Europaudvalget 2016
KOM (2016) 0864
Offentligt
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EUROPEAN
COMMISSION
Brussels, 30.11.2016
SWD(2016) 410 final
PART 5/5
COMMISSION STAFF WORKING DOCUMENT
IMPACT ASSESSMENT
Accompanying the document
Proposal for a Directive of the European Parliament and of the Council on common
rules for the internal market in electricity (recast)
Proposal for a Regulation of the European Parliament and of the Council on the
electricity market (recast)
Proposal for a Regulation of the European Parliament and of the Council establishing
a European Union Agency for the Cooperation of Energy Regulators (recast)
Proposal for a Regulation of the European Parliament and of the Council on risk
preparedness in the electricity sector
{COM(2016) 861 final}
{SWD(2016) 411 final}
{SWD(2016) 412 final}
{SWD(2016) 413 final}
EN
EN
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TABLE OF CONTENTS
6. DETAILED MEASURES ASSESSED UNDER PROBLEM AREA III: A NEW LEGAL
FRAMEWORK FOR PREVENTING AND MANAGING CRISES SITUATIONS ......... 305
6.1.1. Summary table ............................................................................................................................. 305
6.1.2. Description of the baseline .......................................................................................................... 309
6.1.3. Deficiencies of the current legislation ......................................................................................... 310
6.1.4. Presentation of the options ......................................................................................................... 314
6.1.5. Comparison of the options .......................................................................................................... 326
6.1.6. Subsidiarity................................................................................................................................... 335
6.1.7. Stakeholders' Opinions ................................................................................................................ 336
7. DETAILED MEASURES ASSESSED UNDER PROBLEM AREA 4: THE SLOW
DEPLOYMENT OF NEW SERVICES, LOW LEVELS OF SERVICE AND POOR RETAIL
MARKET PERFORMANCE ................................................................................................. 339
7.1. Addressing energy poverty ......................................................................................................... 341
7.1.1. Summary table ............................................................................................................................. 342
7.1.2. Description of the baseline .......................................................................................................... 344
7.1.3. Deficiencies of the current legislation ......................................................................................... 356
7.1.4. Presentation of the options. ........................................................................................................ 358
7.1.5. Comparison of the options .......................................................................................................... 370
7.1.6. Subsidiarity................................................................................................................................... 395
7.1.7. Stakeholders' Opinions ................................................................................................................ 396
7.2. Phasing out regulated prices ....................................................................................................... 401
7.2.1. Summary table ............................................................................................................................. 402
7.2.2. Description of the baseline .......................................................................................................... 403
7.2.3. Deficiencies of the current legislation ......................................................................................... 404
7.2.4. Presentation of the options ......................................................................................................... 407
7.2.5. Comparison of the options .......................................................................................................... 409
7.2.6. Subsidiarity................................................................................................................................... 448
7.2.7. Stakeholders' opinions ................................................................................................................. 448
7.3. Creating a level playing field for access to data ........................................................................... 453
7.3.1. Summary table ............................................................................................................................. 454
7.3.2. Description of the baseline .......................................................................................................... 455
7.3.3. Deficiencies of the current legislation ......................................................................................... 457
7.3.4. Presentation of the options ......................................................................................................... 457
7.3.5. Comparison of the options .......................................................................................................... 458
7.3.6. Subsidiarity................................................................................................................................... 461
7.3.7. Stakeholders' opinions ................................................................................................................. 461
7.4. Facilitating supplier switching ..................................................................................................... 467
7.4.1. Summary table ............................................................................................................................. 468
7.4.2. Description of the baseline .......................................................................................................... 469
7.4.3. Deficiencies of the current legislation ......................................................................................... 478
7.4.4. Presentation of the options ......................................................................................................... 478
7.4.5. Comparison of the options .......................................................................................................... 479
7.4.6. Subsidiarity................................................................................................................................... 484
7.4.7. Stakeholders' opinions ................................................................................................................. 485
7.5. Comparison tools........................................................................................................................ 489
7.5.1. Summary table ............................................................................................................................. 490
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7.5.2. Description of the baseline .......................................................................................................... 491
7.5.3. Deficiencies of the current legislation ......................................................................................... 496
7.5.4. Presentation of the options ......................................................................................................... 497
7.5.5. Comparison of the options .......................................................................................................... 500
7.5.6. Subsidiarity................................................................................................................................... 509
7.5.7. Stakeholders' opinions ................................................................................................................. 510
7.6. Improving billing information ..................................................................................................... 515
7.6.1. Summary table ............................................................................................................................. 516
7.6.2. Description of the baseline .......................................................................................................... 517
7.6.3. Deficiencies of the current legislation ......................................................................................... 530
7.6.4. Presentation of the options ......................................................................................................... 534
7.6.5. Comparison of the options .......................................................................................................... 535
7.6.6. Subsidiarity................................................................................................................................... 545
7.6.7. Stakeholder's opinions ................................................................................................................. 547
8. DESCRIPTION OF RELEVANT EUROPEAN R&D PROJECTS ............................... 553
304
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6. D
ETAILED MEASURES ASSESSED UNDER
P
ROBLEM
A
REA
III:
A NEW LEGAL FRAMEWORK FOR PREVENTING AND MANAGING CRISES SITUATIONS
6.1.1.
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- Option 1: Common minimum Option 2: Common minimum EU rules plus regional Option 3: Full harmonisation
regulatory
EU rules for prevention and cooperation, building on Option 1
and full decision-making at
approach
crisis management
regional level, building on
Option 2
Rare/extreme risks and This option was Member States to identify and ENTSO-E to identify cross-border electricity crisis scenarios All
rare/extreme
risks
-
-
short-term risks related to disregarded as no assess rare/extreme risks based on caused by rare/extreme risks, in a regional context. Resulting undermining security of supply
security of supply are means
crisis scenarios to be discussed in the Electricity assessed at the EU level, which
for common risk types.
assessed from a national enhanced
Coordination Group.
would be prevailing over
-
perspective.
national assessment.
implementing of
Common methodology to be followed for short-term risk
existing
acquis
assessments (ENTSO-E Seasonal Outlooks and week-ahead
Risk
identification
& nor for enhanced
assessments of the RSCs).
assessment methods differ voluntary
across Member States.
cooperation were
identified
Assessments
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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.
No common approach to
risk
prevention
&
preparation
(e.g.,
no
common rules on how to
tackle cybersecurity risks).
Plans
-
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
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.
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.
-
-
-
-
a)
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).
Crisis management
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.
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.
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Montoring
Monitoring of security of
-
supply predominatly at the
national level.
ECG as a
information
platform.
voluntary
exchange
-
Systematic discussion of ENTSO-
E Seasonal Outlooks in ECG and
follow up of their results by
Member States concerned.
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.
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.
Enhanced role of ECG would provide adequate platform for
discussion and exchange between Member States and
regions.
A European Standard (e.g. for
EENS and LOLE) on Security
of Supply could be developed
to
allow
performance
monitoring of Member States.
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.
Regional plans would ensure
full coherence of actions taken
in a crisis.
Pros
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Lack of cooperation in risk
preparedness and managing
crisis may distort internal
market and put at risk the
security of supply of
neighbouring countries.
Cons
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.
The coordination in the
administrative resources.
regional
context
requires
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.
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6.1.2.
Description of the baseline
In the area of risk prevention and management of crisis situations the current legislation
is scattered over different legal acts.
Regarding
risk assessment and preparedness,
currently Article 4 of the Electricity
Directive obliges Member States to ensure the monitoring of security of supply issues.
Such monitoring should, in particular, cover the balance of supply and demand, the
quality and level of maintenance of the networks, as well as the measures to cover peak
demand and to deal with shortfalls of one or more suppliers. This also includes the
obligation to publish every two years, by 31 July, a report outlining the findings resulting
from the monitoring, as well as any measures taken or envisaged to address them.
Member States should submit the report to the Commission.
Additionally,
ENTSO-E
has the obligation to carry out
seasonal outlooks
(6 month
summer & winter outlooks) as required by Article 8 of the Electricity Regulation. The
assessments, which follow a probabilistic generation adequacy methodology, explore the
main risks identified within a seasonal period and highlighting the possibilities for
neighbouring countries to contribute to the generation/demand balance in critical
situations.
In terms of coordination and exchange of information among Member States, the
Commission created in 2012 the
Electricity Coordination Group
1
in the aftermath of
Fukushima crisis. The Group is a platform for the exchange of information and
coordination of electricity policy measures having a cross-border impact. It also should
facilitate the exchange of information and cooperation on security of electricity supply
including the coordination of action in case of an emergency within the Union.
The legislation on
crisis management
is set by Directive 2005/89/EC (SoS Directive),
Article 42 of the Electricity Directive and, as regards technical issues, the network codes,
in particular by the Network Code on Emergency and Restoration ('NC ER') which is
currently in comitology for approval. In addition, also the CACM Guideline and the
Guideline on System Operation (SO Guideline) set out operational procedures during
crisis situations, in particular on system operation to be implemented by TSOs.
The Electricity Directive
contemplates in its Article 42 the possibility for Member
States to take temporary safeguard measures in the event of a sudden crisis and where the
physical safety or security of persons, apparatus or installation or system integrity is
threatened. Member States are obligated to notify those measures without delay to the
other Member States and the Commission. Any safeguard measures taken by Member
States must "cause
the least possible disturbance in the functioning of the internal market
and must not be wider in scope than is strictly necessary
[...]." In taking safeguard
measures “Member
States shall not discriminate between cross-border contracts and
national contracts"
according to Article 4(3) of the SoS Directive.
1
Commission Decision of 15 November 2012 setting up the Electricity Coordination Group. OJ C353,
17.11.2012, p.2.
