whereas
customers in the majority of Member States are currently provided with information on the
consumption period, actual and/or estimated consumption, and a breakdown of the price,
there is a greater diversity of national practices with regards to other potentially beneficial
information, such as switching information, information about price comparison tools, and
the duration of the contract.
518
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0218.png
Figure 1: Information on household customer bills in Member States
–
2014
Source: CEER Database, National Indicators (2014-2015)
The results of a mystery shopping exercise on the information in energy bills covering ten
representative Member States
263
provide a more detailed impression of the differences in
billing practices within the EU. Mystery shoppers were instructed to analyse one of their
own monthly, bi-monthly or quarterly electricity bills for a number of information
elements identified as best practices by the Citizens' Energy Forum's Working Group on
Billing
264
(Table 2) as well as a number of information elements addressed (although not
always required) by the current Electricity Directive (Table 3)
265
. The exercise was carried
out between 11 December 2014 and 18 March 2015.
263
264
265
The Czech Republic, France, Germany, Italy, Lithuania, Poland, Slovenia, Spain, Sweden and the UK.
"Implementation
of EC Good Practice Guidance for Billing",
(2010) CEER,
http://www.energy-
regulators.eu/portal/page/portal/EER_HOME/EER_PUBLICATIONS/CEER_PAPERS/Customers/Ta
b1/E10-CEM-36-03_EC%20billing%20guidance_8-Sept-2010.pdf.
https://ec.europa.eu/energy/sites/ener/files/documents/20131219-e-billing_energy_data.pdf
519
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0219.png
Table 2: Information included on an electricity bill in a sample of ten Member States - I
266
Item
Item in "billing" evaluation
sheet
Provider’s name
Telephone number of customer
service/helpline
Postal address of provider
Email address of provider
Emergency number (e.g. to call
in the event of an electrical
emergency or power outage)
Duration of the contract (e.g. 24
months)
The period of notice to
terminate
your
electricity
contract (e.g. 30 days before the
intended termination date)
Tariff name/plan (e.g. 'Day
&
Night Fix')
A detailed price breakdown for
your tariff (e.g. division of total
price in base price, network
charge, etc.)
%
who
found item
on their bill
(total)
99%
96%
94%
69%
59%
Country
CZ
DE
ES
FR
IT
LT
267
PL
SE
SI
UK
Supplier's name
Contact
details (including
their helpline and emergency number)
96%
92%
92%
92%
68%
100%
100%
100%
95%
8%
100%
100%
97%
80%
97%
100%
100%
100%
27%
87%
100%
100%
100%
37%
93%
88%
80%
60%
40%
28%
100%
93%
100%
75%
35%
100%
100%
96%
84%
64%
100%
100%
100%
96%
40%
100%
97%
83%
60%
87%
The duration of the contract
The deadline for informing the supplier about
switching to another supplier
22%
19%
8%
4%
50%
50%
27%
0%
17%
57%
10%
0%
0%
12%
5%
0%
40%
28%
4%
0%
50%
27%
The tariff name
(A reference to) a clear price breakdown for the
tariff (the base price plus all other charges and
taxes)
80%
79%
84%
92%
65%
65%
57%
100%
87%
83%
93%
93%
60%
8%
93%
88%
80%
92%
76%
96%
100%
73%
266
267
"Second Consumer Market Study on the functioning of retail electricity markets for consumers in the EU"
(2016) European Commission.
Lithuania stands out as the country where mystery shoppers were the least likely to find each of the items on their bill. Mystery shoppers in Lithuania (note: all shoppers were clients
of Lesto) reported that they do not receive an electricity bill; they declare usage themselves online (via www.manoelektra.lt - a site dedicated to Lesto customers) or by means of a
paper bill book.
520
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0220.png
Item
Item in "billing" evaluation
sheet
The base price of one energy unit (in kilowatt
hours or kWh) for the selected tariff
The switching code
The amount to be paid, for which billing period,
by when and how
Clear information on how this amount has been
calculated: is it based on an actual meter reading
or estimated only?
For calculations based on actual consumption:
meter readings and consumption during the
billing period (measured in kilowatt hours or
kWh)
Where does the energy come from, how is it
generated, how environment friendly is it ("the
fuel mix")
Information on how to get tips on saving energy Tips on saving energy (e.g. link
(e.g. a link to a website)
to a website)
Information on how to obtain the bill in Information on how to obtain
alternative formats (e.g. in large print) for your bill in alternative format
consumers with disabilities
(e.g. paper/online, large print)
Base
(note: figures in grey are based on a smaller sample):
Base price per kWh of your
tariff
Switching
code/meter
identification (EAN or MPAN
code; a unique code for your
electricity meter)
Amount to be paid
Billing
period
(e.g.
15
November
–
14 December
2014)
Payment method (e.g. direct
deposit, cheque, bank transfer)
% of shoppers stating that it not
clear how the billing amount
was calculated
Details about consumption
during billing period (in kWh)
Value of the meter reading at
the end of the billing period
Value of the meter reading at
the beginning of the billing
period
Fuel mix/energy sources (e.g.
wind power, biomass)
%
who
found item
on their bill
(total)
82%
73%
Country
CZ
DE
ES
FR
IT
LT
267
PL
SE
SI
UK
68%
96%
65%
58%
87%
87%
93%
87%
83%
67%
68%
44%
83%
78%
92%
76%
88%
72%
93%
67%
97%
95%
100%
96%
100%
90%
97%
100%
97%
97%
100%
100%
72%
80%
100%
93%
100%
100%
100%
100%
97%
97%
84%
5%
88%
4%
100%
18%
87%
3%
87%
0%
87%
0%
64%
8%
65%
3%
92%
4%
64%
4%
100%
3%
89%
89%
88%
95%
90%
95%
67%
93%
93%
96%
96%
96%
100%
86%
86%
100%
88%
88%
73%
73%
73%
95%
95%
86%
87%
87%
83%
91%
82%
91%
95%
95%
90%
32%
48%
45%
20%
47%
43%
0%
18%
52%
40%
13%
26%
24%
8%
16%
48%
8%
17%
23%
23%
27%
20%
53%
36%
28%
8%
5%
24%
20%
20%
16%
57%
50%
300
25
40
30
30
30
25
40
25
25
30
521
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
522
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0222.png
Table 3: Information included on an electricity bill in a sample of ten Member States - II
268
Country
Item
Item in "billing" evaluation sheet
% who found item
CZ DE ES FR IT
on their bill (total)
LT PL SE SI
UK
The contribution of each energy source to the overall fuel 13a. Fuel mix/energy sources (e.g. wind power,
32%
mix of the supplier over the preceding year
biomass)
8b. National contact information point (or single point
Information concerning the consumer's rights as regards of contact where you can obtain information about your 28%
the means of dispute settlement available to them in the energy rights)
event of a dispute
8c. An energy mediator or third-party assistance
23%
Base:
300
48% 45% 20% 47% 43% 0% 18% 52% 40% 13%
44% 43% 33% 43% 30% 4% 3% 16% 12% 53%
36% 45% 23% 57% 0% 0% 3% 12% 0% 50%
25
40
30
30
30
25 40
25
25
30
268
Shoppers were instructed to analyse a monthly or quarterly bill. In the Czech Republic and Germany, a considerable number of shoppers reported that they only receive an annual
bill from their electricity company. In these countries, 88% (n=22) and 50% (n=20), respectively, of shoppers analysed an annual bill. "Second
Consumer Market Study on the
functioning of retail electricity markets for consumers in the EU"
(2016) European Commission.
523
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0223.png
The results show a large variation across countries for selected items; for example,
information about the period of notice to terminate a contract was not found on bills in
Italy, Poland, Slovenia and Spain, while in Germany and France, at least half of shoppers
had found such information on their bill (50% and 57%, respectively). These variations
may reflect national differences in consumer preferences and the characteristics of local
markets, as reflected in Member State rules and discretionary billing practices by suppliers.
In addition, Table 3 illustrates the possible bad application of certain EU requirements.
Only 28% of mystery shoppers (including experts) were able to find a contact point where
they could obtain information about their energy rights, as required under Article 3(9)(c)
of the Electricity and Gas Directives
269
. In addition, Article 3(9)(a) of the Electricity
Directive requires suppliers to specify the contribution of each energy source to the overall
fuel mix of the supplier over the preceding year in or with consumer bills
270
. However,
more than a third (35%) of mystery shoppers in the same study disagreed that their
electricity company informed them about how the electricity they used was produced
(scores 0 to 4 on a scale to 10)
271
.
As transposition checks for the directives do not indicate particular irregularities around
these articles. This points to possible interpretation issues or the bad application of the
relevant measures by national authorities.
269'
270
271
'Member States shall ensure that electricity suppliers specify in or with the bills and in promotional
materials
made available to final customers… the contribution of each energy source to the overall fuel
mix of the supplier over the preceding year in a comprehensible and, at a national level, clearly
comparable manner…'
'Member States shall ensure that electricity suppliers specify in or with the bills and in promotional
materials made available to final customers… information concerning their rights as regards the means
of dispute settlement available to them in the event of a dispute.'
This was the case for a majority of respondents in nine EU-28 countries, with the highest level of
disagreement observed in Bulgaria (78%). On the other end of the scale, the proportion of respondents
who “strongly agreed” (scores 8 to 10) that their electricity company informed
them about how the
electricity they used was produced varied between 5% in Bulgaria and 46% in Austria. Germany joined
Austria at the higher end of the country ranking with 45% of respondents who “strongly agreed”.
524
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0224.png
Figure 2: Information on household customer bills in Member States
–
2014
(number of information elements)
Source: CEER Database, National Indicators (2014-2015)
To illustrate another dimension of divergence, Figure 2 above shows information load in
consumer bills in different Member States. This can have a significant impact on
consumers' ability to comprehend their bills
–
another issue flagged up by stakeholders and
confirmed by a Commission behavioural experiment that showed that superfluous
information in energy bills made it difficult for consumers to understand them (Figure 3).
Figure 3: Performance in bill comprehension task: standard bill vs standard bill with
additional information
Source: "Second Consumer Market Study on the functioning of retail electricity markets for consumers in
the EU" (2016) European Commission
To summarize, there is currently a broad divergence in Member States, both with regards
to the individual elements in consumer bills and the total amount of information in these
bills. The widespread divergence in national practices reflects differences in national
legislation and marketing by suppliers, which are themselves a function of consumer
525
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0225.png
preferences and the characteristics of local markets. To a more limited extent, the
divergence may also reflect the bad application of certain requirements of the Electricity
and Gas Directives, particularly EU requirements on information on consumer rights and
energy sources.
Deficiencies of the current legislation
As addressed in more detail in Section 7.1.1 and Annex V of the Evaluation, the Electricity
and Gas Directives grant consumers the right to comparable and transparent supply
options. They also state that consumers must be properly informed of their actual energy
consumption and costs frequently enough to regulate their consumption. Building on these
general provisions, the Energy Efficiency Directive puts in place requirements on the
frequency of bills and the presentation of cost and consumption information in bills.
One of the major objectives of the Articles in the Electricity and Gas Directives relevant
to billing was enabling easier and more effective consumer choice
272
. There exist various
data that help us understand how EU consumers perceive their energy bills and the extent
to which their bills are building awareness about energy use. These data are summarised
in the remainder of this Section.
Consumer organisations responding to the latest ACER Market Monitoring Report stated
that the average electricity and gas consumer in their countries is only able to compare
prices to a limited extent. The average score was 4.8 and 5.0 on a scale from 1 to 10 for
electricity and gas respectively
273
.
These mediocre figures are backed by the 2016 Electricity Study that found that one in five
consumers surveyed still disagree that the electricity bills of their electricity company were
easy and clear to understand (Figure 4)
–
note the disparity in individual Member States
concerning the level of understanding with Bulgaria performing worst and Cyprus
performing best). This effect was even more pronounced among mystery shoppers from
ten Member States who were quizzed with their current bills to hand. Here, between 20
and 54% of respondents disagreed with the statement “My bill is easy to understand”
(Figure 5)
274
.
