Explanatory Memorandum to COM(2020)700 - EU position concerning an amendment to Annex IV (Energy) to the EEA Agreement [32015R1222 - Guideline on congestion management "CM"]

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1. CONTEXT OF THE PROPOSAL

Reasons for and objectives of the proposal

The draft Decision of the EEA Joint Committee (annexed to the proposed Council Decision) aims to amend Annex IV (Energy) to the EEA Agreement in order to incorporate Commission Regulation (EU) 2015/1222 of 24 July 2015 establishing a guideline on capacity allocation and congestion management 1  into the EEA Agreement.

The electricity network codes and guidelines, as established with a basis in the 3rd Energy Package, set out technical rules to facilitate trade within the EU internal electricity market. A fully functioning and interconnected internal energy market is crucial to the objectives of security of supply, increasing competitiveness and ensuring that consumers can purchase energy at affordable prices. Significant electricity interconnections have been established between Norway, as an EEA EFTA State, and EU Member States. It is therefore imperative that the technical rules applicable to trade within the EU internal electricity market are extended to the EEA to ensure legal homogeneity as a basis for trade in electricity.

Commission Regulation (EU) 2015/1222 sets out rules for the allocation of available capacity on interconnectors spanning the borders in the internal electricity market for the purpose of facilitating trade in day-ahead and intraday markets. It sets requirements for the establishment of common methodologies for determining available capacity, criteria to assess efficiency and a review process for bidding zones. It applies to all transmission system operators, except for those on islands which are not connected to another system.

The adaptations appearing in the draft of the annexed Decision of the EEA Joint Committee go beyond what can be considered mere technical adaptations in the sense of the Council Regulation No 2894/94. The Union position shall therefore be established by the Council.

Consistency with existing policy provisions in the policy area

The annexed draft EEA Joint Committee Decision extends the already existing EU policy to the EEA EFTA States (Norway, Iceland and Liechtenstein).

Consistency with other Union policies

The extension of the EU acquis to the EEA EFTA States, through its incorporation into the EEA Agreement is conducted in conformity with the objectives and principles of that Agreement, aiming at establishing a dynamic and homogeneous European Economic Area, based on common rules and equal conditions of competition.

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

Legal basis

The legislation to be incorporated into the EEA Agreement is based on Article 194 of the Treaty on the Functioning of the European Union.

Article 1(3) of Council Regulation (EC) No 2894/94 2  concerning arrangements for implementing the EEA Agreement provides that the Council establishes the position to be adopted on the Union’s behalf on such Decisions, on a proposal from the Commission.

Subsidiarity (for non-exclusive competence)

The proposal complies with the subsidiarity principle for the following reason:

The objective of this proposal, namely to ensure the homogeneity of the Internal Market, cannot be sufficiently achieved by the Member States and can therefore, by reason of the effects, be better achieved at Union level.

Proportionality

In accordance with the principle of proportionality, this proposal does not go beyond what is necessary in order to achieve its objective.

Choice of the instrument

In conformity with Article 98 of the EEA Agreement, the chosen instrument is the EEA Joint Committee decision. The EEA Joint Committee shall ensure the effective implementation and operation of the EEA Agreement. To this end, it shall take decisions in the cases provided for in the EEA Agreement.

3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

Ex-post evaluations/fitness checks of existing legislation

Not applicable.

4. BUDGETARY IMPLICATIONS

There are no budgetary implications expected as a result of incorporation of the above mentioned Regulation into the EEA Agreement.

5. OTHER ELEMENTS

Detailed explanation of the specific provisions of the proposal

Adaptation (a) – non applicability to Iceland and Lichtenstein

As the transmission system of Iceland is not connected with other transmission systems, therefore, Commission Regulation (EU) 2015/1222 should not apply to Iceland.

Commission Regulation (EU) 2015/1222 should not apply to Liechtenstein, as due to its small size and the limited number of electricity customers, Liechtenstein does not have an own transmission electricity network.

Adaptation (b) and recital (6) – sensitive information about the electricity system

Commission Regulation (EU) 2015/1222 there are provisions setting out obligations to provide information to the European Network of Transmission System Operators for Electricity (ENTSO-E) and Agency for the Cooperation of Energy Regulators (ACER). Adaptation (b) makes it possible that respective Transmission System Operators (“TSOs”) and Regulators exchange such information and protect it.

Adaptation (c) and recital (7) – reference to the participation rights of the Norwegian TSO, Nominated Electricity Market Operator (NEMO) and National Regulatory Authority (NRA) in the development and approval of terms, conditions and methodologies

The adaptation and the recital referred to above adapt relevant provisions of Article 9 of Commission Regulation (EU) 2015/1222 concerning participation rights of relevant entities in the development and approval of terms, conditions and methodologies to include Norway.