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Table 2: Specific provisions in network codes and guidelines governing crisis
prevention and management at the technical level
The
Network Code on Emergency and Restoration ('NC ER')
requires in preparation for emergency
situations that the relevant Regional Security Coordinators (RSCs) ensure consistency of individual TSO
System Defence Plans
2
. This includes inter-TSO information exchange, identification of threats within the
capacity calculation region and identification of incompatibilities of planned measures. During emergency
"each
TSO shall provide through interconnectors any possible assistance"
to its neighbours and to prepare
automatic load-shedding plans to ensure stable system frequency
3
. Concerning suspension of (cross-
border) market activities, TSOs can suspend the provision of cross-zonal capacity and the submission of
balancing bids under the following circumstances
4
: (a) blackout state or imminent risk of a blackout state
after market mechanisms are exhausted; (b) continuing market activities decreases effectiveness of
restoration towards normal/alert state; (c) communication tools of TSO to facilitate market are not
available. It also addresses recovery and settlement of costs related to emergency measures between TSOs
and market participants, subject to assessment through NRAs
5
.
The
Regulation on Capacity Allocation and Congestion Management (CACM)
addresses the firmness
of cross-zonal allocated capacity in case of 'force majeure' or emergency situations. It defines 'force
majeure' as unusual event which has happened, is objectively verifiable, is beyond the control of a TSO and
makes it impossible for the TSOs to fulfil its obligations as set out by the CACM Guideline. According to
Article 72, the event of 'force majeure' allows TSOs to curtail allocated cross-zonal capacity in
coordination with other concerned TSOs. TSOs are further obliged to notify market participants which are
concerned by curtailment, provide compensation and limit both consequences and duration of force
majeure.
The
Guideline on System Operation (SO Guideline)
defines the operational system states of 'normal',
'alert', 'emergency' and 'restoration' in its Article 18. This provides a framework for 'remedial actions' which
are used by the TSOs to manage operational security violations (Art. 20
23) and as an example include
manually controlled load-shedding (Art. 22, paragraph 1(j)). TSOs shall prepare and coordinate their
remedial actions among each other and their RSCs (Art. 21, paragraph 1(b)) and prefer remedial actions
which make available the largest cross-zonal capacity (Art 21, paragraph 2(d)). Moreover, they are obliged
to jointly develop a procedure for sharing costs of remedial actions (Article 76, paragraph 1(b)(v)).
Source: EU legislation
Finally, on
cybersecurity,
NIS Directive provides the horizontal framework to boost the
overall level of network and information security across the EU. It imposes a set of
obligations on Member States as well as on essential service providers - including the
electricity, oil and gas subsectors.
6.1.3.
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
2
3
4
5
6
See Article 6 of NC ER.
See Articles 14 & 15 of NC ER.
See Article 35 of NC ER.
See Article 8 and 39 of NC ER.
See Evaluation of the EU rules on measures to safeguard security of electricity supply and
infrastructure investment (Directive 2005/89/EC).
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the TEN-E 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 and content and rarely take into account cross-border effects.
Diverging perception of risks could lead to different levels of preparedness.
7
8
9
Only ten Member States set clear obligations to draw up risk preparedness plans, whilst eighteen other
Member States do not have such an obligation, but take risk preparedness considerations into account
in reports, plans or measures (source: Risk Preparedness Study).
In addition, Directive 2008/114/EC on the identification and designation of European critical
infrastructures defines the obligation that each identified European Critical Infrastructure needs an
operator security plan (Art. 5) which will be also reflected in the coming System Operation Guideline
(Art. 26). However, these plans focus only on each identified asset and not the electricity system as
whole.
Only nine Member States have direct obligations to carry out a risk assessment; other Member States
are implicitly looking at risks when monitoring the security of electricity supply (source:
Risk
Preparedness Study).
23 Member States define risks to be addressed which vary considerably (source:
Risk Preparedness
Study).
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The evidence shows that national plans
do not look at the impacts beyond the national
borders or simultaneous crisis situations.
There is close cooperation on the level of
TSOs which is not matched by a cooperation of national authorities
10
.
Uncoordinated national measures to ensure the supply in emergency situations may not
be efficient or could have negative effects on neighbouring countries. The lack of
cooperation on the level of national authorities could also lead to diverging actions on
TSO and governmental level (e.g. decision on governmental level on export bans) which
could have detrimental effect on security of electricity supply.
Regarding transparency and information exchange, implementation of
Article 42
of the
Electricity Directive shows that up to now the Commission was only notified of such
measures in few cases (e.g. Poland in 2015
11
), and only ex-post, where there was no
possibility ex-ante to assess their suitability. The current wording of Article 42 is of
rather
general nature
and does
not lead to sufficient cross-border coordination
beforehand.
The Electricity Coordination Group has
limited powers
beyond the exchange of
information. There is no explicit obligation to convoke the group in case of a crisis or
when at least two Member States are in emergency. It is purely a consultative body
without powers to issue recommendations for example on the measures that Member
States could put in place during an emergency.
On
managing crisis situations,
currently Member States predominantly resort to
national measures without sufficient account being taken of their impact on their
neighbours or synergies stemming from a coordinated approach. There are hardly any
cross-border procedures on how Member States should act in crisis situations. However,
with increasingly integrated markets, measures taken by one Member State are highly
probable to affect its neighbours. The cross-border impact is particularly serious and
immediate in case of an actual physical shortage in real time
12
.
10
11
12
There are examples of existing regional co-operation is some regions involving national authorities,
e.g. among the Nordic countries in the framework of NordBER (Nordic Contingency Planning and
Crisis Management Forum) or Pentalateral Energy Forum, however, currently this co-operation is
mainly restricted to the exchange of best practice.
Poland activated a crisis protocol mid-August 2015 allowing TSO to restrict power supplies to large
industrial consumers (load restrictions did not apply however to households and some sensitive
institutions such as hospitals). However, Poland notified the adoption of these measures under Article
42 one month after (mid-September).
Physical shortage arises when it has not been possible to fulfil the given demand, neither by market
transactions in day-ahead and intraday markets nor by balancing activities of the TSO. In this case,
load shedding will be carried out by each TSO to remedy its deficit. After market closure there is no
ambiguity regarding the deficit’s allocation across affected countries –
each TSO knows exactly the
magnitude of its control area’s deficit and consequently
its 'scheduled curtailment'. For exporting
Member States who strive to protect their customers from disconnection, two scenarios may arise: (i)
closing down interconnectors to stop exports altogether or (ii) carry out less-than-scheduled load
shedding in order to reduce export flows. In both cases the national action can have an impact on
cross-border power flows, affecting the neighbours' supply.
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In case of a
simultaneous scarcity situation
in two or more Member States, stopping or
limiting exports to overcome national physical shortage before domestic demand has
been curtailed would directly translate into aggravating supplies to customers in the
neighbouring Member State. The management of interconnectors and the possible spill
over effects of Member States' national actions become particularly relevant when a
concurrent physical energy shortage remains over several days (e.g. due to a heat
wave/cold spell causing a sustained demand spike or when a large number of generation
units is put out of operation). This case of energy shortage is especially exposed to the
risk of intervention with system operation or premature non-market measures by Member
States.
The network codes, i.e. the
draft NC ER, the CACM Guideline and the SO Guideline
are an important step in the harmonisation of technical procedures and interoperatibility
of rules in the EU. However, a
general legislative framework
setting out how Member
States should act and co-operate with each other to prevent and manage electricity crisis
situations
is still missing.
There is still no framework clarifying roles and
responsibilities, aligning national rules, and prescribing co-operation between Member
States to resolve political issues relating to crisis management. As a result, large-scale
electricity crisis situations, as well as situations of a simultaneous crisis, cannot
effectively be resolved (for instance, there is no framework for how to deal with crisis
situations caused by extreme weather conditions, or a fuel shortage; there are no rules on
which consumers should be protected most, how to communicate and intervene at a
political level etc).
Article 4(3) of the SoS Directive does not define clear Dos and Don'ts at the Member
State level even though electricity crisis situations, especially in situations of
simultaneous scarcity, which require political decision and clear rules, roles and
responsibilities. In such situations, the market should be allowed to function as long as
possible and deliver power flows to countries with higher scarcity. Exporting Member
States should not introduce exports bans without restricting national consumers in a
proportionate manner as this would 'export' the scarcity across the borders. The treatment
of interconnection capacity and consequently the way possible load-shedding measures
could be shared across countries is not sufficiently defined. A few Member States
explicitly foresee (potentially unproportioned) export bans in their national legislation
13
and a recent case of export bans in South-Eastern Europe has proven this risk in reality.
On
cybersecurity,
the fragmented approach of the NIS directive could be problematic
for the energy sector, as energy infrastructure is arguably one of the most critical
infrastructures that other sectors - like banking, health and mobility, depend upon to
deliver essential services. Currently, the energy sector consists of both legacy and next
generation technologies. New grid technologies are introducing millions of novel,
intelligent components to the energy sector that communicate in much more advanced
ways (two-way communications, dynamic optimization, and wired and wireless
communications) than in the past. These new components will operate in conjunction
13
One Member State specifically includes a legal provision on export bans in its legislation; eleven more
Member States include forms of export restrictions in national law, TSO regulations or multilateral
agreements (Source: Risk Preparedness Study).
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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 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.
6.1.4.
Presentation of the options
Options
to reinforce coordination between Member States for preventing and
managing crisis situations (Problem Area III)
Table 3: Overview of the Options for Problem Area III
Option 0:
Option 0+:
Option 1:
Option 2:
Option 3:
Baseline scenario
Improved implementation of current legislation without regulatory action at EU level
Common minimum rules to be implemented by Member States
Common minimum rules to be implemented by Member States plus regional cooperation
Full harmonisation and full decision-making at regional level
Option 0: Baseline scenario
Under the baseline scenario, Member States would continue
identifying and addressing
rare/extreme risks and possible crisis situations based on a national approach,
in
accordance with their own national rules and requirements. As a consequence, neither
risks originating across borders, nor possible synergies in preparation for crisis are
sufficiently taken into account.