272
273
274
Boost competition on retail markets and create consumer incentives to save energy were other major
objectives. See the Thematic Evaluation on Metering and billing.
"Market
Monitoring
report
2014"
(2015)
ACER,
http://www.acer.europa.eu/Official_documents/Acts_of_the_Agency/Publication/ACER_Market_Mon
itoring_Report_2015.
"Second Consumer Market Study on the functioning of retail electricity markets for consumers in the
EU"
(2016) European Commission.
526
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0226.png
Figure 4:
Agreement with statement: “bills of my electrify company are easy and
clear to understand”, by country
275
Source:
"
Second Consumer Market Study on the functioning of retail electricity markets for consumers in
the EU" (2016) European Commission.
Figure
5: Agreement with the statement: “My bill is easy to understand”
276
12
8
12
4
44
12
12
8
4
40
13
10
10
20
10
18
10
3
35
24
23
28
15
3
13
13
20
13
7
13
6
22
12
3
29
14
10
7
33
4
4
13
23
38
17
13
7
23
7
28
8
12
10
3
30
3
10
8
23
8
Somewhat disagree
Disagree
Completely disagree
13
3
Completely agree
Agree
Somewhat agree
Neither agree nor disagree
8
12
8
24
30
20
44
33
20
CZ
IT
DE
SE
UK
FR
Total
Q14. To what extent do you agree with the following statement:
%, Base: all mystery shoppers
y bill is easy to u dersta d ?
Source: "Second Consumer Market Study on the functioning of retail electricity markets for consumers in
the EU" (2016) European Commission.
The complaints data collected through the European Consumer Complaints Registration
System indicates the largest share (28%) of consumer complaints reported to the
Commission between 2011 and 2016 were related to billing (Figure 6). Whilst the
complaints classified as relating to "unjustified" or "incorrect" invoicing/billing (10% of
all electricity and gas complaints) are most likely related to billing on estimated rather than
actual consumption
277
, complaints about unclear invoices or bills make up around 1% of
all electricity and gas complaints in the system. The category 'other billing complaints'
relates to cases where users of the European Consumer Complaints Registration System
did not encode a sub-category, or where their specific complaint could not be categorised
according to the options presented below.
275
276
277
Question: "The following question deals with the quality of services offered in the electricity retail
market. Please indicate how much you agree or disagree with each of the following statements, using a
scale from
0 to 10, where 0 means that you “totally disagree” and 10 means that you “totally agree”:
Bills of [PROVIDER] are clear and easy to understand."
Agreement with the statement: “My
bill is easy to understand.”
See Thematic Evaluation on Smart Metering.
527
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
ES
PL
LT
SI
 kom (2016) 0864 - Ingen titel
1730778_0227.png
Figure 6: Electricity and gas consumer complaints, 2011-2016
Switching
1%
Other issues
22%
Incorrect bill
6%
Price / Tariff
7%
Provision of
services
7%
Quality of service
8%
Unclear bill
1%
Billing
28%
Unjustified invoicing
4%
Debt collection
2%
Non-issue of invoice
0%
Other billing complaints
15%
Contracts and
sales
11%
Unfair Commercial
Practices
16%
Source: DG JUST, European Consumer Complaints Registration System.
It therefore appears that whereas a significant percentage of EU consumers do indeed have
difficulties understanding their energy bill, problems directly related to bill clarity have
not led to a large number of consumer complaints compared with other issues such as back-
billing, unfair commercial practices, and contractual clauses. However, looking at
consumer complaints alone may be insufficient as complaint levels are influenced by
consumer awareness and expectations, both of which may be low when it comes to energy
bills.
Energy bills are the foremost means through which suppliers communicate with their
customers. As such, consumers' ability to correctly answer simple questions about their
own electricity use indirectly reveals the extent to which bills have been effective in
providing information that could facilitate effective consumer choice. Figure 7 under
shows that whereas the majority of EU consumers report that they know how much they
pay for electricity, fewer were aware of their consumption in terms of kWh, what type of
tariff they have, or their sources of electricity.
Whilst this finding may certainly reflect a lack of consumer interest in this information,
the information facilitates effective consumer choice by helping consumers identify the
best offer in the market and weigh the benefits of switching. Their omission from many
bills, as the data presented in Table 2 and Table 3 over illustrates, may therefore be
impeding the achievement of one of the stated objectives of the billing provisions in the
Electricity and Gas Directives.
528
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0228.png
Figure 7: Self-reported awareness of electricity use
EU 28
2.3.1 self-reported awareness
278
Disagree (0-4)
Strongly agree (8-10)
Average
I know how much I pay for electricity (per month, year or any
other frequency)
16%
52%
7.1
I know how much electricity I use (per month, year or any other
frequency) in kWh
32%
34%
5.7
I know the main characteristics of the tariff I am on (e.g. whether
I am on a fixed or variable price, the use of renewable energy,
etc.)
30%
32%
5.8
I know how the price I pay for electricity is calculated
38%
26%
5.2
I know how the electricity that I use is produced (e.g. nuclear
generation, wind, gas, solar, petroleum, coal, etc.)
42%
24%
4.9
Q1_1 to 5. Please indicate how much you agree or disagree with each of the following statements, using a scale from 0 to 10,
where
ea s that you totally disagree a d
ea s that you totally agree .
%, EU28, Base: all respondents
Source: "Second Consumer Market Study on the functioning of retail electricity markets
for consumers in
the EU" (2016) European Commission.
To summarize, the analysis presented in this Section indicates that there is scope to
improve the extent to which the billing provisions in the Electricity and Gas Directives
facilitate consumer choice. To help consumers accurately assess information, the
legislation can provide some degree of standardisation to allow consumers to make
accurate comparisons between offers, which is difficult to achieve through the market
alone. Standardisation of some information can also be useful to build familiarity and help
consumers recognise or retain important information.
As Figure 8 under illustrates, the difference in price between offers in the market can be
significant, and so even marginal gains in consumers' ability to identify the best deal can
result in a significant impact on consumer savings.
278
Question: "Please indicate how much you agree or disagree with each of the following statements, using
a scale from 0 to 10, where 0 means that you “totally disagree” and 10 means that you “totally agree”."
529
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0229.png
Figure 8: Dispersion in the energy component of retail prices for households in
capitals
–
December 2014
Source: ACER Retail Database (November–December 2014) and ACER calculations.
Presentation of the options
Option 0: BAU with stronger enforcement
Whilst no additional legislation is proposed, the Commission actively follows up evidence
suggesting possible cases of the bad application of EU law by Member States uncovered
in the evaluation. Specifically, the following elements of the current legislation may not
be being adhered to in certain Member States:
-
Article 3(9)(a) of the Electricity Directive, which requires suppliers to specify the
contribution of each energy source to the overall fuel mix of the supplier over the
preceding year in or with consumer bills;
-
Article 3(9)(c) of the Electricity and Gas Directives, which requires suppliers to
include information on consumer rights in or with bills.
530
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0230.png
Option 0+: Non-regulatory approach; Commission Recommendation on billing
information
This includes general principles such as:
-
Making information which is essential for understanding the price which
consumers pay for the service prominent, clear and easy to read on the bill. One
way to achieve this is to present it in a standard "comparability box" that should
feature prominently on the bill and include all the key information that consumers
need to compare offers and switch suppliers.
-
Ensuring that there is a link to a national authority competent to lead a billing
review process and information campaigns.
Option 1: More detailed legal requirements on the key information
Specifically, this includes:
-
Requiring electricity and gas suppliers to 'prominently display' in every household
energy bill, both paper and electronic, eight key pieces of information
279
initially
identified by the Citizens' Energy Forum Working Group on Billing in 2009
280
.
Not all of these data are covered by the existing legislation, and their inclusion
would help ensure that consumers have the minimum information necessary to
interact with the market, whilst leaving Member States freedom to tailor the
presentation of this information to national markets.
-
Requiring the breakdown of energy costs presented to consumers to be in line with
the new Regulation on electricity and natural gas price statistics i.e. three
components (energy costs, network charges, taxes & levies) with standard
definitions throughout the EU. This could help improve consumer awareness on
the factors affecting price changes and enable the cross-border comparison of bills.
Option 2: A fully standardized 'comparability box' in bills
This option would be to develop a standard EU information box that would prescriptively
present all the key information that consumers need to compare offers and switch suppliers
prominently on the bill. It may also most require implementing legislation to define the
format and contents of the information box.
Comparison of the options
This Section compares the costs and benefits of each of the Options presented above in a
semi-quantitative manner.
279
280
i) The price to pay; ii) Consumption for current billing period, including comparison with previous year
(as per EED); iii) The name of the energy supplier; iv) The contact details of the energy supplier; v) The
tariff name; vi) Contract duration; vii) The customer's switching code or unique identification code for
their supply point; viii) A contact point for alternative dispute resolution (as per current Electricity and
Gas Directives).
"Implementation
of EC Good Practice Guidance for Billing",
(2010) CEER
http://www.energy-
regulators.eu/portal/page/portal/EER_HOME/EER_PUBLICATIONS/CEER_PAPERS/Customers/Ta
b1/E10-CEM-36-03_EC%20billing%20guidance_8-Sept-2010.pdf.
531
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0231.png
In general, the costs of implementing each of the above measures can be estimated to a
reasonably certain degree using tools such as the standard cost model for estimating
administrative costs
281
. However, no data or methodology exists to accurately quantify all
the benefits of the measures in terms of direct benefits to consumer (consumer surplus) or
general competition. As such, this Section draws on behavioural experiments from a
controlled environment to evaluate the impact of some policy options on consumer
decision-making. Where appropriate, it aims to illustrate the possible direct benefit to
consumers assuming certain conditions. It also highlights important qualitative evidence
from stakeholders that policymakers should also incorporate into their analysis of costs
and benefits.
Option 0: BAU with stronger enforcement
A good case can be made for a prudent, business-as-usual approach in this policy area.
First, there appear to be implementation issues on certain bill items required under current
EU legislation.
Secondly, even though there are clear issues around billing, a recent Commission survey
showed that 77% of energy consumers either agreed or strongly agreed that their bills were
"easy and clear to understand" (Figure 5), and unclear bills led to just 1% of the electricity
and gas consumer complaints reported to the Commission (Figure 6). Even after factoring
in the unreliability of some consumer report data, the absolute size of the problem itself
does not therefore appear to be very significant.
And thirdly, national regulators and energy suppliers are implementing various ways of
improving the billing experience. A business as usual approach would allow 'natural
experiments' in this area to be developed, and the Commission to gather stronger evidence
for a more targeted intervention at a later date.
In spite of these considerations,
it is unlikely that Option 0 would most effectively
address the problem of poor consumer engagement.
Whilst adherence to certain billing
requirements does seem to be lacking, this only relates to one or possibly two information
items, and so even ensuring 100% compliance would therefore not result in significant
change to energy bills. Whilst consumers report satisfaction with bill clarity,
questionnaires reveal glaring shortcomings in their knowledge of basic market-relevant
information that would help them identify the best offer in the market and weigh the
benefits of switching
–
information that could be more effectively conveyed in bills.
Accordingly, consumer groups strongly support further legislative measures to ensure bills
inform consumer better and help them to engage with the market. Indeed, all major
stakeholder groups
–
except for energy suppliers and industry associations
–
indicate that
there may be at least some scope for further EU action to ensure bills facilitate consumer
engagement in the market.
There are
no implementation costs
associated with Option 0.
