IEM incomplete for sometime yet

Screenshot 2014-07-03 at 10.16.29 AM

It’s a safe bet to say that Europe’s internal energy market (IEM) will be ‘incomplete’ for sometime yet and that, to avoid further embarrassment, the stale rhetoric that it will be “completed by 2014” will, if not already, soon be consigned to the archives.

Good political leadership would have already clarified this a while back. But in the absence of that (and still in the presence of Oetti) a few notes here may be useful.

(Alternatively, you can read Oetti’s recent speech on the topic here, though he doesn’t defend any more the ‘by 2014‘ goal.)

Internal market is a given

First, while the internal market isn’t ‘complete’, it exists by virtue of the EU treaties, as well as by common rules and case law. This is not a facile point but a point of principle, since ensuring free movement of goods, services, people and money everywhere in EU territory must have a basic legal framework, which the treaties already provide. Derogations are generally temporary, but the four freedoms are permanent.

Therefore, in policy debates, saying that “there is no internal energy market” is at least lazy thinking and arguably is anti-European. To those doubting IEM progress in this way I say; wake-up guys, or you shoot yourself the foot and things really will start to fragment.

Second, under shared treaty competences, “common rules” in any sector are still only an “approximation” of the associated national laws. (Directives e.g. are directives to modify national rules.) In fields where the Union has not acted, national administrations remains free to do so.

The process of making common rules is often referred to “harmonisation”. Stop for a moment and think about the meaning of this word in its context. In the musical sphere, harmonise means not everyone is playing the same notes or even the same instrument but the combination of all notes and all instruments is still a pleasant and appealing one. The same concept applies in the internal market where common rules represent some but not all rules.

So who set that 2014 deadline?

Short answer; the European Council in February 2011 made a non-binding call (§4). What exactly did they mean? Primarily, it meant that full application of the 2009 (‘3rd’) legislative package (five laws) and especially new EU-wide Network Codes and Guidelines, i.e. the cross-border trading rules, were to be finished within four years.

In other words, EU heads of government, recognising the sluggishness of networked power and gas utility managers to deliver a complex collaborative project in good time, decided on putting a firm high-level behind the legislation already agreed.

This was the right thing to do at the time, for sure, but it only had a political effect and not a legal effect. If now we only finish the new network codes in five years and not four then that is not really a big issue.

3rd package was not end in itself

Of course the 3rd package is not an end in itself, only a means to an end, i.e. a more inter-operable Europe-wide market with all the benefits that brings (cost-effectiveness, reliability, etc.).

Neither was the 3rd package necessarily the last package. Indeed, it has already been followed (i.a.) by the 2013 infrastructure package, combining new rules and new money to help develop more inter-connections, and which is now being implemented.

The largest and most important questions in the new political mandates 2014-19 are what comes next, for example:

  • Might there be a fourth IEM package? If so, what would go in it?
  • Might there be a retail package? Would EC and ACER get more powers?
  • How will common trading rules fit with an emerging “2030” framework.
  • How will Energy Community countries integrate further with EU?

In short, the 2014 IEM “completion” deadline, even if only a high-level political push, was never in reality the end of the story. There’s lots more to do and the real work lies ahead of us.

Now, where’s a good Monnet quote when you need one?







3 thoughts on “IEM incomplete for sometime yet

  1. I like what you’re saying, and agree. It should not be surprising that 2014 was not a miracle year when all the obstacles on the path to the IEM have vanished. I’d also put a quote from JM’s Memoires: “we’re discussing things in vain while the best thing we’ve got to do is to keep going” (“nous nous posons des questions inutilement, alors que nous n’avons rien de mieux à faire que de continuer.”).

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