The recently adopted network codes and guidelines (i.e. The Network Code on
Emergency and Restoration, the Regulation on Capacity Calculation and Congestion
Management and the Guideline on System Operation) bring a certain degree of
harmonisation on how to deal with electricity systems in different states (normal state,
alert state, emergency state, black-out and restoration). This ensures more clarity as
regards how TSOs should act in crisis siuations, and as to how they should co-operate
with one another.
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The innovative tools
14
developed for TSOs in the area of the system security in the last
years, will also contribute to improve monitoring, prediction and managing secure
interconnected power systems preventing, in particular, cascading failures
15
.
However, the TSOs cooperation would be limited to technical-level decisions, and would
be hampered in practice by the absence of a proper framework for national rules and
decisions on how to prepare for and handle electricity crisis situations, in particular in
situations of siumultaneous scarcity. Such political decisions continue to be taken at a
purely national level, in an intransparent manner, without taking account of other
Member States' interests, both in a preparatory phase, and when crisis situations kick in.
Monitoring results would be published bi-annualy without any requirement to coordinate
among each other or develop any risk preparedness plan. Furthermore Member States
would not be obliged to
exchange information
when a possible crisis approaches. A
current mandate of the
Electricity Coordination Group
would also not be sufficient to
act as information exchange platform in crisis situations. This could lead to inefficiencies
when preventing and managing a crisis situation or have negative effects on
neighbouring countries.
On
cybersecurity,
the NIS Directive, aiming at a high common level of network and
information security across the Union, provides the horizontal framework to boost the
overall level of network and information security across the EU on a cross-sectoral and
generic level. However, as the NIS Directive is defining only very generic and high-level
obligations, there is room for a more sectoral approach defining concrete modalities to
ensure a minimum of coordination among Member States and resilience of the
interconnected European electricity grid. Energy infrastructure is arguably one of the
most critical infrastructures that other sectors - like banking, health and mobility- which
depend upon to deliver essential electricity services. Thus it is essential to tackle the
potential risks of a major blackout taking into account coordinated attacks to more than
one Member State and the interconnectivity and the system complexity of the energy
sector.
14
15
ITESLA project (which was financed under FP7) developed methods and tools for the coordinated
operational planning of power transmission systems, to cope with increased uncertainties and
variability of power flows, with fast fluctuations in the power system as a result of the increased share
of resources connected through power electronics, and with increasing cross-border flows. The project
shows that the reliance on risk-based approaches for corrective actions can avoid costly preventive
measures such as re-dispatching or reduced the overall risk of failure.
In addition the AFTER project (which was financed under FP7) also developed tools for TSOs to
increase their capabilities in creating, monitoring and managing secure interconnected electrical power
system infrastructures, being able to survive major failures and to efficiently restore service supply
after major disruptions (http://www.after-project.eu/).
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Table 4: R&D Results
The technical base to produce accurate prediction of rapid fluctuations and prevent cascading failures has
been developed in
ITESLA
through a framework for the exchange dynamic models of power system
elements. It showed that the reliance on risk-based approaches for corrective actions can avoid costly
preventive measures such as re-dispatching or reduced while the overall risk of failure is decreased. This
requires more and more formalised data exchange among TSO's to support the new methods and tools.
AFTER
has developed a framework for electrical power systems vulnerability identification,
defence
and
restoration. It uses a large set of data (big data) coming from on-line monitoring systems available at
TSOs’ control centres. A fundamental outcome of the tool consists in
risk-based ranking list of
contingencies, which can help operators decide where to deploy possible control actions.
SESAME,
developed a comprehensive decision support system to help the main public actors in the power
system, TSOs and Regulators, on their decision making in relation to network planning and investment,
policies and legislation, to address and minimize the impacts (physical, security of supply, and economic)
of power outages in the power system itself, and on all affected energy users, based on the identification,
analysis and resolution of power system vulnerabilities.
Source: European Commission (DG ENER)
Table 5: Innovative Tools for Electrical System Security within Large Areas
(ITESLA)
Project
FP7-ITESLA
Innovative Tools for Electrical System Security within Large Areas
Addressing mainly:
Co-optimisation of interconnection capacity, Regional operational centres
The project developed methods and tools for the coordinated operational planning of power transmission
systems, to cope with increased uncertainties and variability of power flows, with fast fluctuations in the
power system as a result of the increased share of resources connected through power electronics, and with
increasing cross-border flows. The project aims at enhancing cross-border capacity and flexibility while
ensuring a high level of operational security.
Fact Sheet:
http://cordis.europa.eu/project/rcn/101320_en.html
Web Site:
http://www.itesla-project.eu/
Important project outcomes include
-
A platform of tools and methods to assist the cooperation of transmission system operators in dealing
with operational planning from two days ahead to real time, particularly to ensure security of the
system. These tools support the optimisation of security measures, in particular to consider corrective
actions, which only need to be implemented in rare cases that a fault occurs, in addition to preventive
actions which are implemented ahead of time to guarantee security in case of faults. The tools provide
risk-based support for the coordination and optimisation of measures that transmission operators need
to take to ensure system security. The platform also supports "defence and restoration plans" to deal
with exceptional situation where the service is degraded, e.g. after storms, or to restore the service
after a black-out. The platform has been made publicly available as open-source software.
A clarification of the data and data exchanges that are necessary to enable the implementation of these
coordination aspects.
A framework to exchange dynamic models of power system elements including grids, generators and
loads, and a library of such models covering a wide range of resources. These models are essential to
produce accurate prediction of the rapid fluctuations that take place in the power grid after faults, and
to prevent cascading failures.
The tools and models allow reducing the amount of necessary preventive measures. The reliance on
risk-based approaches can avoid or minimise costly preventive measures such as re-dispatching while
the overall risk of failure is decreased.
A set of recommendations to policymakers, regulators, transmission operators and their associations
(jointly with the UMBRELLA project). These foster the harmonisation of legal, regulatory and
-
-
-
-
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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.
Source: European Commission (DG ENER)
Option 0+: Non-regulatory approach
As current legislative framework established by the SoS Directive set general principles
rather than requires Member States to take concrete measures, better implementation and
enforcement actions will be of no avail.
In fact, as the progress report of 2010 shows
16
, the SoS Directive has been implemented
across Europe, but such implementation did not result in better co-ordinated or clearer
national policies regarding risk preparedness.
The recently adopted network codes and guidelines offer some improvements at the
technical level, but do not address the main problems identified.
In addition, today voluntary cooperation in prevention and crisis management is scarce
across Europe and where it takes place at all, it is often limited to cooperation at the level
of TSOs. It is true that certain Member States collaborate on a voluntary basis in order to
addresss certain of the problems identified (e.g. Nord-BER, PLEF). However, these
initiatives have different levels of ambition and effectiveness, and they geografically
cover only part of the EU electricity market. Therefore, voluntary cooperation will not be
an effective tool to solve the problems identified timely and in the whole EU.
Option 1: Common minimum rules to be implemented by Member States
Assessments and plans
Under Option 1 Member States would be obliged to develop
national
Risk Preparedness
Plans ('Plan') with the aim to prevent or better manage the electricity crisis. The Plan
should respect minimum common requirements and include a
risk assessment
of the
most relevant crisis scenarios originated by rare/extreme risks. For that purpose, at least
the following types of risks could be considered: a) rare/extreme natural hazards
17
, b)
16
17
Report on the progress concerning measures to safeguard security of electricity supply and
infrastructure investment
COM (2010) 330 final.
Extreme weather events are likely to affect the power supply in various ways: (i) thermal generation is
threatened by lack of cooling water (as shown e.g. in summer 2015 at the French nuclear power
stations Bugey, St. Alban and Golfech); (ii) heat waves cause high demand of air conditioning (which
e.g. resulted in price peaks in Spain in late July 2015 when occurring in parallel with low wind
output); (iii) heat waves affect grid performance in various ways, e.g. moisture accumulating in
transformers (which e.g. lead to blackouts in France on June 30
th
2015) or line overheating (leading to
declaration of emergency state by the Czech grid operator CEPS on July 25
th
in 2006) (source: S&P
Global, Platts:
European Power Daily,
Vol. 18, Issue 123).
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accidental hazards which go beyond N-1, c) consequential hazards such as fuel
shortage
18
, d) malicious attacks (terrorist attacks, cyberattacks).
The Plans would need to respect a set of minimum requirements, namely how Member
States
would prepare for crisis situations
and how they should
deal with the identified
crisis
scenarios. Preparatory measures could include, e.g. training for all staff involved in
crisis management and regular simulations of crisis. Risk preparedness plans should
further include how to prevent and manage cyber-attack situations which would be one of
the risks to be covered by the plans. This will be combined with a soft guidance on
cybersecurity in the energy sector based on NIS Directive.
Plans should be adopted by relevant governments
/ ministries, following an inclusive
process, and (at least some parts of the Plans) should be rendered public. Plans should be
updated on a regular basis
(e.g., every three years, unless major incidents or market
developments require an earlier update). For the purpose of consultation, Plans should be
submitted to other Member States and the Commission.
The main benefit this option would bring is better preparedness, due to the fact that a
common approach is followed across Europe, thus excluding the risk that some Member
States 'under-prepare'. In addition, better preparedness, transparency and clear rules on
crisis management are likely to reduce the chances of premature market intervention.
Crisis management
To ensure transparency and information exchange, Member States would be obliged to
inform
immediately in situations of "early
warning"
or "crisis"
their neighbours and
the European Commission to provide them with all the necessary information, in
particular on the actions they intend to take.
"Early
warning"
could be defined as the state where there is concrete, serious and
reliable information that an event may occur which is likely to result in significant
deterioration of the supply situation and is likely to lead to a crisis level. While "crisis"
could be defined as the event of significant deterioration of electricity supply over a time
span lasting long enough to give room for political action and when all relevant market
measures have been implemented but the supply is insufficient to meet the remaining
demand
19
.
18
19
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).