281
http://ec.europa.eu/smart-regulation/guidelines/tool_53_en.htm
532
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0232.png
Option 0+: Non-regulatory approach e.g. a Commission Recommendation on billing
information
This option can be discarded
because a very similar set of recommendations have already
been developed by the Commission-chaired Working Group on Billing (more details
below). Whilst the group's findings were published and presented to the Citizens' Energy
Forum in 2009, these recommendations have not been fully adhered to (Table 2), and it is
unlikely that putting them in a non-binding Commission Recommendation would change
this. It is thus unlikely that voluntary cooperation between Member States would address
this problem.
Option 1: More detailed legal requirements on the key information
To recap, this option would involve ensuring that all EU suppliers use the same definitions
of price components (energy, network charges, and taxes) when communicating with
consumers. It would also involve prominently displaying the eight pieces of information
presented in every EU energy bill. These eight items are drawn from a guidance document
on billing originally proposed by a Commission-led Working Group in 2009
282
. The
importance of the information items was then reaffirmed by a Working Group on e-Billing
and Personal Data Management in 2013
283
. Whilst the former comprised of representatives
from NRAs and the Commission, the latter also included representatives from consumer
groups and industry. The identification and selection of these items is therefore based on
comprehensive of stakeholder dialogue process.
The
economic benefits
of Option 1 will primarily be indirect, and come in terms of greater
competition (lower prices, higher standards of service and a broader variety of products on
the market). These benefits are unquantifiable.
In addition, Option 1 will directly result in
greater consumer surplus,
something that can
be estimated using the following assumptions.
As a whole, EU households spend a total of 147 billion euros on electricity and 97 billion
euros on gas annually, the average annual household bill being 773 euros for electricity
and 795 euros for gas
284
. According to CEER, 6.3% of electricity consumers and 5.5% of
gas consumers switched energy suppliers in 2014.
If we assume that:
282
"Implementation
of EC Good Practice Guidance for Billing"
(2010) CEER
http://www.energy-
regulators.eu/portal/page/portal/EER_HOME/EER_PUBLICATIONS/CEER_PAPERS/Customers/Ta
b1/E10-CEM-36-03_EC%20billing%20guidance_8-Sept-2010.pdf.
283
"Working
Group Report on e-Billing and Personal Data Management",
(2013) Report prepared for the
6th Citizens' Energy Forum,
https://ec.europa.eu/energy/sites/ener/files/documents/20131219-e-
billing_energy_data.pdf.
284
Not including MT or CY. Based on latest data available: 2014 for BE, BG, CZ, DK, EL, HR, HU, IT,
LV, PL, RO, and SK; 2013 for DE, ES, LU, NL, UK; 2012 for EE, FI, LT, SE and SI; 2011 for FR;
2010 for AT, IE and PT. Source: Eurostat.
533
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0233.png
-
-
-
-
-
-
-
The average EU switching rates for electricity and gas remained unchanged at
6.3% and 5.5% respectively
285
;
The measures improved the ability of one out of every one-hundred customers
who switched to identify a better offer
286
;
The measures benefitted consumers using comparison tools just as much as
those comparing the market directly through suppliers
287
;
These consumers were able to save an additional 5 euros from both their
electricity and gas bills a year as a result of the measures put in place
288
;
The financial advantage of being able to identify the best deal as a result of
these measures persists for four years
289
;
All EU households are able to benefit from these changes equally in relative
terms
290
;
A discount rate of 4% for the consumer benefits year on year;
then Option 1 would result in an increase in consumer surplus
of between 0.9 and 3.2
million euros annually
(depending on the year of implementation), and
27.6 million
euros in total for the period 2020-2030.
285
286
287
288
289
290
This is a conservative assumption given that 40% more consumers would have access to their unique
switching code with every bill (a piece of information important for switching) and significantly more
consumers on fixed term contracts are likely to be aware of when their current contracts expired (24%
of household consumers report that they only compare tariffs when they needed to renew their contracts).
"Second
Consumer Market Study on the functioning of retail electricity markets for consumers in the
EU"
(2016) European Commission.
This equates to just 0.063% of electricity consumers and 0.055% of gas consumers in any given year
–
again, a conservative assumption. Taken as a whole, the eight information items in Option 1 aim to arm
the consumer with all the most relevant information necessary to engage with the market, including
helping consumers identify the best offer.
One of the benefits of this intervention would also be to give consumers easy access to all information
relevant to using comparison tools in every bill (switching code, tariff name, consumption).
This figure seems proportionate given that the average 80% range of the dispersion of electricity and
gas household offers in the market is around EUR 150 (Figure 8). Assuming that those switching would
tend to be moving from a tariff at the more expensive side of this distribution to a tariff at the cheaper
side of this distribution, this amounts to saying that the greater market awareness engendered by this
intervention would enable consumers to identify an offer that was just c. 3% cheaper than the offer they
would have otherwise identified without the intervention.
A conservative assumption given the implied average time between switches is upwards of 15.5 years
for electricity consumers and 18 years for gas consumers.
In reality, households will react differently depending on consumers’ needs,
skills, motivations,
interests, lifestyle, and access to resources such as accurate online comparison tools. However, we have
no reliable data to quantify these differences in this specific context.
534
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0234.png
Table 4: The prevalence of eight key information items in consumer bills
Item
Item in "billing" evaluation sheet
%
who
found item
on their bill
(total)
97%
95%
89%
89%
88%
99%
96%
94%
69%
59%
Amount to be paid
Billing period (e.g. 15 November
–
14 December 2014)
ii) For calculations based on actual consumption: Details about consumption during
meter readings and consumption during the billing billing period (in kWh)
period (measured in kilowatt hours or kWh) (existing Value of the meter reading at the
EU legal requirement)
end of the billing period
Value of the meter reading at the
beginning of the billing period
iii) Supplier's name
Provider’s name
iv)
Contact
details (including Telephone number of customer
their helpline and emergency number)
service/helpline
Postal address of provider
Email address of provider
Emergency number (e.g. to call in
the event of an electrical
emergency or power outage)
v) The tariff name
Tariff name/plan (e.g. 'Day
&
Night Fix')
vi) The duration of the contract
Duration of the contract (e.g. 24
months)
vii) The switching code
Switching
code/meter
identification (EAN or MPAN
code; a unique code for your
electricity meter)
viii) Information concerning the consumer's rights as National contact information
regards the means of dispute settlement available to point (or single point of contact
them in the event of a dispute (existing EU legal where you can obtain information
requirement)
about your energy rights)
An energy mediator or third-party
assistance
Base
(note: figures in grey are based on a smaller sample):
Source: "Second Consumer Market Study on the functioning of retail electricity markets for
the EU" (2016) European Commission.
i) The amount to be paid, for which billing period, by
when and how (existing EU legal requirement)
80%
22%
73%
28%
23%
300
consumers in
The
implementation costs
of Option 1 will most likely be modest because:
-
All Member States have legislation with billing requirements that are more prescriptive
than those in the EU
acquis
(Table 1);
-
National legislation is periodically revised independently of EU requirements, and so
minor EU requirements would not lead to significant additional implementation costs
to national administrations;
-
It is already an EU legal requirement to display three out of the eight pieces of
information this measure proposes should be 'prominently displayed' (information on
consumption, information on costs, and information on dispute settlement);
-
Only one piece of information (the contract duration) would have to be added to around
80% of EU bills;
-
Two pieces of information (the tariff name and switching code) can already be found
in over 70% of bills;
-
The remaining two pieces of information (the suppliers name and contact details) can
already be found in over 95% of bills (Table 4);
535
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0235.png
-
The requirement to use standardised definitions of energy price component would not
result in any additional information requirements,
per se.
This option would therefore result in the following one-time implementation costs to the
2752 electricity and 1595 gas suppliers in the EU
291
. No running costs are associated
with this option due to the computerisation of billing systems.
Table 5: Option 1 implementation costs (all one-time costs)
292
Obligation
Action
Suppliers
concerned
2174
293
1449
294
Staff type
Hourly
rate
(EUR)
32.10
32.10
Man
hours
16
72
Activity
(EUR)
cost
Ensuring 8 key
information items
are prominently
displayed in every
energy bill
Ensuring that all
EU suppliers use
the
same
definitions
of
price components
in bills
Bill design
Bill design
Professionals
Professionals
1,116,566.40
3,348,928.80
Understanding
information
obligation
Adjusting
existing data
3434
295
Professionals
32.10
4
440,925.60
3434
Professionals
32.10
24
2,645,553.60
Total
7,551,974.40
As regards stakeholder views, Option 1 would likely enjoy broad support amongst
stakeholders, apart from energy suppliers and the industry associations who represent
them. It responds to the input from consumer groups, the European Parliament and the
Committee of the Regions that legislative action is necessary to ensure that energy bills
meet minimum standards. It also accommodates feedback from NRAs that prescriptive or
detailed EU requirements could reduce the scope for innovation among suppliers and could
become outdated quickly.
Option 2: A fully standardized 'comparability box' in bills
To recap, this option would be to develop a standard information box that would
prescriptively present key information in all EU energy bills.
The
economic benefits
of Option 2 would primarily be indirect, and come in terms of
greater competition (lower prices, higher standards of service and a broader variety of
products on the market). These benefits are unquantifiable.
291
292
293
294
295
Source: CEER National Indicators Database (2015).
Derived from the standard cost model for estimating administrative costs.
This assumes that 50% of all suppliers would need to make minor changes to their bills to accommodate
one additional piece of information (contract duration). 2 man days of work. Estimate based on the
figures in Table 4
This assumes that 30% of all suppliers would need to make moderate changes to their bills to
accommodate three additional pieces of information (contract duration, switching code, tariff name). 9
man days of work. Estimate based on the figures in Table 4.
79% of consumers found a breakdown of energy costs in their bills (Table 2). This legal requirement
would only apply to suppliers providing a breakdown.
536
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0236.png
In addition, Option 2 would directly result in
greater consumer surplus,
something that
can be estimated with the aid of the following behavioural experiments.
10,056 respondents completed behavioural experiments to test if bill presentation impacts
consumer awareness and decision making. The behavioural experiment included a task on
bill comprehension, in which respondents were shown a best practice bill with a
comparison box or a standard bill and tested on how well they understood key pieces of
information contained in the bill. Respondents were also tested on their ability to identify
the best offer after having seen a best practice bill or a standard bill.
The “best practice” bill drew on the Working Group Reports on Billing, and Personal Data
Management cited earlier, as well as the electricity bill model/prototype developed
following input received from working group members, which makes suggestions for both
the content and format of an electricity bill and encourages the use of a “comparability
box”.
Figure 9: Best practice comparability box design
Source: "Second Consumer Market Study on the functioning of retail electricity markets for consumers in
the EU" (2016) European Commission.
The “standard bill” was developed based on the bills collected through desk research on
actual providers in Europe. It does not have a comparability box and, although it provides
consumers with the same information, the presentation of the information is not as clear
(i.e. key information on tariff characteristics are not presented in a simple box on the first
page of the bill).
537
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0237.png
Figure 10: Excerpt of standard bill
YOUR TARIFF INFORMATION
TARIFF NAME
Base unit price
Standing Charge
National levy( the Green Energy Fund)
TOTAL UNIT COST WITHOUT VAT
+ VAT at 20%
TOTAL UNIT COST incl. VAT
STANDARD FIX
[insert currency symbol/amount]/kWh
[insert currency symbol/amount]/kWh
[insert currency symbol/amount]/kWh
[insert currency symbol/amount]/kWh
[insert currency symbol/amount]/kWh
[insert currency symbol/amount]/kWh
DATE
Previous reading*
15 August
14 November
Your consumption
15 August
–
14 November 2014
*A
reviatio s: a : a tual, e : esti ate
GENERAL METER NO 7546 - reading
32250kWh (a)
33570kWh (a)
34100kWh (a)
530 kWh
Source: "Second Consumer Market Study on the functioning of retail electricity markets for consumers in
the EU" (2016) European Commission.