In most of the cases the declaration of "crisis" by the national authorities will coincide with the
"emergency
state"
of the transmission system as severe technical problems could lead to the
"exceptional
situation".
But in very extreme or rare cases where situations demand political decisions
and are not solely limited to system operation in real time (e.g. fuel supply scarcity, energy shortage
for longer time periods) the government could decide to declare emergency - without necessary being
in "emergency
state"-
with the aim to take safeguard measures (non-market based measures).
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Under this option, the Commission could also set out legal principles governing
crisis
management.
This will replace the current Article 42 of the Electricity Directive, which
allows Member States to take 'safeguard measures' in situations of a sudden crisis and
when security of persons or equipment is threatened. When dealing with emergency
Member States should respect three basic rules:
- 'Market comes first':
Non-market measures should be introduced only once market
measures cannot tackle the situation. Measures should not unduly distort functioning of
the market. They should be introduced only temporary and on the basis of an objective
trigger described in the Plans. In particular, market rules on cross-border trade need to be
respected
20
.
- 'Duty to offer assistance':
In case crisis arises, Member States should react in a spirit of
good cooperation and solidarity
21
. Practical arrangements regarding cooperation and
solidarity measures shall be established in advance by Member States and be reflected in
the risk preparedness plans.
- 'Transparency and information exchange':
Member States should ensure transparency
of the actions taken from the moment that there are serious indications of a crisis and
during a crisis. This should be ensured through the regional part of the risk preparedness
plans and through informing neighbours and the Commission in case of declaration of
'early warning' or 'crisis'.
By imposing obligations to co-operate and lend assistance, Member States are also less
likely to 'over-protect' themselves against possible crisis situations, which in turn will
contribute to more security of supply at a lesser cost.
Monitoring
In order to anticipate and mitigate potential upcoming crisis, under Option 1 Member
States would be obliged to take into account the
results of the ENTSO-E seasonal
assessments
(winter & summer outlooks). Member States should take measures
accordingly, if there are serious indications that they could be in a predefined crisis
situation (i.e. in an 'early warning' situation), as well as in a situation of crisis.
Option 2: Common minimum rules to be implemented by Member States plus
regional co-operation
Assessments and plans
Option 2 would be built on Option 1 adding rules and tools facilitating cross-border
cooperation in a regional and Union wide context.
20
21
Rules on cross-border capacity allocation are set out in the CACM Guideline. Its Article 72 allows
TSOs to curtail allocated cross-zonal capacity in the event of 'force majeure'.
At TSO level, providing cross-border assistance through the available interconnectors is provided for
in Article 12 of the draft Network Code on Emergency and Restoration.
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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
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.
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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 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
22
23
24
For cases of crisis, in particular simultaneous scarcity, also ENTSO-E sees a need for "not
only on a
technical level but political cooperation"
and plans which "should cover extreme crisis situations
beyond the measures provided by e.g. network codes and RSCs services" (s.
ENTSO-E
recommendations to the regulatory framework on risk preparedness (WS5)
(2016), ENTSO-E,
document in the process of publication).
Unlike sudden power outages, an energy shortage could be (i) anticipated e.g. several days in advance
and (ii) last over a period of several days. Therefore, decision making on customer disconnection, rota
plans etc. is likely to not only affect TSOs, but also involve Member States. A good example of a rota
plan
is
the
"Electricity
Supply
Emergency
Code"
of
the
UK:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/396424/revised_esec_ja
nuary_2015.pdf
One example of a load shedding plan prioritizing regions is the Belgian "Plan
de délestage en cas de
pénurie d'électricité"
http://economie.fgov.be/fr/penurie_electricite/plan-delestage/#.VpTd2v7luUk
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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' energy scarcity to neighbouring markets Member States should also allow for
domestic load shedding to be carried out by their TSOs according to schedules. Any rules
on protected customers should not lead to unjustified over-protection of a too high share
of national customers
25
.
25
As already existing in many Member States today, Member States can introduce rules on customer
categorization to prioritize customers in case of load shedding. Such rules on protected customers
should take into account national and local specifics, but respect harmonized principles.
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Graph 1: Distribution of system stress hours by Member States over fifty years of
historical demand data
Stress hours are defined as hours of extremely high demand. The graph shows the 150 hours per Member
State of the highest demand in the historical period of fifty years (1960-2010). The intensity of the colour
indicates the intensity of demand (red means super peaks of demand). Rows indicate Member States.
Columns indicate the respective historical years.
Source: METIS
Graph 2: Distribution of prices at VoLL in the context of a well-integrated market
by Member States over fifty years of historical demand data
As result of better integration of the markets the stress hours would decrease and be concentrated in periods
affecting simultaneously several Member States.
During these stress hours the price becomes equal to VoLL.
Source: METIS
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Table 7: Best practice example of TSO agreements of Nordel
The Nordic TSOs pre-agreed on certain procedures to be taken in crisis situations (s. Apendix 9 of Nordel
System Operation Agreement 3 (5)). In
Power Shortages,
it demands information of the other TSOs as
quickly as possible and forbids that prearranged trading between players can be changed. In
Critical Power
Shortages
and after all manual balancing reserve (i.e. available generation capacity) has been exhausted, it
sets out a procedure for load shedding without a commercial agreement. After the subsystem with the
greatest physical deficit has started load shedding and two or more subsistems have an equally large deficit,
load shedding is distributed thereafter between those subsystems
26
.
Source: Nordel System Operation Agreement 1 (5), Appendix 9
Monitoring
Building on Option 1, ENTSO-E would carry out seasonal assessments, which would
need to be further improved via the introduction of a
common methodology,
to be
developed by ENTSO-E on the basis of criteria set out in EU legislation. This could be a
probabilistic methodology that should take into account uncertainties of input variables
(e.g. probability of transmission capacity outage, of severe weather conditions, of
unplanned outage of power plants, variability of demand, etc.). The methodology would
also indicate the probability of a critical situation actually occuring and of low level of
cross-border capacity. This methodology should be used not only for seasonal outlooks
but also for weekly risk assessments by RSCs.
This option also contemplates the
reinforcement of tasks and powers of the Electricity
Coordination Group
with a view to ensure transparency and wide discussion between
Member States in the preventive phase and after declaration of early warning/crisis. In
particular, the Group would be the forum for the discussion of the draft plans and the
measures that Members States foresee to implement based on the results of the seasonal
outlooks. The Group could also play a role in the assessment of measures adopted by
Member States in early warning/crisis. More generally, the Group could be given
concrete tasks to discuss policies in the area of security of supply, for instance, through
regular discussions on the basis of ENTSO-E adequacy outlooks. It could issue
recommendations and develop best practice. The reinforced role would enhance the
coordination of measures and ensure more uniformity and coherent plans. Overall, the
reinforcement of tasks and powers of the Electricity Coordination Group would
contribute to enhance cooperation and to build trust and confidence among Member
States.
In addition to the obligation to notify immediately the declaration of early warning or
crisis and provide Member States concerned and the Commisison with all relevant
information, under Option 2 Member States would be obligated to carry out
an ex-post
evaluation.
The evaluation should be submitted to the Commission at the latest six
weeks after the lifting of early warning or crisis. The assessments should be presented by
the Member States concerned at the Electricity Coordination Group.
26
That agreements similar to the Nordic TSOs could be a best practice also for the system of continental
Europe as it mentioned by the Dutch TSO TenneT to the public consultation. It recommends to have
common rules and definitions and defining allowed measures on different levels of criticality, as
security of electricity supply is becoming an issue of reginal rather than national importance.
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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 energy non served (EENS) expressed in GWh/year and loss of load expectation
(LOLE) expressed in hours/year. ENTSO-E would conduct the security of supply
performance measurements based on the indicators on annual basis, at the occasion of the
adequacy assessment outlook. The introduction of security of supply indicators to assess
how well Member States perform in the area of security of supply would enhance
comparability and mutual trust in neighbours.
Option 3: Full harmonisation and full decision-making at regional level
Assessments and plans
Built on Option 2, under Option 3 the assessment of rare and extreme risks would be
carried out at EU level, which would prevail over national assessments.
The
risk preparedness plans
would be developed on
regional level
27
. In each region the
Member States would need to agree on one risk preparedness plan which would address
the most relevant risks in each region. The list of measures to mitigate the risks should be
developed on and co-ordinated at the regional level by the ROCs. This would allow a
harmonised response to potential crisis situation in each region.
Even though the regional plans would ensure full coherence of actions ahead and in
particular in a crisis, it would be difficult that all national specificities could be addressed
through regional plans.
On
cybersecurity
Option 3 would go one step further and nominate a dedicated body
(agency) to deal with cybersecurity in the energy sector. This would guarantee full
harmonisation on risk preparedness, communication, coordination and a coordinated
cross-border reaction on cyber-incidents.
Crisis management
Regarding
crisis management,
under Option 3 crisis would have to be managed
according to the regional plans agreed among Member States. The Commission would
determine the key elements of the regional plans such as: commonly agreed regional
load-shedding plans, rules on customer categorisation, a harmonised definition of
'protected customers' (high priority grid users) at regional level or specific rules on crisis
information exchanges in the region. Under Option 3, the Commission would also create
a
detailed 'emergency rulebook'
with an exhaustive list of measures that can be taken
by Member States and TSOs in crisis situations.
27
The results of the public consultation showed that only few stakeholders were in favour of regional or
EU wide plans. Some stakeholders mentioned the possibility to have plans on all three levels (national,
regional and EU), e.g. see the answers of Latvian government, EDSO, GEODE, Europex.
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Monitoring
The seasonal outlooks carried out by the ENTSO-E and ROCs would include a proposal
of ROCs for each reagion of measures to mitigate the risks identified. Member States
would be obligated to implement them.
In order to also harmonize monitoring practices on a European level and ensure full
consistency, a European standard (e.g. for EENS and LOLE) on Security of Supply could
be developed and fixed (e.g. determined value to be fulfilled by all Member States)
which could be used to monitor the Member State performance.