In the comprehension exercise, respondents were asked eight questions about the
information provided in the bill, each of which had a single correct answer (respondents
could see the bill next to the questions they had to answer). Generally, viewing the bill in
the best practice format helped respondents pick out the correct answer when compared to
the standard bill. On average across all questions, 84% of respondents who saw the best
practice bill selected the correct answers, compared to 79% of respondents who saw the
standard bill. This result is statistically significant for all eight questions as illustrated in
the table below.
Table 6: Shares of respondents who correctly answered the bill comprehension test
questions, by basic bill type
Best practice
Standard bill
Difference
bill
What is the name of your tariff?
90%
86%
5 pp***
How much are you being charged in total?
90%
87%
3 pp***
How much electricity did you consume?
91%
87%
4 pp***
What is the total unit cost of energy excl. VAT?
77%
72%
6 pp***
What is the standing charge incl. taxes and charges?
82%
78%
4 pp**
What is the duration of your contract?
90%
80%
10 pp***
When does your contract expire?
90%
88%
2 pp*
How much energy did you consume last year?
60%
52%
8 pp***
Average across all questions
84%
79%
5 pp***
Source: "Second Consumer Market Study on the functioning of retail electricity markets for consumers in
the EU" (2016) European Commission.
Question
In the 'stay or switch' task, designed to test if the presentation format of consumers’ bills
impacts their propensity to switch to the cheapest tariff, best practice bills also led to better
performance, albeit to a limited extent. Respondents viewing the “best practice” bill were
538
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0238.png
more likely to choose the cheapest deal compared to those viewing the “standard” bill
(61% compared to 59%), this impact is small and only marginally statistically significant
overall (Table 7).
Table 7: Share of respondents who selected the cheapest deal
296
All
CZ
DE
countries
Best practice 61%
59%
64%
Standard
59%
59%
61%
Source: "Second Consumer Market Study on
the EU" (2016) European Commission.
Bill type
ES
FR
UK
IT
LT
PL
SE
SI
53%
59%
72%
52%
60%
59%
63%
59%
51%
55%
70%
55%
58%
53%
57%
58%
the functioning of retail electricity markets for consumers in
If we assume that:
-
The average EU switching rates for electricity and gas remained unchanged at
6.3% and 5.5% respectively
297
;
-
The measures improved the ability of two out of every one-hundred customers
who switched to identify a better offer, reflecting the results in Table 7
298
;
-
The measures benefitted consumers using comparison tools just as much as
those comparing the market directly through suppliers
299
;
-
These consumers were able to save an additional 5 euros from both their
electricity and gas bills a year as a result of the measures put in place
300
;
-
The financial advantage of being able to identify the best deal as a result of
these measures persists for four years
301
;
-
All EU households are able to benefit from these changes equally in relative
terms
302
;
296
297
298
299
300
301
302
Note: Weighted base varies by treatment: Best practice = 5,042; Standard = 5,014.
As with Option 1, this is a conservative assumption given that 40% more consumers would have access
to their unique switching code with every bill (a piece of information important for switching) and
significantly more consumers on fixed term contracts are likely to be aware of when their current
contracts expired (24% of household consumers report that they only compare tariffs when they needed
to renew their contracts). "Second
Consumer Market Study on the functioning of retail electricity markets
for consumers in the EU"
(2016) European Commission.
This assumes the size of improvement in decision making in the real world is as significant as the size
of the effect in the experiment. However, many consumers in the real world would not even have access
to all the information in the 'standard' bill in the behavioural experiment (see Table 2). The true effect
can therefore be expected to be greater.
Whilst the behavioural experiment addressed the latter mode of comparison, one of the benefits of this
intervention would also be to give consumers easy access to all information relevant to using comparison
tools in every bill (switching code, tariff name, consumption).
This figure seems proportionate given that the average 80% range of the dispersion of electricity and
gas household offers in the market is around EUR 150 (Figure ). Assuming that those switching would
tend to be moving from a tariff at the more expensive side of this distribution to a tariff at the cheaper
side of this distribution, this amounts to saying that the greater market awareness engendered by this
intervention would enable consumers to identify an offer that was just c. 3% cheaper than the offer they
would have otherwise identified without the intervention.
A conservative assumption given the implied average time between switches is upwards of 15.5 years
for electricity consumers and 18 years for gas consumers.
In reality, households will react differently depending on consumers’ needs, skills, motivations,
interests, lifestyle, and access to resources such as accurate online comparison tools. However, we have
no reliable data to quantify these differences in this specific context.
539
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0239.png
-
A discount rate of 4% for the consumer benefits year on year;
then Option 2 would result in an increase in consumer surplus
of between 1.8 and 6.5
million euros annually
(depending on the year of implementation), and
55.3 million
euros in total for the period 2020-2030.
However, there is significant uncertainty as to these benefits because it may prove difficult
to devise a standard EU comparability box that can fully accommodate all differences
between national energy markets. Such as box may downplay the non-quantitative value
of energy services (green offers, or offers bundled with home insulation services) when
compared to 'plain vanilla' supply contracts. Finally, the prescriptive approach would
inhibit beneficial innovation by national regulators and suppliers, and make it difficult to
adapt bills to evolving technologies and consumer preferences.
Indeed, the Commission-chaired Working Group on e-Billing and Personal Data
Management found that bill design
"should not be imposed by regulation but rather be
developed on the basis of better understanding of consumer interests also drawing on the
results of behavioural research"
303
.
The
implementation costs
of Option 2 will most likely be significant because:
-
All Member States have legislation with billing requirements that are relatively
prescriptive, and that will need to be significantly revised (Table 1);
-
All energy suppliers would need to significantly revise the design of their
household bills in order to comply with the new EU requirements.
This option would therefore result in the following one-time implementation costs to
public administrations as well as the 2752 electricity and 1595 gas suppliers in the EU
304
.
No running costs are associated with this option due to the computerisation of billing
systems.
303
304
Working Group Report on e-Billing and Personal Data Management",
(2013) Report prepared for the
6th Citizens' Energy Forum,
https://ec.europa.eu/energy/sites/ener/files/documents/20131219-e-
billing_energy_data.pdf.
Source: CEER National Indicators Database (2015).
540
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0240.png
Table 8: Option 2 implementation costs (all one-time costs)
305
Obligation
Action
Entities
concerned
28
306
Staff type
Hourly
rate
(EUR)
41.50
Man
hours
320
Activity
(EUR)
371,840.00
cost
Incorporating
comparison box
into bills
Revising
national
legislation
Understanding
information
obligation
Bill design
4347
307
Legislators,
senior
officials,
managers
Professionals
32.10
8
1,116,309.60
4347
Professionals
32.10
144
Total
20,093,572.80
21,581,722.40
As regards stakeholder views, Option 2 would not enjoy as much support as Option 1. In
particular, it would be resisted by NRAs as well as industry as it would significantly reduce
the scope for beneficial innovation by national authorities and suppliers, as well as their
ability to tailor information to specific national markets or consumer groups
308
. In addition,
whilst consumer groups, the European Parliament and the Committee of the Regions have
pushed for greater standardisation of the format of bills, it may prove impossible to devise
a format that pleases all of these diverse stakeholders in practice.
Conclusion
Option 1 is the preferred option
as it likely leads to significant economic benefits and
increased consumer surplus without significant administrative costs or the risk of overly-
prescriptive legislation at the EU level.
Subsidiarity
Consumers are not taking full advantage of competition on energy markets due, in part, to
poor awareness of basic, market-relevant information that could be provided in energy
bills.
The Options envisage reinforcing legal requirements on key information to include in
consumers' bills. National legal regimes for billing remain fragmented with diverging
content and format, and do not always facilitate comparison with offers and pre-contractual
information, which would improve switching rates and effectiveness. There is also a need
to standardise the definitions of energy costs, network charges, and taxes and levies used
in all EU bills in order that consumers understand what they are paying for and are better
aware of the extent to which they can control their energy costs.
305
306
307
308
Derived from the standard cost model for estimating administrative costs.
All Member States. 40 man-days each.
All electricity and gas supply companies. 18 man-days each.
In a workshop on effective billing that the UK energy regulator, Ofgem, recently held, attendees
generally agreed that the level of prescribed information on bills and other communications in the UK
is too high, leading to consumers being overwhelmed with information, and that a one size fits all
approach doesn’t allow for tailored information to be provided to a consumer. See 'Memo:
Effective
billing
workshop',
(2015)
Ofgem,
https://www.ofgem.gov.uk/system/files/docs/2016/03/effective_billing_workshop_251115_.pdf.
541
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0241.png
Well designed and implemented consumer policies with a European dimension can enable
consumers to make informed choices that reward competition, and support the goal of
sustainable and resource-efficient growth, whilst taking account of the needs of all
consumers. Increasing confidence and ensuring that unfair trading practices do not bring
a competitive advantage will also have a positive impact in terms of stimulating growth.
The legal basis for the legislative options proposed (Options 1 and 2) is therefore likely to
be Article 114 TFEU. This allows for the adoption of
"measures for the approximation of
the provisions laid down by law, regulation or administrative action in Member States
which have as their object the establishment and functioning of the internal market".
In
doing this, in accordance with Article 169 TFEU, the Commission will aim at ensuring a
high level of consumer protection.
Option 0: BAU with stronger enforcement
Business as usual/stronger enforcement does not change the
status quo.
Member States
would continue to have a significant degree of discretion in specifying the content of
consumers' bills.
From a subsidiarity perspective, this option allows Member States to decide on the extent
to which they wish to create an environment where customers are encouraged to switch
more freely. If the
status quo
continues, this may not always result in lower overall prices,
depending on the national situation.
From the perspective of proportionality, however, this option would not necessarily lead
to sufficient improvements in the market.
Option 1: More detailed legal requirements on the key information
The principles of subsidiarity and proportionality are best met through this Option as it is
not overly prescriptive and will concretely reduce levels of consumer detriment that are
currently not addressed at a national level by all Member State authorities.
This option aims primarily at reinforcing existing legislation but without being overly
prescriptive. As billing is already addressed in EU provisions, the subsidiarity and
proportionality principles have clearly been assessed previously and deemed as met.
Box 1: Impacts on different groups of consumers
The benefits of the measures contained in the preferred option (Option 1), described in detail in the preceding
pages, accrue predominantly to consumers who do not engage in the market or better control their energy
consumption because of insufficient billing information or confusing bills. This may include certain
vulnerable consumers, or those who are time poor.
Option 2: A fully standardized 'comparability box' in bills
Implementing a standardised comparability box for billing would help to create a level
playing field for consumers within Member States and between Member States. At this
point, however, it would be disproportionate to impose such a requirement as consumer
research in this area is ongoing and current findings are inconclusive.
542
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0242.png
Stakeholder's opinions
Public Consultation
222 out of 237 respondents to the Commission's Consultation on the Retail Energy
Market
309
believed that transparent contracts and bills were either important or very
important for helping residential consumers and SMEs to better control their energy
consumption and costs. 110 out of 237 believed that prices and tariffs that were difficult
to compare were a key factor influence switching rates. And 66 out of 133 respondents
who thought that bills did not provide sufficient information thought this was the case
because they were not sufficiently transparent and meaningful.
43% of all 332 respondents to the Commission's Consultation on the Review of Directive
2012/27/EU on Energy Efficiency
310
think the EED provisions on metering and billing are
sufficient to guarantee all consumers easily accessible, sufficiently frequent, detailed and
understandable information on their own consumption of energy, versus 32% who opposed
this view, and 25% who had no view. Most comments were provided by participants who
did not think that the provisions are sufficient. Many argued that energy bills would remain
too complex to be properly understood by most customers.
Citizens' Energy Forum, February 2016
The European Commission established the
Citizens' Energy Forum
in 2007. The Forum
meets on an annual basis in London and is organised with the support of Ofgem, the UK
regulatory authority. The overall aim of the Forum is to explore consumers' perspective
and role in a competitive, 'smart', energy-efficient and fair energy retail market. The
London Forum brings together representatives of consumer organisations, energy
regulators, energy ombudsmen, energy industries, and national energy ministries.
The 8th Citizens' Energy Forum, organised by DG Energy in collaboration with DG
Justice, took place in London on Tuesday 23 and Wednesday 24 February. In its
conclusions, the forum:
"Call[ed] for improved and comparable pre-contractual
information, including green offers, contract and billing information to increase consumer
engagement."
It addition, the Forum:
"Call[ed] for phasing out regulated prices and more
clarity on the costs of the components of energy bills to remove barriers to effective
competition and allow consumers to choose from more diverse offers."
European Commission Working Group on e-Billing and Personal Energy Data
Management
Including representatives from national NRAs, consumer groups and industry, this
working group
concluded in December 2013 that data presented in e-bills and e-billing
information, as well as in paper bills and consumption data presented on paper, needed to
be correct, clear, concise and presented in a manner that facilitates comparison and
309
310
Held from 22 to 17 April 2014.
https://ec.europa.eu/energy/en/consultations/consultation-retail-energy-
market
Held
from
4
November
2015
to
29
January
2016.
https://ec.europa.eu/energy/sites/ener/files/documents/Public%20Consultation%20Report%20on%20th
e%20EED%20Review.pdf
543
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0243.png
provides all relevant information to consumers
–
including complaint handling and contact
points for consumer information e.g. on their energy bills and consumption.
It acknowledged that clear and accurate information on energy consumption, feedback
devices, as well as information on historical consumption can help consumers to be better
aware of their consumption.
It also suggested that information is presented to consumers in a 'tiered' manner from basic
towards more complex data, enabling consumers to look for additional, e.g. more
'technical' data, in an educational manner
311
.
National Regulatory Authorities
ACER
suggests that there is still a lack of information relevant to switching suppliers on
the bill in many Member States. However, it point out that too much information can also
lead to too complex bills inhibiting the beneficial role of information to consumers.
The body representing the EU's national regulatory authorities in Brussels,
CEER
312
,
points out that detailed requirements can reduce the scope for innovation among suppliers
and could become outdated quickly (e.g. there are more people opting for electronic
billing). To this end, it feels that minimum standards or slightly higher-level requirements
might be more appropriate. It states that understandable billing information as well as
readily comparable information are critically important for consumers and welcomes the
proposal from the European Commission to identify, in collaboration with national
regulators, minimum standards for key information in advertising and bills. It agrees that
information on consumption patterns is important for consumers.
The Czech NRA
ERO
states that bills are very difficult to understand, not easy to read and
overloaded. Consumers need clear and transparent information, to be able to compare
offers, contract termination information, and information for switching.
The French NRA
CRE
suggests that the layout of energy bills should contain two levels:
essential / minimal information and detailed information (including where relevant, meter
reading, all tariffs, taxes and levies). In a consumer centric model, the exact layout should
be the suppliers’ responsibility. The breakout pages of the bill might not be relevant in the
near future, with the development of web-only / paperless offers. Detailed legislation on
paper bills is probably irrelevant in a forward looking perspective, considering the general
trend in recurrent billing services. Paper bills should not be made compulsory. Paperless
should be promoted as interactive relations allow the supplier to develop a higher
competitive advantage.
The UK NRA
Ofgem
does not support prescription beyond ensuring that the key
information is presented clearly. The layout of bills should be broadly left to suppliers.
Testing and trials is the best route through which to identify the most effective way to
present information on bills. It is important to ensure that consumers have access to key
information and that this is not hidden away. In GB on key communications consumers are
311
312
Working Group Report on e-Billing and Personal Data Management",
(2013) Report prepared for the
6th Citizens' Energy Forum,
https://ec.europa.eu/energy/sites/ener/files/documents/20131219-e-
billing_energy_data.pdf.
The Council of European Energy Regulators.
544
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
presented with a Tariff Information Label (TIL) that houses key information about their
tariff and consumption. This provides them with easy access to the information they need
to switch tariffs. Ofgem considers this to be a useful/effective tool for consumers. Ofgem
has received feedback from a number of sources that consumers find their bills confusing
and overly complex.
Consumer Groups
BEUC
states that the current EU legislative provisions related to billing are insufficient.
Bills should be clear and concise and include the necessary information for the consumer
to compare offers and to switch supplier. BEUC
welcomes the Commission’s plan to put
forward proposals to improve the information provided on the bill in order to facilitate
comparability and switching among others.
Simpler bills are welcome by consumers. EU legislation should also prescribe the
outcomes required for consumers (e.g. that consumers have the data required to switch).
As bills are often packed with a lot of information, a way to avoid the overload and simplify
the overall bill would be to provide only fundamental elements on the bill (for example in
a standardized box). The bill could then include a reference to find more detailed but
perhaps less crucial information online.
The first page of the bill should contain specific elements which are standardised. A
comparability box showing the key information for switching is needed on the first page
of the bill. The Commission should respect the consumer’s choice not to play an active
role. Clear and accurate bills require high level principles for bills at the EU level.
Consumers have a diverse range of preferences and of accessible tools so the approach to
information should be shaped by consumer research at the national level. The focus should
be on less, simpler and more meaningful is better.
The Swedish consumer group
Konsumenternas
highlights that issues with the bill are
often connected to lack of knowledge or understanding the difference between supply and
distribution and the respective prices/tariffs. Billing should be subject to competition.
Legal provisions on the clarity of bills are difficult to sanction by the regulator. Paper bills
are likely to decrease in number and become less relevant.
The Portuguese consumer group
DECO
Highlights that while we already have a
standardized information model of pre-contractual information, we don't have the same for
energy bills. It could be useful to have a comparability box in the bill, which shows key
elements (including energy used compared with previous year, contract end date etc.) and
also have information about new promotions and discounts of the same supplier.
DECO believes that some elements that are similar on all energy bills should be
standardised at EU level, namely:
1. Energy supplier identification
2. Customer/Consumer identification
3. Invoice date information
4. Invoice number information
5. Commercial supply/services identification (base product/campaign)
6. Specific offer conditions
7. Fees and taxes
8. Bundled Services
9. Payment Methods
10. Social Tariffs/Mechanisms for vulnerable consumers
545
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
11. Information about savings/sustainability and energy poverty measures.
Citizens Advice
(UK) believes that a comparability box showing the key information for
switching is needed on the first page of the bill. EU legislation should prescribe the
outcomes required for consumers (e.g. that consumers have the data required to switch).
This should be supported by actions to monitor and enforce this (e.g. with a link across to
the indicators for market monitoring, including by CEER/ACER). The format and layout
should be subject to consumer testing/consumer research. It is useful to provide consumers
with information on similar properties in the area but the ‘bill’ may not be the best location.
For instance, the information could be provided in a separate report, sent to the household,
outside of the standard billing cycle.
Germany's
VZBV
believes that a clear requirement to show the price per kWh including
taxes is missing in the regulation. A requirement to access the meter is missing in the
regulation as well. Although legislations exists, these are partly insufficiently implemented
from the consumer point of view (esp. in terms of understand ability).
Suppliers
EURELECTRIC
states that many consumers across Europe complain that there is too
much information on their bills, making them difficult to read. At the same time, regulation
does not always allow suppliers to simplify or improve them to fit with specific consumer
needs. In a competitive market, bill design should be left to suppliers (and other market
parties) to diversify their brand and image. Suppliers also need flexibility to take into
account the needs of different groups of consumers. Beside, EURELECTRIC thinks the
main issue with bill is not about the “layout” per se but about its “regulated content” (e.g.
taxes, legal wording, consumption estimation, etc.). Only the most critical elements could
be standardised at national level if evidence suggests this is needed. Consumers also face
problems with the high volume of regulated information on their bills. The primary purpose
of a bill is to set out charges for energy and to allow the customer to understand how their
consumption affects those charges. Giving evidence of how the lay-out of paper bills can
create competitive advantage is not an easy thing to do. The point is that different
consumer/consumer groups may have different needs and preferences as to what they’d
like to see in their energy bill: level of details, format, use of graphs/tables, etc. This is why
suppliers should be given enough flexibility to innovate. In any competitive market,
differentiation is key to create competitive advantage. EURELECTRIC does not see any
evidence which would support the need for further standardisation of elements of the
energy bill at European level.
Eurogas
states that EU legislation sets prescriptive requirements on billing frequency and
use of meter readings which can and should be left to suppliers in competitive markets.
Communications should also be able to adapt to changing technology, such as the
increasing use of digital media, including smartphones and tablets. Suppliers in
competitive markets are best-placed to work out how to engage customers. Graphs and
tables may be equally useful in certain situations but it should be up to the competitive
market to determine how to present information to customers in an engaging way.
Consumers face problems with the high volume of regulated information on bills. The
primary purpose of a bill is to set out charges for energy and to allow the customer to
understand how their consumption affects those charges. To facilitate the readability of the
bill, some information (such as general conditions) could be made available on the
dedicated customer area and signposted on the bill.
546
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
CEDEC
argues that before including new measures in the legislation it should be ensured
that the current provisions are respected. New requirements should be conditional on
technical feasibility and cost-effectiveness. The focus on measures that are technically
feasible and cost effective must remain. Consumers find more difficult to identify and
choose the cheapest deal if price structure of electricity offers is complex. In this sense, it
would be useful to avoid too many pieces of information.
UK ENERGY
highlights that all markets are different and it is the role of competition
between market participants to determine what is most effective and appropriate for billing
purposes. It believes suppliers need more flexibility to determine what information they
provide to customers and how that information is provided with what frequency. Suppliers
should have increased flexibility in the layout of the bill since this is one of the few and
key contact points to engage with customers. The primary purpose of a bill is to set out
charges for energy and to allow the customer to understand how their consumption affects
those charges. It is unclear how a standardisation of the first page could keep pace with
changing technologies and markets. Consumers increasingly want to receive
communication in alternative formats such as online or via apps. It is unclear what benefits
standardisation at European level would bring.
The European Parliament
In its April 2016 opinion on the Commission's Communication on Delivering a New Deal
for Energy Consumers, the Parliament's
Committee on Industry, Research and Energy
(ITRE):
"Recommends improving the frequency of energy bills and the transparency and
clarity of both bills and contracts in order to aid interpretability and comparison, and to
include in or alongside energy bills peer-based comparisons and information on
switching; insists that clear language must be used, avoiding technical terms; requests the
Commission to identify minimum information requirements in this respect, including best
practices; stresses that both fixed charges and taxes and levies should be clearly identified
as such in the bills, allowing the customer to distinguish them easily from the variable,
consumption-related cost; recalls existing requirements for suppliers to specify in or with
bills the contribution of each energy source to the overall fuel mix of the supplier over the
preceding year in a comprehensible and clearly comparable manner, including a reference
to where information can be found on the environmental impact in terms of CO
2
emissions
and radioactive waste. Recommends that consumers should be notified in or alongside
energy bills about the most suitable and advantageous tariff for them, based on historic
consumption patterns, and that it should be possible for consumers to move to that tariff,
if they so wish, in the simplest way possible. Considers that incentives and access to quality
information are key in this respect and asks the Commission to address this in upcoming
proposals."
In its April 2016 opinion on the Commission's Communication on Delivering a New Deal
for Energy Consumers, the Parliament's
Committee on the Internal Market and
Consumer Protection (IMCO)
called for:
"the Commission to take further action to
improve the frequency of energy bills and the associated meter readings, and their clarity,
comparability, and transparency as regards types of energy sources, consumption, price
structure and the processing of enquiries and complaints."