6.1.5.
Comparison of the options
Option 1 (Common minimum rules to be implemented by Member States)
Contribution to the policy objectives
Under this option, Member States would be required to draw up risk preparedness plans,
built on common elements, and to respect certain common minimum rules when
managing crisis situations.
The main benefit this option would bring is better preparedness, due to the fact that a
common approach is followed across Europe, thus excluding the risk that some Member
States 'under-prepare'. In addition, better preparedness, transparency and clear rules on
crisis management are likely to reduce the chances of premature market intervention.
By imposing obligations to co-operate and lend assistance, Member States are also less
likely to 'over-protect' themselves against possible crisis situations, which in turn will
contribute to more security of supply at a lesser cost.
Economic Impacts
Overall, the policy tools proposed under this option should have positive effects. Putting
in place a more common approach to crisis prevention and management would not entail
additional costs for businesses and consumers. It would, by contrast, bring clear benefits
to them.
First, a more common approach would help better prevent blackout situations, which are
extremely costly. The immense costs of large-scale blackouts provide an indication of
potential benefits of improved preparation and prevention
28
.
28
Previous blackouts in Europe had severe consequences. For example, the blackout in Italy in
September 2003 resulted in a power disruption for several hours affecting about 55 million people in
Italy and neighbouring countries and causing around 1.2 billion euros worth of damage. (source:
The
costs of blackouts in Europe
(2016), EC CORDIS:
http://cordis.europa.eu/news/rcn/132674_en.html).
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Table 8: Overview over most severe blackouts in Europe
Number of end-
Duration,
Country & year
consumers
energy not
interrupted
served
0.86 million
2.1 hours,
Sweden/Denmark,
(Sweden);
18 GWh
2003
2.4 million
(Denmark)
2 days–2 weeks,
France, 1999
1.4 - 3.5 million
400 GWh
Italy/Switzerland,
55 million
18 hours
2003
1 day
5 weeks,
Sweden, 2005
0.7 million
11 GWh
Less than
Central Europe, 2006
45 million
2 hours
Estimated costs to
whole society
EUR 145
180 million
EUR 11.5 billion
EUR 400 million
Source: SESAME: Securing the European Electricity Supply Against Malicious and Accidental Threats
A more common approach to emergency handling, with an obligation for Member States
to help each other, would help to avoid or limit the effects of potential blackouts. A more
common approach, with clear obligations to e.g., follow up on the results of seasonal
outlooks, would also reduce the costs of remedial actions TSOs have to face today
29
.
This, in turn, should have a positive effect on costs overall.
In addition, improving transparency and information exchange would facilitate
coordination, leading to a more efficient and less costly measures.
By ensuring that electricity markets operate as long as possible also in stress situations,
cost-efficient measures to prevent and resolve crisis are prioritized.
The overall impact of the Commission Recommendations on cybersecurity for the energy
sector can be very broad, given the voluntary nature of this approach. If fully followed by
all Member States, the same impacts as in Option 2 should be considered. If only
partially considered by Member States, the average administrative cost would be rather
low.
Who should be affected and how
Option 1 is expected to have a positive effect on society at large and electricity
consumers in particular, since it helps prevent crisis situations and avoid unnecessary cut-
offs. Given the nature of the measures proposed, no major other impact on market
participants and consumers is expected.
29
The example of the Summer Outlook 2016 for Poland involves the following remedial actions to
prevent emergency situations: (i) switching measures of the respective TSOs PSE and 50Hertz, as well
as (ii) rescheduling of DC loop flows involving DE, DK, SE, PL, (iii) bilateral re-dispatch between DE
and PL and (iv) multilateral re-dispatch additionally involving e.g. AT, CH. Out of those, (i) and (ii)
are non-costly measures whereas re-dispatch induces significant costs.
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On cybersecurity, given the voluntary approach of this option, several stakeholders
(TSOs, DSOs, generators, suppliers and aggregators) could be affected. However, the
impact is estimated limited as the costs of cybersecurity for regulated entities merely
need to get considered and taken into account by the regulatory authority. Thus, the
TSOs and DSOs affected could recover their costs via grid tariffs. In that case, the pass
through of costs would have an impact on consumers that could see a slightly increased
in the final prices of electricity.
Impact on business and public administration
The preparation of risk preparedness plans as well as the increased transparency and
information exchange in crisis management imply a certain administrative effort
30
.
However, the impact in terms of administrative impact would remain low, as currently
Member States already assess risks relating to security of supply, and all have plans in
place for dealing with electricity crisis situations
31
.
In addition, it is foreseen to withdraw the current legal obligation for Member States to
draw up reports monitoring security of supply
32
, as such reporting obligation will no
longer be necessary where national plans reflect a common approach and are made
transparent. This would reduce administrative impacts.
Option 2 (Common minimum rules to be implemented by Member States plus
regional co-operation)
Contribution to the policy objectives
Option 2 build on Option 1, but adds the dimension of regional (and some) EU-level co-
operation. In particular, it requires Member States to pre-agree on certain aspects of the
Risk Preparedness Plans (notably on how to deal with situations of a simultaneous
electricity crisis). It also calls for a more systematic assessment of rare/ extreme risks at
the regional level. Given the interlinked nature of EU's electricity systems, enhanced
regional co-operation brings clear benefits when it comes to preventing and managing
crisis situations.
The regional approach in the identification of the crisis scenarios ensures a common
strategy to minimise impacts of possible crisis, focus in particular on correlated risks and
on risks that could affect simultaneously several Member States. This would significantly
improve level of preparedness at national, regional and EU level, as the cross-border
considerations are duly taken into account since the beginning. The regional coordination
of plans would build trust between Member States which is crucial in times of crisis. The
30
31
32
Administrative costs are defined as the costs incurred by enterprises, the voluntary sector, public
authorities and citizens in meeting legal obligations to provide information on their action or
production, either to public authorities or to private parties.
All twenty-eight Member States have a general obligation to monitor the security of electricity supply
from which implicitly follows the obligation to assess electricity supply risks, while nine countries
have a direct legal obligation to carry out an assessment of these risks. (Source:
Risk Preparedness
Study).
Article 4 of the Electricity Directive; Article 7 of the Electricity SoS Directive.
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harmonised approach via Network Codes/Guidelines would also ensure a minimum level
of harmonization for cybersecurity in the energy sector throughout the EU.
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.
33
34
"METIS
Study S16: Weather-driven revenue uncertainty for power producers and ways to mitigate it",
Artelys (2016).
Even though periods with very low temperature occur rarely (9C difference between the 50 year worst
case and the 1% centile) countries can face high demand peaks (e.g. Nordic countries and France)
mainly due to the high consumption for the electric heating. As example, the additional demand for the
50 years peak compared to the annual peak demand is 23% for France, 18% for Sweden and 17.3% for
Finland.
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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, 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
35
36
"METIS
Study S04: Stakes of a common approach for generation and system adequacy",
Artelys
(2016).
ENTSO-E 2030 v1: vision for 2030 "Slowest progress". The perspective of Vision 1 is a scenario
where no common European decision regarding how to reach the CO2-emission reductions has been
reached. Each country has its own policy and methodology for CO2, RES and system adequacy.
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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.
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
37
38
39
"Benefits of an Integrated European Energy Market (2013)",
BOOZ&CO.
Insurance as a risk management instrument for energy infrastructure security and resilience
(2013),
U.S. Department of Energy:
http://www.bloomberg.com/news/articles/2012-02-01/cyber-attack-on-u-
s-power-grid-seen-leaving-millions-in-dark-for-months.
Insurance as a risk management instrument for energy infrastructure security and resilience"
(2013),
U.S. Department of Energy:
http://www.bloomberg.com/news/articles/2012-02-01/cyber-attack-on-u-
s-power-grid-seen-leaving-millions-in-dark-for-months.
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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, 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
40
The Nordic TSOs, regulators and energy authorities cooperate through
NordBER,
the Nordic
Contingency and Crisis Management Forum. This includes information exchange and joint working
groups and contingency planning for the overall Nordic power sector as a supplement to the national
emergency work and TSO cooperation (www.nordber.org).
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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 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
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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 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.
41
SWD(2013) 32 final.
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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
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.
6.1.6.
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.
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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.
6.1.7.
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
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.
42
See:
Towards a New Energy Market Design
(June 2016), Werner Langen, European Parliament,
paragraph 68.
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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 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.
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7. D
ETAILED MEASURES ASSESSED UNDER
P
ROBLEM
A
REA
4:
THE SLOW DEPLOYMENT
OF NEW SERVICES
,
LOW LEVELS OF SERVICE AND POOR RETAIL MARKET PERFORMANCE
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7.1. Addressing energy poverty
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7.1.1.
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 poverty Option 0+: EU Observatory of Energy
-
-
(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
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Standardised energy poverty concept and
metric which enables monitoring of
energy poverty at EU level.
-
Equip Member States with the tools to
reduce disconnections.
Cons
-
Existing shortcomings of the legislation
-
Insufficient to address the
-
New legislative proposal necessary.
-
New legislative proposal necessary.
are not addressed: lack of clarity of the
shortcomings of the current
-
Administrative costs.
-
Higher 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.
solutions can be found for heatwave (drink water; staying indoors). We are aware that in some MS the housing stock is not prepared for heatwaves and houses are overheated. However,
this may be better assessed at Member State level.
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7.1.2.
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
344
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Insight_E identifies high energy bills, low income and poor energy efficiency as the main
drivers of energy poverty
52
.