The Committee of the Regions
In its April 2016 opinion on the Commission's Communication on Delivering a New Deal
for Energy Consumers, the
Committee of the Regions:
-
calls on the European Union to examine the different components of energy bills,
in order to put together a "standard" bill incorporating a number of elements that
547
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
-
-
-
-
are uniform, legible, clear and comparable at European level and which would
allow consumers to optimise their energy use. In this regard, the European
Committee of the Regions supports the Council of European Energy Regulators'
initiative to set out harmonised definitions of different elements that should be
included in energy bills;
calls for standardisation to be accompanied in the final bill by information about
the free tools and services that are available for comparing supply offers, as well
as information and support for households and businesses with regard to the
protection of consumers' rights;
calls on Member States to create tools and services that make bills easier for
households and businesses to understand, so that they can be analysed; and, where
appropriate, to provide advice and support for end-users regarding the steps which
may be necessary to rectify any irregularities identified or guide end-users towards
supply contracts that are better suited to their needs;
recommends that bills and any information issued by suppliers to their end-users
should be sent in the format requested by the latter, i.e. via post or e-mail, without
any discrimination;
stresses that vulnerable consumers are particularly likely to encounter difficulties
in identifying the best tariffs amongst the wide range of offers, and that they often
seek the assistance of the closest level of governance. Consequently, the European
Committee of the Regions calls upon the European Union to assist local and
regional authorities in setting up support systems in the field of energy if this is not
being done by the Member States.
548
Fejl! Brug fanen Hjem til at anvende Heading 2 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0248.png
8. D
ESCRIPTION OF RELEVANT
E
UROPEAN
R&D
PROJECTS
Technological developments are both part of the drivers that affect the present initiative
and part of the solutions of the problems they affect.
Technological developments have created the opportunities for consumers to transit from
being passive consumers of electricity to prosumers that can actively manage their
consumption, storage and production of electricity and particiapte in the market. This
provides opportunities for innovative business models of service provisions, often based
on advanced technologies, based on enabling smaller consumers and distributed generation
to interact with the market and have their resources being managed. At the same time,
networks should be managed more actively in order to meet the challenges more
decentralised generation brings about.
As the transition path is also created by technological progress and the solutions to the
problems they entail are equally shaped by technology, the present annex provides for a
sample of projects, supported by the EU through its 6
th
and 7
th
Framework Programme and
Horizon2020, that have developed technologies and innovations that render these
developments more concrete but also provide insights as to the direction the transition may
take.
549
Fejl! Brug fanen Hjem til at anvende Heading 1 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0249.png
Project
FP7-DISCERN
Title:
Distributed Intelligence for Cost-Effective and Reliable Distribution Network Operation
The project linked with six large-scale smart grids demonstration projects financed at national level. The
project developed methods to characterise outcomes and aimed to find ways to replicate solutions from one
country to another.
Fact Sheet:
http://cordis.europa.eu/project/rcn/106040_en.html
Web Site:
http://www.discern.eu/
Important project outcome include:
The practical testing and tuning of performance metrics (Key Performance Indicators
–
KPI) and evaluation
of their values based on actual measurements. The project concludes that use of the KPI framework is a valid
approach for revealing the impact of a technical solution and its function(s) on a DSO grid, system or
organisation and to set the expected set of outcomes. These can be used to analyse cost/benefit ratios at
design stage and after implementation. Cost KPIs are a valid method for assessing cost structures for Use
Cases, however as the creation of a common cost list to support impartial comparisons of the various Use
Cases was found impractical within the constraints of DISCERN, the evaluation of costs and determination
of initial investments relied on individual Use Case information, which by its nature incorporates company
specific cost drivers
Project FP7-ITESLA
Title:
Innovative Tools for Electrical System Security within Large Areas
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 to reduce the amount of necessary preventive measures. The reliance on
risk-based approaches can avoid or mimimise 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
-
-
-
-
550
Fejl! Brug fanen Hjem til at anvende Heading 1 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0250.png
identify the need for increased formalised data exchange among TSO's to support the new methods and
tools.
Project FP7-UMBRELLA
Title:
Toolbox for Common Forecasting, Risk assessment, and Operational Optimisation in Grid Security
Cooperations of Transmission System Operators (TSOs)
The project developed methods and tools for the coordinated operational planning of power transmission
systems, particularly to cope with high shares of variable renewable energy. They aimed at enhancing cross-
border capacity and flexibility while ensuring a high level of operational security.
Fact Sheet:
http://cordis.europa.eu/project/rcn/101318_en.html
Web Site:
http://www.e-umbrella.eu/
Important project outcomes include:
-
The demonstration of probabilistic forecasting of power generation and power flows on a regional basis.
These are important to plan ahead of time, the most effective methods for relieving expected congestions.
Such forecasts will also be important for intraday trading on wholesale markets.
Validated methods and tools for a coordinated optimisation of measures to ensure the security of the
pan-European grid. Of particular importance is the to coordination of measures for relieving expected
congestions, starting from low-cost measures such as switches to coordinated generation redispatching.
The tools and models allow to reduce the amount of necessary preventive measures. The reliance on
risk-based approaches can avoid or mimimise 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 ITESLA project). These foster the harmonisation of legal, regulatory and operational
framework to allow the exploitation of the newly developed methods and tools. They also identify the
need for increased formalised data exchange among TSO's to support the new methods and tools.
-
-
-
Project FP7-eHIGHWAY2050
Title:
Modular Development Plan of the Pan-European Transmission System 2050
The project developed new methods for the top-down long-term foresight of the power system infrastructure
in a 2050 perspective, and applied these to depict grid requirements under a number of scenarios, and outlined
a "future proof" modular development pathway to this horizon.
Fact Sheet:
http://cordis.europa.eu/project/rcn/106279_en.html
Web site:
http://www.e-highway2050.eu/e-highway2050/
Important project outcomes include:
-
-
-
-
-
-
a number of basis scenarios framing possible evolution of demand, generation and delivery infrastructure
in the 2050 perspective
a foresight of expected power system technology evolution in this time frame
optimised grid architectures to efficiently respond to the delivery needs for each of the selected scenarios
a modular development plan with intermediate steps that largely fit all the future pathways
new methods for optimal long-term planning of power systems in the presence of major uncertainties
a well-documented proposal for the clarification of the concept of "electricity highways" in the context
of the EU energy infrastructure package. This proposal has largely been adopted in the process of
selecting the second round of "projects of common interest" and has resulted in a substantial number of
projects identified as "electricity highways" as part of a double label.
551
Fejl! Brug fanen Hjem til at anvende Heading 1 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0251.png
Project FP6 : VSYNC
–
Title:
Virtual Synchronous Machines (VSG's) For Frequency Stabilisation In Future Grids with a Significant
Share of Decentralized Generation.
The project developed methodologies to enable a generator to behave like a "Virtual
Synchronous
Generator"
(VSG) during short time intervals and contribute to the stabilisation of the grid frequency.
Cordis website:
http://cordis.europa.eu/project/rcn/85687_en.html
Project website:
http://www.vsync.eu/
Important project outcomes include:
-
The Virtual Synchronous Generator technology can contribute to the stabilisation of the grid frequency
at distribution level. The Vsync technology could allow PV to provide balancing services replacing the
inertia of 'traditional' generators. As a result, the RES absorption capacity of the grid is increased.
Today frequency control is handled by TSOs mainly with the help of generators connected to the
transmission network. The provision of Ancillary Services of assets connected to the distribution grid is
currently not standard practice and is not standardized. However, it is possible that these will be required
or offered in future, due to increased system needs, increasing share of decentralized generation (also
reducing the possibility to rely exclusively on large generation) and possible connection and
reinforcement cost optimization at distribution..
-
IEE project REServiceS
–
Title:
Economic grid support from variable renewables
RESERVICES addresses changes in the future European power system:, in particular the need for
development of an ancillary services market in which RES can participate.
IEE website:
http://ec.europa.eu/energy/intelligent/projects/en/projects/reservices
Project website:
http://www.reservices-project.eu/
Important project outcomes include:
-
Ancillary services
are grid support services required by the power systems (transmission or distribution
system operators TSOs or DSOs) to maintain integrity, stability and power quality or the power system
(transmission or distribution system). Ancillary services can be provided by connected generators,
controllable loads and/or network devices. Some services are set as requirements in Grid Codes and
some services are procured as needed by TSOs and DSOs to keep the frequency and voltage of the power
system within operational limits or to recover the system in case of disturbance or failure.
There are different procurement and remuneration practices for Ancillary services, and these practices
are evolving. There are already markets for some services. Some services are mandatory (not necessarily
paid for) and some services are subject to payments according to regulated (tariff) pricing or tendering
process and competitive pricing.
RES (in particular PV and wind) can provide ancillary services both at DSO and TSO level, from a
technology point of view, but due to the way the markets are defined (and the way ancillary services are
managed) in practice they cannot participate.
-
-
552
Fejl! Brug fanen Hjem til at anvende Heading 1 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0252.png
Project FP6 Integral
Title:
Integrated ICT-platform based Distributed Control in electricity grids with a large share of Distributed
Energy Resources and Renewable Energy Sources.
The INTEGRAL project demonstrated how Distributed Energy Resources and Demand Side Response in
the distribution grid can be controlled and coordinated, based on commonly available ICT components,
standards and platforms. The project treated the operating conditions of the grid with DER/RES
aggregations in three different operating conditions:
-
-
-
Normal operating conditions of DER/RES aggregations
–
Stakeholders involved: consumers,
aggregators, utilities.
Critical operating conditions of DER/RES aggregations
–
Stakeholders involved: consumers, DSO
Emergency operating conditions
–
Stakeholders involved: DSO
Cordis website:
http://cordis.europa.eu/project/rcn/86362_en.html
Project website:
http://integral-eu.com/
Important project outcomes include
-
The test field A of the INTEGRAL project (grid in normal operational conditions), the PowerMatching
City, demonstrated that the control of DER through an automated market based concept by means of
"agents" distributed in the grid and the Powermatcher application, satisfies the needs of consumers,
aggregators and DSO. On the Data and communication aspects, the project demonstrated the absence of
technological barriers as public networks were used for transport of private data by means of Virtual
Private Networks (VPN), a proven technology to transfer encrypted data.
The test field B (critical operation of the grid) demonstrated that DSO or aggregators can control the
grid through controlling loads and generation of prosumers. Under critical conditions, the Demand Side
Management (DSM) system disconnects the critical loads.
The test field C (emergency operation of the grid) demonstrates that the self-healing concept helps to
minimize the average outage time of the grid. It is a high automation levels that allows DSO reducing
the average number of interruptions, enhancing hence the service quality of the grid.
-
-
Project FP7 SuSTAINABLE
Title:
Smart distribution System operaTion for mAximising the Integration of renewable generation
The SuSTAINABLE project developed and demonstrated the efficient and cost-effective management of the
grid with high penetration of RES configured as a virtual power plant through elaboration of data related
to load forecast, grid infrastructure protection and renewable energy production forecast.
Cordis website:
http://cordis.europa.eu/project/rcn/106534_en.html
Project website:
http://www.sustainableproject.eu/Home.aspx
Important project outcomes include:
-
Concerning data management, the project demonstrated that intelligent management supported by more
reliable load and weather forecast can optimise the operation of the grid. The results show that using the
distributed flexibility provided by DRD
–
Dynamic Response of Demand can bring an increase of RES
penetration while, at the same time, avoiding investments in network reinforcement.
Concerning DSO benefits, the results of the project demonstrated that the active management of the
renewable generation can lead to a decrease in the investment costs of distribution lines and substations.
-
553
Fejl! Brug fanen Hjem til at anvende Heading 1 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0253.png
Project FP7 IDE4L
Title:
Ideal Grid for All
The IDE4L project focuses on
-
-
improving distribution network monitoring and controllability by introducing hierarchical decentralized
automation solution for complete real-time MV and LV grid management,
utilizing existing distribution networks more efficiently and managing fast changing conditions by
integrating large number of distributed energy resources in distribution network through real-time
automation and market based flexibility services,
guaranteeing continuity and quality of electricity supply by distributed real-time fault location, isolation
and supply restoration solution cooperating with microgrids, and
improving visibility of distributed energy resources to TSOs by synthesizing dynamic information from
distribution system and to commercial aggregators by validating and purchasing flexibility services.