Figure 1: Drivers of energy poverty
HIGH
ENERGY
BILLS
Indicators:
-
Energy consumption
(type)*
-
Type
of
heating
system & share of
central heating*
Indicators:
-
Income
-
Energy prices*
-
Energy
consumption
(level)
ENERGY
AFFORDABILITY
ENERGY
USE
PATTERNS
ENERGY
POVERTY
LOW
INCOME
POOR
ENERGY
EFFICIENCY
HOUSING
PATTERNS
Indicators:
-
Tenure system*
-
Housing
characteristics*
* :
exogenous
Source: Insight_E (2015)
Looking at the drivers, it is likely that energy poverty impacts low-income households
with higher energy needs. Eurostat publishes the number of households who felt unable
to keep warm during winter. This indicator is widely used in the literature as a proxy
indicator of energy poverty. In 2014, around 10% of the EU population was not able to
keep their home adequately warm
53
(see Figure below).
52
53
advice to the European Commission on the topics of consumer vulnerability and energy poverty.
Industry, consumer associations, regulators and Member States representatives are members of the
group.
Energy poverty and vulnerable consumers in the energy sector across the EU: analysis of policies and
measures.
(2015). Insight_E.
The indicator is measured as part of the Eurostat Survey on Income and Living Conditions (EU-SILC).
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Figure 2: Percentage of all households and households in poverty that consider they
are unable to keep warm
Source: Eurostat
SILC indicators (Inability to keep home adequately warm - Code: ilc_mdes01)
Evidence suggests that energy poverty is increasing in Europe. In recent years, energy
prices have risen faster than household disposable income
54
, which has been particularly
problematic for low-income households, who depending on their individual
circumstances, may have had to under-heat their homes, reduce consumption on other
essential goods and services or get into debt to meet their energy needs
55
.
Data from Member States on household energy consumption shows that the poorest
households have seen their share of disposable income spent on gas, electricity and other
fuels used for domestic use
56
increased more than middle-income households. The Figure
below presents the EU share of household expenditure on domestic energy between 2000
and 2014.
54
55
56
Source: Eurostat (Electricity prices for domestic consumers; Gas prices for domestic consumers;
disposable income of households per capita; period 2010
2014).
Working Paper on Energy Poverty.
2016. Vulnerable Consumer Working Group.
Domestic use refers to heating, lighting and powering appliances.
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Figure 3: EU average - share of households' budget spent on domestic energy
services
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
9%
6%
5%
6%
Poorest households
Middle income households
Source: National Statistical Authorities of EU Member States; VCWG (2016)
In 2014, expenditure on energy services for the poorest households in the EU increased
by 50%, reaching almost 9% of their total budget.
Preliminary analysis for the upcoming Energy Price and Cost Report indicates that in
most of the EU Member States the share of energy in total expenditure grew faster in the
lowest income quintile than in the third quintile, implying that increasing energy costs
impacted poorer households more significantly than those on middle income. For
instance, the EU average spending for households in the lowest income quintile on
electricity and gas increased by 24% in real terms. As a comparison, middle income
households saw their domestic energy expenditure increase by 18% in real terms.
The lack of affordability of domestic energy services, which can be understood as a
proxy for energy poverty, can have serious consequences on households' well-being.
The Marmot Review highlighted the strong relationship between colder homes, Excess
Winter Deaths (EWDs) and increased incidence of other health problems. The review
found that 22% of EWDs in the UK could be attributed to cold housing. Healy
57
found
that countries with the poorest housing (Portugal, Greece, Ireland, the UK) show the
highest excess winter mortality.
The Figure below presents EWD
58
for the EU Member States in 2014. The Figure shows
that deaths in winter are significantly higher than during the rest of the year, particular
for some Member States.
57
58
Excess winter mortality in Europe: a cross country analysis identifying key risk factors.
(2003). Healy.
Excess Winter Deaths
=
winter
death (December
March)- 0.5Non-winter deaths (August
November, April
July�½ / (average of non-winter deaths)
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Figure 4: Excess Winter Deaths
2014
Source: EU Buildings Database (BPIE)
In addition to the negative impacts on health, energy poverty can result in high level of
indebtedness or even disconnection. At the EU level, energy poverty risks excluding
some consumers from the energy transition, preventing them from enjoying the benefits
of the IEM.
The issue of energy poverty or lack of affordability of domestic energy services is likely
to remain relevant. In a scenario where energy prices follow GDP growth while wages,
especially for low-income workers remain flat, the gap between household income and
energy prices will widen and energy poverty is likely to increase. There are two main
channels through which wages for low-skilled workers may be supressed:
-
Automation: routine tasks which are usually carried out by low-skilled workers
can be automated as technology allows. As the cost of technology falls, low-
skilled wages may be supressed to compete with capital
59
.
Skill-bias innovation: modern economics rely on a more educated workforce. As
demand for skilled individuals increases, it decreases the demand for unskilled
workers and their wages
60
-
These effects combined are likely to supress wages, making affordability of energy
services more difficult for low-income households and, as a result, increase the number
of households in energy poverty.
Disconnection safeguards: protecting energy poor and vulnerable consumers
59
60
Unemployment and Innovation,
No 20670, NBER Working Papers. 2014. Stiglitz.
"Skills,
Tasks and Technologies: Implications for employment and earnings",
No 16082, NBER
Working Papers. 2010. Acemoglu and Autor.
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The evaluation identified that given the rising levels of energy poverty. Member States
may have been discouraged to phase out regulated prices. Regulated prices, however,
have negative implications on consumers, hindering competition and innovation
61
.
The evaluation recommended that any future legislative change could look into
reinforcing EU assistance on energy poverty proposing appropriate tools for addressing
energy poverty which support Member States' efforts to phase-out regulated prices
62
.
Article 3 of the Electricity Directive
63
and Gas Directive
64
markets reinforces the role of
consumer protection and the additional need for protection of vulnerable consumers
through particular measures, referring to the prohibition of electricity (and gas) in critical
times as one option.
Disconnections in electricity or gas supply to residential households typically arise out of
non-payment and can become especially problematic for households struggling to keep
up with their bills. In addition, there may be a disproportionately negative impact on
households with children or elderly residents in terms of health, education, etc.
In what follows, we provide an overview of the number of households being
disconnected and the main disconnection safeguards applied by Member States.
Overview of electricity and gas disconnections in the EU
Disconnection rates vary significantly across Member States. Figure 5 indicates that the
higher the disconnection level, as can be expected, the higher the arrears on utility bills
65
,
which increases when the income falls below 60% of the median income. Similar
disconnection levels (Malta, Denmark, France, and Austria) exhibit similar levels of
arrears on utility bills. However, there are some exceptions: UK, Lithuania, Belgium and
Luxembourg have relatively high arrears and low disconnection rates.
61
62
63
64
65
A detail description of the negative impacts of regulated prices and the Member States currently
applying some kind of price regulation mechanism is included in Annex on Price Regulation
All energy consumers explicitly have a number of rights including a right to an electricity connection,
choice of and ability to switch supplier, clear contract information and right of withdrawal, and
accurate information and billing on energy consumption, vulnerable customers should receive specific
protection measures to ensure adequate protection.
“Member
States shall take appropriate measures to protect final customers, and shall, in particular,
ensure that there are adequate safeguards to protect vulnerable customers. In this context, each
Member State shall define the concept of vulnerable customers which may refer to energy poverty and,
inter alia, to the prohibition of disconnection of electricity to such customers in critical times. Member
States shall ensure that rights and obligations linked to vulnerable customers are applied. In
particular, they shall take measures to protect final customers in remote areas.”
Directive 2009/73/EC of the European Parliament and the Council of 13 July 2009 concerning
common rules for the internal market in natural gas and repealing Directive 2003/55/EC (OJ L 211,
14.8.2009, p. 94).
Eurostat EU-SILC 2014
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Figure 5: Share of customers with electricity disconnections, gas disconnection, and
share of population in arrears on utility bills
Source: Insight_E (Forthcoming); Data: Eurostat; CEER National Indicators Database 2015
The rate of electricity disconnections, where the data is available, is highest across the
southern European Member States that have arguably been hardest hit by recessionary
effects of the recent economic downturn
66
. In fact, in those Member States, households
exhibit the highest shares of debt on utility bills.
In terms of gas disconnections, where the data was reported, Portugal, Italy, Greece and
Hungary exhibit the highest levels of gas disconnections followed by France, Spain,
Poland, Austria, Germany and Slovakia.
Disconnection safeguards: a classification of measures
Disconnection safeguards represent one of the measures that Member States implement
to protect energy consumers. These measures ensure consumers have a continuous
supply of energy. Such safeguards can be applied to the entire customer base or to
specific groups, such as vulnerable consumers.
Disconnection safeguards can be grouped into four key measures, which can take the
form of direct protection measures, such as disconnection prohibitions, and / or other
66
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to protect vulnerable consumers in the energy sector: an assessment of disconnection
safeguards, social tariffs and financial transfers".
Forthcoming publication. Insight_E.
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complementary associated measures such as debt management, and customer
engagement. See Table below
67
.
Table 1: Summary of disconnection safeguards
Measure
Disconnection
prohibition
Debt management
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
Customer
supplier and the customer, where either the customer contacts the energy supplier for
engagement
assistance or the energy supplier is required to engage with the customer before
commencing the actual disconnection.
Source: Insight_E (Forthcoming)
Member States use a combination of these measures to prevent consumers from
disconnection. A summary of those is reported in Table 2.
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to protect vulnerable consumers in the energy sector: an assessment of disconnection
safeguards, social tariffs and financial transfers".