-
-
Cordis website:
http://cordis.europa.eu/project/rcn/109372_en.html
Project website:
http://ide4l.eu/
Important project outcomes include:
-
Concerning data management and interoperability, the project aims to create a single concept for
distribution network companies to implement active distribution network today based on existing
technology, solutions and future requirements.
All data exchange and data modelling are based on international standards IEC 61850, DLMS/COSEM
and CIM to enable interoperability, modularity, reuse of existing automation components and faster
integration and configuration of new automation components.
-
IDE4L develops the entire system of distribution network automation, IT systems and functions for active
network management.
-
-
-
Fault location, isolation and supply restoration
Congestion management
Interactions between distribution and transmission network companies
Project FP7 NRG4Cast
Title:
Energy Forecasting
NRG4Cast project developed advanced solutions for predicting behaviour of local energy networks for the
three functions:
-
-
Predicting energy demand on several network granularity levels (region, municipality, city, business,
household and energy service provider),
Predicting energy network failures on interlinked local network topologies,
Detecting short-term trends in energy prices and long-term trends in national and local energy policies.
Cordis website:
http://cordis.europa.eu/search/result_en?q=nrg4cast
Project website:
http://www.nrg4cast.org/
Important project outcomes include:
-
From the data collection point of view, the project demonstrates (as other similar projects) that the
optimization of the use of energy (and hence a higher business margin) in a distributed generation can
be achieved with the support of IT dedicated tools. DSOs as well as other actors (utilities, municipalities,
etc.) can use these tools in their activities.
554
Fejl! Brug fanen Hjem til at anvende Heading 1 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0254.png
Project FP7 EEPOS
Title:
Energy management and decision support systems for Energy Positive neighbourhoods
EEPOS is a central energy management system for neighbourhoods that performs coordinated energy
management. Additionally, it actively participates in energy trading with external parties on behalf of
the neighbourhood members.
Cordis website:
http://cordis.europa.eu/project/rcn/105854_en.html
Project website:
http://eepos-project.eu/
Important project outcomes include:
-
Regarding the right to self-produce, consume, store electricity and use flexibility, optimization of use of
energy use can be achieved at neighbourhood or district level more effectively than at household level
through ad hoc energy management systems (IT support as other similar projects).
Consequence: Matching supply and demand automatically relieves grid unbalance providing hence
indirectly grid services.
-
H2020:
BRIDGE project network
The BRIDGE initiative collects policy recommendations from the use cases which are currently under
demonstration in the ongoing H2020 energy projects.
Important findings for the market design initiative:
Balancing:
-
barriers on access to the balancing market. It is observed that not all markets in practice allow load to be
included. This is discriminatory for the energy storage assets demonstrated in the projects and does not
allow the correct valorisation of their double operative nature.
Ancillary services:
-
barriers on access to the ancillary market. Participants in the project include Energy Service companies
that provide e.g. Frequency Response, Congestion management, Reserve and Ramping Duty. It is
recommended that products for ancillary services should be consistent and standardized from
transmission and down to the local level in the distribution network. Such harmonization will increase
the availability of the services, enable cross-border exchanges and lower system costs.
Project H2020:
SMARTNET
Title:
Smart TSO-DSO interaction schemes, market architectures and ICT Solutions for the integration of
ancillary services from demand side management and distributed generation
The project SmartNet aims at providing architectures for optimized interaction between TSOs and DSOs in
managing the exchange of information for monitoring and for the acquisition of ancillary services (reserve
and balancing, voltage regulation, congestion management) both at national level and in a cross-border
context.
Cordis web site:
http://cordis.europa.eu/project/rcn/200556_en.html
Project web Site:
http://smartnet-project.eu/
Important project outcomes include:
-
Validated acquisition of ancillary services from specific resources such as thermal inertia of indoor
swimming pools and batteries in telecommunication base systems. In addition the project will
demonstrate modalities to exchange monitoring signals between transmission and distribution networks.
The architectures for dataflow and control signals will be tested in full replica lab considering various
levels of responsibilities for the DSOs. These ranges from a model with extended central dispatch where
TSO contracts ancillary services directly from DER owners connected to the DSO grid to a more
decentralized model where TSO, DSO and BRPs contract ancillary services connected at distribution
555
Fejl! Brug fanen Hjem til at anvende Heading 1 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0255.png
level for their own need in a common market. The preferential architectures and data flow models will
be defined during the course of the project that is running until the end of 2018.
Project FP7: ECOgrid-EU
Title:
Large scale Smart Grids demonstration of real time market-based integration of DER and DR
ECOGRID-EU is a large-scale demonstration project which included 1,900 test households, out of which
~1,200 houses were equipped with home automation equipment and 500 were manually controlled
households. The project focused on direct (resistance based) and indirect (heatpump) electricity heating
applications for households since these has the highest volume potential for demand response
Cordis web site:
http://cordis.europa.eu/project/rcn/103636_en.html
Project web Site:
http://www.eu-ecogrid.net/
Important project outcomes include:
-
Dynamic pricing needs a short time-interval, i.e. 15 minutes or less. It shows as well that this is
technically possible: even a 5-minute period is technically possible although not cost-effective in the
project setting.
The FP7 project ECOGRID has successfully demonstrated a "real time" power market concept with 5
min time resolution. The concept provides the customers with real time prices and the local ICT control
system in the houses make it possible to optimize the use of electricity by automated adjustment of the
consumption. The concept included both a global price signal for balancing and a locational price signals
for congestion management, although the latter wasn't fully validated. In the basic concept of the
EcoGrid EU project, control of active power is generally done by leveraging the global real-time market
price and its corresponding forecast. Based on this, price deviations for each of the local areas can be
computed in order to relief active power issues within that area. The ICT concept consists of a new
market place and local control schemes which are implemented by three different technology vendors,
thereby allowing a wider base of appliances.
It showed as well the importance of a reliable communication and automation channel, in particular for
'legacy equipment' (i.e. already installed heat pumps or electric heating).
An important learning was that automated control has responded much better to price signals than
manually controlled. A customer with manual control gave a 60 kW total peak load reduction while
automated or semi-automated customers gave an average peak reduction of 583 kW.
For the households equipped with fully automated demand response, the communication interface was
the highest share of the equipment cost, but in future these costs could be virtually zero when appliances
are cloud connected anyway.
For the demonstration area (Bornholm in Denmark) wind power curtailment (virtually) was reduced by
almost 80%, and the use of (virtual) spinning reserves has been reduced by 5.5%.
In the replication roadmap it is shown that the Belgian market could give a EUR 2 million/year reduction
of balancing cost if 10%, of the 18% of the households that have a hot water buffer tank, is used for
demand response.
-
-
-
-
-
-
Project FP7 Grid4eu
Title:
Large-Scale Demonstration of Advanced Smart GRID Solutions with wide Replication and
Scalability Potential for EUROPE
Grid4EU aims at testing in real size some innovative system concepts and technologies in order to highlight
and help to remove some of the barriers to the smart grids deployment and the achievement of the 2020
European goals. It focuses on how distribution system operators can dynamically manage electricity supply
and demand, which is crucial for integration of large amounts of renewable energy, and empowers consumers
to become active participants in their energy choices. It is organized around large-scale demonstrations
networks located in six different countries,
556
Fejl! Brug fanen Hjem til at anvende Heading 1 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0256.png
Cordis web site:
http://cordis.europa.eu/project/rcn/103637_en.html
Project web Site:
http://www.grid4eu.eu
Important project outcomes include:
-
Demonstration of enhanced functionalities of Online Tap Change Transformers (OLTC) that will enable
higher levels of PV to be integrated in the downstream LV grid. This function consists in fine-tuning the
voltage set point according to a set of parameters and inputs that includes real-time solar radiation, used
as an indicator of the amount of PV energy being produced. This enhanced control allows varying the
voltage set point that takes into account the amount of PV energy being produced, including reaction to
real time perturbations (e.g. temporary reduction in PV production due to a cloud).
Demonstration of technical viability of islanding in a segment of a distribution network to alleviate e.g.
critical situations at TSO level.
Demonstration of the "Network Energy Manager (NEM) that provides an integrated flexibility
marketplace for the TSO and DSO to specify their flexibility needs to solve their respective grid
operational constraints. These needs can be automatically computed by the NEM based on renewable
production forecasts and individual load forecasts. The NEM also provides a portal for various DER and
flexibility aggregators to offer their flexibility services to satisfy the requests. As a result, the NEM
performs a global optimisation to address needs in the most economical way while still enforcing the
technical constraints. This fully automated process notifies the aggregators of their awarded flexibility
for implementation and activation for demand response, load shifting or storage device dispatch.
-
-
Project H2020: Futureflow
Title:
Smart TSO-DSO interaction schemes, market architectures and ICT Solutions for the integration of
ancillary services from demand side management and distributed generation
FutureFlow links interconnected control areas of four transmission system operators of Central-South Europe
which today do face increasing challenges to ensure transmission system security: the growing share of
renewable electricity units has reduced drastically the capabilities of conventional, fossil-fuel based means
to ensure balancing activities and congestion relief through redispatching. Research and innovation activities
are proposed to validate the enabling conditions for consumers and distributed generators to provide
balancing and redispatching services, within an attractive business environment.
Cordis web site:
http://cordis.europa.eu/project/rcn/200558_en.html
Project web Site:
http://www.futureflow.eu/
Important project outcomes include:
-
The project Futureflow will demonstrate in near-to-real-life conditions that balancing and redispatching
service providers are able to provide cross-border balancing and redispatching services to control zones
outside their Member State borders, including automatic frequency restoration reserve services. Each
transmission system operator connected to the regional platform is able to perform its activities by using
the offers from generators and consumers possibly located in the control area of another transmission
system operator also connected to the regional balancing and redispatching platform.
Project FP7-AFTER
Title:
A Framework for electrical power sysTems vulnerability identification, dEfense and Restoration
The AFTER project addresses the challenges posed by the need for vulnerability evaluation and contin-gency
planning of the energy grids and energy plants considering also the relevant ICT systems used in protection
and control. Project emphasis is on cascading events that can cause catastrophic outages of the electric power
systems.
Cordis web site:
http://cordis.europa.eu/project/rcn/100196_en.html
Project web Site:
http://www.after-project.eu
Important project outcomes include:
557
Fejl! Brug fanen Hjem til at anvende Heading 1 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0257.png
-
The FP7 project AFTER has developed a framework for electrical power systems vulnerability
identification, defense 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.
Project FP7-SESAME
Title:
Securing the European Electricity Supply Against Malicious and accidental threats
SESAME develops a Decision Support System (DSS) for the protection of the European power system and
applies it to two regional electricity grids, Austria and Romania.
Cordis web site:
http://cordis.europa.eu/project/rcn/98988_en.html
Project web Site:
https://www.sesame-project.eu/
Important project outcomes include:
-
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.
Project H2020: Nobelgrid
Title:
New Cost Efficient Business Models for Flexible Smart Grids
NOBEL GRID will develop, deploy and evaluate advanced tools and ICT services for energy DSOs
cooperatives and medium-size retailers, enabling active consumers involvement
–i.e.
new demand response
schemas
–
and flexibility of the market
–
i.e. new business models for aggregators and ESCOs.
Cordis web site:
http://cordis.europa.eu/project/rcn/194422_en.html
Project web Site:
http://nobelgrid.eu/
Important project outcomes include:
-
The H2020 project NOBEL Grid will develop, deploy and evaluate advanced tools and ICT services for
energy DSOs cooperatives and medium-size retailers, enabling active consumers and prosumers
involvement. Particularly for domestic and industrial prosumers they will develop an Energy Monitoring
and Analytics App. Demonstration and validation of the project solutions will be done in real conditions
in five different electric cooperatives and non-profit
sites in five EU members’ states.
Project FP7-S3c
Title:
Smart Consumer - Smart Customer
–
Smart Citizen
The S3C project’s overall objective is to foster the ‘smart’ energy behaviour of energy customers in Europe
by assessing and analysing technology and user-interaction solutions and best practices in scientific
literature, test cases and pilot projects. Based on these insights, the S3C consortium has developed a practical
toolkit for everyone who is involved or intends to become involved in the active engagement of end users in
smart energy projects or rollouts.
Cordis web site:
http://cordis.europa.eu/project/rcn/105831_en.html
Project web Site:
http://www.s3c-project.eu/
Important project outcomes include:
-
The project suggests that energy system actors (e.g. DSOs, suppliers, ESCOs, regulators) must adapt the
way and the content of their communication with customers and citizens, taking into account the
558
Fejl! Brug fanen Hjem til at anvende Heading 1 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0258.png
diversity of consumer segments with different backgrounds and needs. The content of communication
must be transformed into something more visual, tangible and understandable, showing exactly the
benefits customers may experience (e.g. saved money, reduction of CO2 emission) instead of a purely
technical information.
Project FP7-metaPV
Title:
Metamorphosis of Power Distribution: System Services from Photovoltaics
The goal of the demonstrator was to explore in real life how PV systems can provide grid services for
increasing the hosting capacity of existing grids. This was pursued by adding a significant amount of
controllable inverters to a confined grid where the PV penetration was high already before. The demonstrator
is split up in a low voltage (LV) and a medium voltage (MV) part. On LV, the project aimed to convince 128
households' consumers to install PV systems of an average PV generation capacity of 4 kW, for a total of
512 kW. On MV, the target was to realise 31 installations of on average 200 kW, for a total of 6,2 MW,
located at commercial and industrial sites connected to the MV grid.
Notably, all PV inverters generate low voltage at their output; however, the so-called MV systems are directly
connected to the medium voltage grid through a transformer..
Cordis web site:
http://cordis.europa.eu/project/rcn/94493_en.html
http://cordis.europa.eu/project/rcn/107957_en.html
Project web Site:
http://metapv.eu
Important project outcomes include:
-
MetaPV demonstrated that remotely controllable inverters connecting PV-panels to the distribution grid
can offer congestion management services to the distribution grid (in the form of voltage control
obtained via reactive power modulation).
For medium-voltage grids, the hosting capacity of the network can be increased by more than 50% at
the cost of 10% of traditional grid reinforcement. For low-voltage grids, the same is also possible as
long as the costs of sophisticated features for communication do not eat up the savings from the
substituted grid reinforcement.
-
In MetaPV, the household received a commercial offer for the demonstrator. This offer was attractive, partly
because the inverter was offered by the inverter manufacturer at the cost (not price). DSO paid for
additional equipment needed (like hardware for data logging and communication, batteries, etc.). In
exchange, the customers acknowledged that the installations made part of a demonstration and that DSO
had the right to control them from time to time.
-
-
MetaPV suggests that DSO makes a multiannual investment plan that takes into account flexibility
(MetaPV suggests to do this through a cost-based analysis).
The case of MetaPV raises the question if the DSOs have the right to use or impose functions to the
customers where the PV inverters are placed. Direct control over the inverter is only granted (in special
cases) in Austria and Germany whereas in several countries DSO can impose functions to PV inverters.
Project FP7-INTrEPID
Title:
INTelligent systems for Energy Prosumer buildings at District level
INTrEPID developed technologies that enable energy optimization of residential buildings, allowing control
of internal sub-systems within the Home Area Network and interaction with other buildings, local producers,
and electricity distributors, as well as enabling energy exchange capabilities at district level. The project had
three main objectives: A. Energy optimization, which is provided by the development of three INTrEPID
technological components (Indoor Home networks, Supervisory control strategies and Energy Brokerage);
B. Integration and validation of the integrated system. C. Dissemination and Exploitation.
Cordis web site:
http://cordis.europa.eu/project/rcn/105992_en.html
559
Fejl! Brug fanen Hjem til at anvende Heading 1 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0259.png
Project web Site:
http://www.fp7-intrepid.eu/ [email protected]
Important project outcomes include:
-
A methodology to extract individual power consumption of home appliances with a measurement at a
single point, using non-intrusive load monitoring (NILM) has been developed. NILM algorithms utilize
machine learning to detect and extract features from the aggregated consumption data. For the
households considered in the INTrEPID project, the algorithm disaggregates the individual consumption
of major appliances, without the added cost of an individual meter per device. The tested algorithm
performs well in the experiments and delivers on its promises in simple settings, where the models
account for all of the loads. However, in the final scenario, the algorithm has to give up due to lack of
models and detailed datasets. Producing the Markov models for the algorithm proves to be the biggest
disadvantage of the algorithm. Attempts were made to construct these by manual inspection of the
dataset, which did prove to be quite successful. However, it was necessary to make assumptions about
the states of the refrigerator. For the general case this works quite well, but the possible defrost cycle
was not taken into account, and only one program in the dish washer was considered. This indicates that
exhaustive knowledge about the appliance is required, when reasoning about the number of states and
transitions.
This project shows that direct access to the meter should be considered for other parties to be able to
develop innovative services based on NILM algorithm. It is therefore not good for innovation if all
information from the smart meter has to go via the DSO first.
The project also demonstrates that there are further dimensions to investigate when considering the data
customer confidentiality
-
-
Project FP7- INCREASE
Title:
Increasing the Penetration of Renewable Energy Sources in the Distribution Grid by Developing
Control Strategies and using Ancillary Services
INCREASE focuses on how to manage renewable energy sources in LV and MV networks, to provide
ancillary services (towards DSO, but also TSOs), in particular voltage control and the provision of reserve.
INCREASE investigates the regulatory framework, grid code structure and ancillary market mechanisms,
and propose adjustments to facilitate successful provisioning of ancillary services that are necessary for the
operation of the electricity grid, including flexible market products
Cordis web site:
http://cordis.europa.eu/project/rcn/109974_en.html
Project web site:
http://www.project-increase.eu/
Important project outcomes:
-
The market access for aggregators is improving in some EU countries, while others are still lagging
behind. Often the regulatory frameworks are not supportive for demand response or participation of
distributed renewable generation.
Important adjustments of market regulations can be observed in a few countries, namely the reduction
of the minimum bid sizes to allow small renewable generations to participate in tenders, and shorter
scheduling periods. However in several EU countries no suitable frameworks to enable participation of
flexibility aggregators yet exist.
-
Project FP7- evolvDSO
Title:
Development of methodologies and tools for new and evolving DSO roles for efficient DRES
integration in distribution networks
With the growing relevance of distributed renewable energy sources (DRES) in the generation mix and the
increasingly pro-active demand for electricity, power systems and their mode of operation need to evolve.
evolvDSO will define future roles of distribution system operators (DSOs) and develop tools required for
560
Fejl! Brug fanen Hjem til at anvende Heading 1 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0260.png
these new roles on the basis of scenarios which will be driven by different DRES penetration levels, various
degrees of technological progress, and differing customer acceptance patterns.
Cordis web site:
http://cordis.europa.eu/project/rcn/109548_en.html
Project web Site:
http://www.evolvdso.eu/
Important project outcomes include:
-
DSOs can create additional value by offering/using services to/from different stakeholders in the interest
of the entire power system and its users. A sound regulatory framework can support them in these
activities.
Future markets and regulatory frameworks should recognize the need and should provide incentives for
possible innovative flexibility levers to be procured and activated on distribution grid level. Different
stakeholders may benefit from these flexibility levers. DSOs may need these services in different
timeframes as alternatives for grid investment (long-term ahead, procured via tender) and/or
conventional operational planning actions (short-term ahead, procured via a (flexibility) market
platform). DSOs will have to gradually increase their network monitoring capacities, as well as their
active involvement in flexibility services.
-
Future regulatory frameworks should set clear rules for the recognition of the costs (both CAPEX and OPEX,
over all timeframes) associated with innovative smart grid solutions, taking into account their interaction
with conventional solutions and the uncertainty on cost recovery.
-
Future regulatory frameworks should continue to safeguard the availability of neutral, secure, cost-
efficient and transparent data and information management on distribution grid level for all concerned
stakeholders.
Future electricity markets will need to take into account the location of system flexibility sources and
their impact on distribution grids.
-
Project FP7- DREAM
Title:
Distributed Renewable resources Exploitation in electric grids through Advanced heterarchical
Management
DREAM is working on an innovative organisational and technological approach for connecting electricity
supply and demand. Heterarchical principles, in which coordination is configurable, are used to coordinate
users, producers and technical/commercial/financial operators to achieve benefits. These are expected to well
exceed the technological investments required to final users. This will be pursued also through the
introduction of a new layer in the energy market, placed at distribution level and allowing for cost-effective
dynamic aggregations of users and local exchange/sales of capabilities (e.g. ancillary services from shed-
able loads or from time-flexible use of electric power), while ensuring integration with upper level national
energy marketplaces and their international interactions..
Cordis web site:
http://cordis.europa.eu/project/rcn/109909_en.html
Project web Site:
http://www.dream-smartgrid.eu/
Important project outcomes include:
-
The intrinsic control capability made available at distribution network level through the innovative
heterarchical paradigm of DREAM, will accommodate for improved real time local balancing of energy
demand and provision, thus limiting the request of voltage and frequency regulation capacity at
transmission and distribution control level.
The net effect of additional local balancing capacity will be reflected into a reduction of network
reinforcement requirements, and thus will increase the allowance for safe management of renewable and
distributed energy resources at the same level of deployed reinforcements.
-
Project FP7-PlanGridEV
561
Fejl! Brug fanen Hjem til at anvende Heading 1 på teksten, der skal vises her.
 kom (2016) 0864 - Ingen titel
1730778_0261.png
Title:
Distribution grid planning and operational principles for electric vehicles mass roll-out while enabling
integration of renewable distributed energy sources.
The increasing number of electric vehicles (EVs) (and their batteries) on the one hand and of distributed
energy sources (DER) on the other, both connected to the low-voltage (LV) and the medium-voltage (MV)
grid, are a major challenge for Distribution System Operators (DSOs) with regard to secure and reliable
energy supply and grid operation. The project developed a planning tool for DSOs which copes with this
new challenge and facilitates the transformation of the grid towards a smart grid (with controllable loads).
With the help of the tool, investment strategies regarding the reinforcement of infrastructures can be
downsized while the service quality and efficiency can be improved at the same time (reduction of peak loads
and increased renewable energy supply). PlanGridEV developed architectures to build smart grids that
support a successful and economical rollout of charging infrastructure. In addition to paving the way into a
new way of mobility these architectures are able to activate new markets where the costumers’ (EV users)
can participate and benefit from (change from costumer to prosumer e.g. by offering battery capacity for grid
stability services).
Cordis web site:
http://cordis.europa.eu/project/rcn/109374_en.html
Project web site:
http://www.plangridev.eu/
Important project outcomes include
-
-
The new planning tool for DSOs: it considers the controllability of the loads (i.e. EVs) with the
(estimated) electricity generation from renewable resources;
Tests with controllable loads DER performed in a large variety of grid constellations have shown that
peak loads could be reduced (up to 50%) and more renewable electricity could be transported over the
grid compared to scenarios with traditional distribution grid scenarios; as a result, critical power supply
situations can be avoided, and grids, consequently, do not call for reinforcement;
Smart grids on LV/MV level require the introduction of more information and communication
technologies (ICT) allowing the exchange of operation data and control schemes between independent
market actors. PlanGridEV outlines changes of the regulatory framework allowing for a new market
design embedded within a roadmap and tangible recommendations for (i) industry, (ii) grid operators
and service providers, (iii) policy makers, and (iv) regulators with the aim that investments in grid
intelligence can be rewarded via modified tariff systems and market borders can be broken down.
-
562
Fejl! Brug fanen Hjem til at anvende Heading 1 på teksten, der skal vises her.