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Table 2: Disconnection protection safeguards by Member States
Measures
Focus
All consumers
AT
BE
BG
CY
CZ
DE
DK
EE
ES
FI
FR
GR
HR
HU
IE
IT
LT
LV
LU
MT
NL
PL
EG
PT
RO
SE
SK
SI
UK
year-round measures
Disconnection prohibition
Vulnerable consumers/low
income/socio-demographic
Consumers with (or at risk
of) medical conditions
Services (such as public
lighting, hospitals and
transport)
Unemployed consumers
Under bill dispute
settlement
E
E
EG
EG
EG
EG
EG
EG
E
E
EG
E
EG
EG
EG
EG
E
EG
E
E
EG
EG
EG
E
E
EG
EG
EG
EG
E
Seasonal measures
(Winter or certain days
of the week)
All consumers
EG
EG
E
Vulnerable consumers/low
income/socio-demographic
Consumers with (or at risk
of) medical conditions
LV
Debt management
LV
Prepaid meters
LV
Customer engagement
Elec Discon per 1000
customers
Prepaid meters per 1000
customers
LV
LV
L
LV
L
LV
LV
L
L
LV
LV
EG
EG
EG
EG
EG
EG
EG
E
EG
EG
L
V
EG
L
EG
L
L
L
L
L
L
L
L
L
Complementary
measures
L
L
L
L
L
L
L
LV
LV
L
L
L
LV
L
V
Statistics
9.1
1.5
55.1
7.5
10.0
23.0
10.0
32.6
6.3
3.6
40.0
1.8
3.0
10.0
20.0
56.1
14.0
0.0
1.4
46.0
0.0
0.4
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
15.1
0.0
0.0
12.0
E
electricity
G
gas
L
legislated
V
voluntary
Source: CEER National Indicators Database 2015, INSIGHT_E Country Reports 2015
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Disconnection safeguards - disconnection prohibition
Disconnection prohibitions are non-financial measures where moratoriums on
disconnections are declared, often for specific customer groups or for specific time
periods. These include measures that forbid disconnection to all customers or a target
group, or measures that allow disconnection only after certain stringent steps have been
taken. Prohibition can apply at particular times of the year (e.g., Winter), target particular
socio-demographic characteristics (e.g., either defined through the official definition for
“vulnerable consumer” or target households with elderly or children), where this would
have a negative impact on health, to customers in a legitimate complaint process, or to a
situation where a country is going through a national economic crisis
68
.
Nineteen states have either year-round or seasonal disconnection prohibition.
Disconnection prohibition is legislated exclusively all year-round for specific customer
groups in seven Member States (Cyprus, Denmark, Spain, Luxembourg, Poland,
Portugal, Sweden), two Member States offer seasonal disconnection prohibition only
(Belgium, UK) and eleven Member States offer both year-round and seasonal
disconnection prohibition to varying customer groups (Estonia, Finland, France, Greece,
Hungary, Ireland, Italy, Lithuania, Netherlands, Romania and Slovenia).
Only four Member States provide blanket coverage for consumers in relation to
disconnection protection, but only on a seasonal basis (Belgium, Estonia, Italy, and the
Netherlands). Other widely protected consumers are those with (or at risk of) medical
conditions (in ten Member States - Cyprus, Estonia, Spain, Finland, Greece, Hungary,
Ireland, the Netherlands, Sweden, Slovenia), and customers currently under dispute
settlements (in six Member States - Italy, Luxembourg, the Netherlands, Poland,
Portugal, Sweden).
Disconnection safeguards - debt management
Debt management can include non-financial arrangements such as counselling or
assistance with budgeting as well as financial arrangements including a negotiated
payment plan, delayed payment responsibility or a financial grant to assist with costs. In
some instances, this is a measure that regulators or energy suppliers are required to offer,
whereas in other Member States, this can be offered either voluntarily through a
government agency, an energy supplier, or other consultation bodies.
The use of debt management measures is legislated in 17 Member States (Austria,
Belgium, Cyprus, Czech Republic, Germany, Spain, France, Hungary, Ireland, Italy,
Luxembourg, Malta, the Netherlands, Poland, Sweden Slovenia, and UK), while four
Member States (Austria, Belgium, Germany, Spain) also implement additional voluntary
measures, whereas Greece implements only voluntary measures for debt management.
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to protect vulnerable consumers in the energy sector: an assessment of disconnection
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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 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
69
70
71
CEER National Indicators Database 2015
"Measures to protect vulnerable consumers in the energy sector: an assessment of disconnection
safeguards, social tariffs and financial transfers".
Forthcoming publication. Insight_E.
Upon defaulting on payments, a customer is given at least 30 day notice of cancellation of the contract,
followed by a 60 day grace period to find another supplier. If the customer defaults on payments with
the second supplier, this process is repeated. Thereafter, the supplier can apply to the local council for
permission to disconnect the customer, especially if they refuse the installation of a prepaid meter.
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prepaid meters and strong use of complementary measures. Denmark does not have a
specific number of days legislated, but rather specifies that at least two notifications must
be sent out
72
.
Certain Member States (e.g., Sweden and Luxembourg) contact the social services in
between the final notice period and the disconnection of a consumer. Other Member
States have longer disconnection times where a smart meter is in place (e.g., in Italy
before the disconnection takes place, the maximum power supply is reduced to 15% for
15 days
73
).
Figure 6: Working days before electricity disconnection, in ascending order for
notification period (2014)
Source: Insight_E (Forthcoming)
Reconnection happens in most Member States only upon receipt of payment of the entire
outstanding debt to the service provider or when an alternative repayment plan has been
negotiated. In some Member States, the customer is reconnected if the unpaid bill is
disputed. In those cases, the service provider cannot disconnect the customer again until
the dispute is settled.
72
73
"Measures to protect vulnerable consumers in the energy sector: an assessment of disconnection
safeguards, social tariffs and financial transfers".
Forthcoming publication. Insight_E.
"Measures to protect vulnerable consumers in the energy sector: an assessment of disconnection
safeguards, social tariffs and financial transfers".
Forthcoming publication. Insight_E.
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7.1.3.
Deficiencies of the current legislation
This Section summarises Section 7.1.1 and Annex III of the Commission evaluation of
the provisions on consumer vulnerability and energy poverty in the 2009 Electricity and
Gas Directives. The full evaluation is included in a separate document.
The legislators' original objectives of these provisions were:
1. To ensure protection of vulnerable consumers by having Member States define
the concept of vulnerable consumers and implement measures to protect them.
2. To mitigate the problem of energy poverty by having Member States address
energy poverty, where identified, as an issue.
These provisions were put in place to facilitate the decision by Member States to proceed
with electricity and gas market liberalisation, as it was recognised by the legislators that
actions to protect vulnerable consumers were needed in the context of liberalising the
European energy market.
The evaluation assesses the legislation against five criteria. The Table below provides a
summary of this assessment.
Table 3: Evaluation of the provisions on consumer vulnerability and energy poverty
Criterion
Effectiveness
Legislation
meets
criterion
Partially
Assessment
Achievements
Member
States
define
vulnerable consumer and
adopt measures to protect
them.
Shortcomings
Uneven protection of vulnerable
consumers.
Lack of data on the scale and drivers of
energy poverty
Growing energy poverty levels across
the EU
Lack of assistance by Member States to
address energy poverty.
NRA lack data to fulfil monitoring role.
Some Member States still quote energy
poverty as a reason for maintaining
price regulation and not going ahead
with full energy market liberalisation
Efficiency
Relevance
Completely
Completely
Coherence
Partially
Low costs compared with
potential benefits.
Consumer vulnerability will
remain relevant as some
drivers of vulnerability are
permanent.
No inconsistencies with or
elements working against
objectives of the provisions.
Energy poverty likely to grow in the
future if no policy adopted.
Lack of an agreed description of the
term energy poverty and caveats in the
obligations stand in contrast to the call
for action in the Directive.
Member States have taken
action as a result of EU
intervention.
Source: Evaluation of the provisions on consumer vulnerability and energy poverty
EU-added
value
Completely
The evaluation concluded that the provisions in the Electricity and Gas Directive related
to consumer vulnerability and energy poverty were mostly
effective.
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EU action successfully encouraged Member States to define the concept of vulnerable
consumers in their legislation and to adopt measures to protect vulnerable consumers.
The provisions have also brought the issue of energy poverty to the attention of Member
States.
However, the evaluation also identified certain shortcomings. With respect to energy
poverty, the evaluation shows that even though most Member States have correctly
implemented the provisions on consumer vulnerability, the incidence of energy poverty
has continued to rise across the EU. In addition, even though Member States have to
address energy poverty where identified, the Electricity and Gas Directives do not
include any reference to the meaning of energy poverty nor do they explain in which
circumstances energy poverty can be identified as an issue.
At the same time current legislation does not enable comparable data on energy poverty
to be sourced from Member States to deliver a full picture of energy poverty in the EU,
in terms of scale, drivers and potential future evolution. In addition, while the provisions
on vulnerable consumers and energy poverty were put in place to facilitate the decision
by Member States to proceed with electricity and gas market liberalisation, 17 Member
States still maintain electricity and/or gas price regulation, often quoting increase in
energy poverty as a risk associated with deregulating energy prices.
While research indicates that energy poverty and consumer vulnerability are two distinct
issues
74
, the provisions in the Electricity and Gas Directives refer to energy poverty as a
type of consumer vulnerability. The evaluation argues that this may have led to an
incorrect expectation that a single set of policy tools could address both problems
simultaneously.
The evaluation also identifies shortcomings in the effectiveness of the provisions
referring to the role of National Regulatory Authorities (NRAs) in monitoring electricity
and gas disconnections.
The evaluation found that the provisions were
efficient
and
relevant.
While efficiency
was difficult to quantify due to lack of data, it is likely that the benefits derived from
defining consumer vulnerability at the Member State level and implementing measures to
protect them outweighed the costs of setting up such policies. In terms of relevance,
evidence suggests that the problem of energy poverty is growing and it is likely to
continue without policy intervention. European Commission
75
research suggests that
consumer vulnerability in the energy market will continue to be a relevant policy issue in
the future as a substantial share of those characterised as vulnerable consumers have
permanent characteristics that make them vulnerable.
74
75
"Energy poverty and vulnerable consumers in the energy sector across the EU: analysis of policies
and measures".
(2015). Insight_E.
European
Commission
(2016).
Available
at:
http://ec.europa.eu/consumers/consumer_evidence/market_studies/vulnerability/index_en.htm-
summit/2015/files/ener_le_vulnerability_study_european_consumer_summit_2015_en.pdf.
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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 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.
7.1.4.
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
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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.
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
76
77
Monitoring the level and effectiveness of market opening and competition at wholesale and retail
levels, including on electricity exchanges, prices for household customers including prepayment
systems, switching rates, disconnection rates, charges for and the execution of maintenance services,
and complaints by household customers, as well as any distortion or restriction of competition,
including providing any relevant information, and bringing any relevant cases to the relevant
competition authorities;
Reporting annually on its activity and the fulfilment of its duties to the relevant authorities of the
Member States, the Agency and the Commission. Such reports shall cover the steps taken and the
results obtained as regards each of the tasks listed in this Article;
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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.
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…”.
-
78
79
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.
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-
-
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 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
80
81
82
83
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.
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.
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-
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 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
:
84
85
86
87
88
89
A few Member States already have a definition of energy poverty. These definitions are presented in
Sub-Annex 1.
Working Paper on Energy Poverty.
2016. Vulnerable Consumer Working Group.
This kind of indicators is referred in the academic literature as consensual-based indicators.
Selecting Indicators to Measure Energy Poverty. 2016. Trinomics.
"Quantifying
the prevalence of fuel poverty across the European Union".
2013. Thomson and Snell.
"Selecting Indicators to Measure Energy Poverty".
2016. Trinomics.
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-
-
-
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 that all the final recommended indicators can be produced using data
already collected by Member States
90
.
These measures build upon the existing provisions on energy poverty in the Electricity
and Gas Directive. They offer the necessary clarity to the term energy poverty, as well as,
the transparency with regards to the number of household in energy poverty. Since
currently available data can be used to measure energy poverty, the administrative costs
are limited. Likewise, the actions proposed do not condition Member States primary
competence on social policy, hence, respecting the principle of subsidiary.
90
Trinomics
2016.
Available
at:
https://ec.europa.eu/energy/sites/ener/files/documents/Selecting%20Indicators%20to%20Measure%20
Energy%20Poverty.pdf
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Option 2: Setting a uniform EU framework to monitor energy poverty, preventative
measures to avoid disconnections and disconnection winter moratorium for vulnerable
consumers.
Table 8: Option 2
Energy poverty
Measures
- Specific, harmonised definition
of energy poverty.
- Require Member States to
measure energy poverty using
required energy.
Pros
- Improve comparability
of energy poverty as a
result of a harmonised
concept
of
energy
poverty.
- Measuring energy
poverty using required
energy.
Cons
- New legislation will be
necessary.
-
A
prescriptive
definition of energy
poverty may not be
adequate for all Member
States.
- High administrative
cost to measure energy
poverty using required
energy.
- New legislation will be
necessary.
- Administrative impact
on Member States.
- Administrative impact
on energy companies
- Safeguards against
disconnection
may
result in higher costs for
companies which may
be passed to consumers.
- Safeguards against
disconnection may also
result
in
market
distortions as suppliers
seek to avoid entering
markets where there are
likely to be significant
risks of disconnections
and the suppliers active
in such markets raise
margins
for
all
consumers in order to
recoup losses from
unpaid bills.
-
Moratorium
of
disconnection
may
conflict with freedom of
contract.
Safeguards
against
disconnection
- A minimum notification period
before a disconnection.
All customers to receive
information on the sources of
support and be offered the
-
possibility to delay payments or
restructure their debts, prior to
disconnection.
-
Winter
moratorium
of
disconnections for vulnerable
consumers.
-
- Equips Member States
with the tools to prevent
and reduce the number of
disconnections.
- Gives customers more
time
to
make
arrangements to pay their
bills,
i.e.
avoids
unnecessary
disconnections and costs
of disconnecting and
reconnecting.
- Customers are given
information.
about
outreach points.
- Customers are given an
opportunity to better
handle their energy debts
- The most vulnerable
customers will benefit
from a guaranteed energy
supply
through
the
coldest months of the
year.
Option 2 represents additional obligations for Member States. In what follows, we
describe these new obligations.
Energy poverty - EU definition of energy poverty
Option 2 adds a specific definition of energy poverty in the EU legislation. Energy
poverty will refer to those households which after meeting their required energy needs
fall below the poverty line or other income related threshold. This measure will clarify
the term energy poverty (as in Option 1) and improve the comparability and monitoring
of energy poverty within the EU.
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A definition using a relative income threshold, such as the Low Income High Cost
91
, is
suited to measure energy poverty in the EU. Since the poverty threshold is a relative
metric (e.g. below 40% of the median income) this type of metric takes account of the
distribution of income in each Member State. However, it might well be that in some
Member States a significant number of households live below the poverty line. In those
cases, a different metric of energy poverty using a lower income threshold may be more
suitable.
Some stakeholders will be in favour of such as measure since it addresses the need for a
common definition. However, as it was described in Option 1, the EESC (2011: 1) and
Committee or the Regions (2014;15) request the Commission a
'common general
definition'
;
'flexible in view of the diverse circumstances of the Member States and
regions'.
The VCWG
92
also stated that
'a prescriptive definition of energy poverty for the
EU28 would be too restrictive, given the diverse realities across Member States'.
Similar arguments were put forward in Thomson et al
93
with regard to comparability. The
authors argue that a shared pan-EU definition would need to be relatively broad in order
to accommodate the diversity of contexts found at the Member State level in terms of
climate conditions, socioeconomic factors or energy markets. This is in contradiction
with a more prescriptive definition of energy poverty at the EU level.
Energy poverty - measuring energy poverty
Option 2 requires Member States to measure energy poverty using
'required energy'.
Metrics using
'required'
rather than
'actual'
expenditure calculate the amount of energy
necessary to meet certain standards such as a specific indoor temperature during a
number of hours per day.
The main advantage of this type of measurement
94
is that it refers to an adequate level of
energy service. As such, it computes the amount of energy for a specific heating regime
rather than measuring actual expenditure, which may not be adequate for low-income
households that may under-consume due to budget constraints.
In order to be able to compute required energy, the following information is needed
95
:
-
-
-
-
heating system and fuels used;
dwelling characteristics;
regional and daily climate variations; and
number of days per year a household stays in their home.
91
92
93
94
95
Low income High Costs (LIHC) indicator"
(Hills, 2011): A household i) income is below the poverty
line (taking into account energy costs); and ii) their energy costs are higher than is typical for their
household type.
Working Paper on Energy Poverty.
2016. Vulnerable Consumer Working Group.
"Fuel poverty in the European Union: a concept in need of definition?"
2016. Thomson et al.
The UK, which has considerable experience in this field, measures energy poverty or fuel poverty
using required energy.
Selecting Indicators to Measure Energy Poverty.
2016. Trinomics.
"
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This data, especially the variables related to dwelling characteristics, are rarely available.
To collect it, Member States are likely to need to run a Housing Condition Survey
96
which ideally should be linked to the Household Budget Survey.
Safeguards against disconnection - minimum notification period of 40 working days
Evidence suggests that stronger guidelines dictating adequate disconnection times and
procedures could be an effective way to prevent disconnections. For instance, in Belgium
and UK, the two countries with the highest disconnection time requirements,
disconnection levels are at the lowest
97
.
This measure requires Member States to give all customers at least two months
(approximately 40 working days) notice before a disconnection from the first unpaid bill.
In Member States, legislated working days before disconnecting a customer vary
between a week and 200 days, with an average of approximately 40 days (See Table
below).
Table 9: Statistics on disconnection notices (legal requirements) in Member States
MIN
Working days to final disconnection notice
98
Working days to actually disconnect a final household
customer from the grid because of non-payment
3
7
MAX
45
200
Average
18.15
36.81
Standard
deviation
12.87
36.79
Source: Insight_E (Forthcoming); Data: Eurostat; CEER National Indicators Database 2015
Longer disconnection period may stop some disconnections as customers have more time
to engage or to seek help. The direct monetary benefit comes in the form of avoided
disconnection and reconnection costs to society. Other non-direct monetary benefits to
the utility are those of retaining the customer, and avoiding lost income, due to allowing
the consumer time to pay back arrears.
It is possible to calculate the amount of time before which it is not cost effective to
disconnect a household from electricity and gas provision. This is done by comparing the
cost of disconnection and reconnection with the average monthly household expenditure
for gas and electricity.
Figure 7 shows the number of days it is cost-effective not to disconnect a household for
those Member States with available data to perform the necessary calculations.
96
97
98
The Housing Condition Survey measures the physical characteristics of the dwelling such as height of
the ceilings, materials of the wall, or the size of the windows to calculate the energy performance of
the building.
"Measures
to protect vulnerable consumers in the energy sector: an assessment of disconnection
safeguards, social tariffs and financial transfers".
Forthcoming publication. Insight_E.
Denmark does not stipulate a number of days but rather that a minimum of two notices be sent
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Figure 7: Number of days from which it is cost-effective to disconnect a household
Source: Insight_E (Forthcoming)
Interestingly for both electricity and gas it is not cost effective to disconnect within a
certain time starting from the unpaid bill for any of the considered countries. For
electricity, in Germany and Italy, it is cost-effective to disconnect only after
approximately 2 months from the unpaid bill, while in Ireland and the UK at least one
month is needed to justify disconnection. That value is approximately 15 working days
for France and Spain, having less costly connection and reconnection procedures. For
gas, as the cost of connection and reconnection is higher, those values are larger. In
Germany and Spain three or more months of unpaid bills would justify a disconnection,
for Italy and France more than one month
99
.
It is to be noted that these numbers merely compare the cost of connecting and
disconnecting a household with household energy bills. Including other social and health
benefits would increase the amount of days before a disconnection is cost effective.
Those costs are difficult to quantify. Nonetheless, a number of articles and research
projects 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.
99
100
"Measures to protect vulnerable consumers in the energy sector: an assessment of disconnection
safeguards, social tariffs and financial transfers".
Forthcoming publication. Insight_E
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
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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.
Table 10: Additional working days with a two month disconnection notice
106
Member State