Documents considered by the Committee on 12 December 2018 Contents

8EU Electricity Market Design

Committee’s assessment

Politically important

Committee’s decision

Cleared from scrutiny (document (d) cleared from scrutiny on 29/11/2017); further information requested; drawn to the attention of the Business, Energy and Industrial Strategy Committee

Document details

(a) Proposal for a Regulation on the internal market for electricity (recast); (b) Proposal for a Regulation establishing a European Agency for the Cooperation of Energy Regulators (recast); (c) Proposal for a Directive on common rules for the internal market in electricity; (d) Proposal for a Regulation on risk-preparedness in the electricity sector and repealing Directive 2005/89/EC

Legal base

(a) Article 194(2) TFEU, ordinary legislative procedure, QMV; (b) Article 194(2) TFEU, ordinary legislative procedure, QMV; (c) Article 194(2) TFEU, ordinary legislative procedure; QMV(d) Article 194 TFEU, ordinary legislative procedure; QMV

Department

Business, Energy and Industrial Strategy

Document Numbers

(a) (38346), 15135/16 + ADDs 1–11; (b) (38347), 15149/16 + ADD 1, COM(16) 863; (c) (38348), 15150/16 + ADD 1, COM(16) 864; (d) (38349), 15151/16 + ADD 1, COM(16) 862

Summary and Committee’s conclusions

8.1Market design is the set of rules establishing the principles and details for participation in, and oversight of, the energy market. The four proposals considered in this Chapter represent the Commission’s proposed overhaul of the rules as a response to the changing nature of the electricity market, notably the increasing volume of renewable energy. They aim to increase the efficiency and resilience of the market.

8.2We and our predecessors have reported on these documents on a number of occasions. Full details of the Commission’s original proposals were set out in the Committee’s Report of 25 January 2017.71

8.3The Minister for Climate Change and Industry (Claire Perry) has written72 to update us on developments ahead of consideration at the Energy Council on 19 December. She invites the Committee to consider clearing from scrutiny the three documents which remain under scrutiny so that the UK may signal its support for the compromises.

8.4On the proposal for a revised Electricity Regulation (document (a)), the provisions on capacity mechanisms have been the main issue for the UK, specifically the ability of Member States to be able to determine, through their own national resource adequacy assessments, whether they have a resource adequacy concern to justify putting a capacity mechanism in place. Member States will be required to produce and apply an implementation plan to demonstrate that the resource concern can only be addressed by introducing a capacity mechanism and the European Agency for the Cooperation of Energy Regulators (ACER) will give an opinion on this plan. However, it will be for Member States to decide whether a capacity mechanism is needed, after giving due account to the ACER opinion.

8.5The Minister is confident that the General Approach position on adequacy assessment and capacity mechanisms—with which the UK was content—will be retained. This will not require any change to current UK arrangements.

8.6She also clarifies that the recent General Court judgement73 against the European Commission Decision not to raise objections against the UK capacity mechanism was related to matters of procedure and was not a challenge to the nature of the Capacity Market itself. The Government is actively working with the Commission to reinstate the Capacity Market as soon as possible.

8.7Concerning the proposal for a revised Electricity Directive (document (c)), including price intervention in the retail market, the Government expects that the final outcome will allow the GB price cap to be implemented and for Northern Ireland to continue apply its regulated tariff. The Minister also expects the agreed text on smart metering, electricity storage and demand-side response to be consistent with UK policy.

8.8Turning to the proposal for a revised Regulation on the European Agency for the Cooperation of Energy Regulators (ACER) (document(b)), the Minister reports that a consensus has been reached that is acceptable to the UK, in particular by achieving the right balance of power between the Agency Director and the Board of Regulators.

8.9On the proposal for a Regulation on risk preparedness in the electricity sector (document(d)), the Minister explains that the agreement is consistent with the UK’s objectives and can therefore be supported. The framework for risk preparedness that it will put in place across the EU is broadly similar to the UK’s own resilience arrangements and will reinforce UK energy security by reducing the potential for incidents in mainland Europe to affect the UK as interconnection levels are increased.

8.10The Minister makes no comment on arrangements following the UK’s withdrawal from the EU, but all elements of this package of legislation will need to be applied before the end of the post-Brexit implementation period on 31 December 2020. That period—during which the UK will be obliged to apply all EU energy legislation—may be extended until 31 December 2022 at the latest. Should the EU and UK decide to apply the Northern Ireland “Backstop” arrangement, Northern Ireland would be obliged to apply internal energy market legislation (including this package of legislation) in order to maintain the Irish Single Energy Market. Furthermore, the Parties committed under the Political Declaration on the future EU-UK relationship to facilitate technical cooperation to support the trade of electricity and security of supply.

8.11We note that agreement has been reached on this package of legislation to improve the design and functioning of the EU’s electricity market. We note too that the UK would be obliged to apply this legislation under any post-Brexit implementation period lasting at least until 31 December 2020 and that the UK in respect of Northern Ireland would be obliged to apply it should the Northern Ireland “Backstop” arrangement be applied. In this light—and given the longer term commitment to UK-EU cooperation in this area—it is welcome that the UK’s negotiating objectives have been met.

8.12The proposal for a Regulation on risk-preparedness (document (d)) has already been cleared from scrutiny. We clear the remaining documents from scrutiny in advance of the Energy Council on 19 December 2018 and would welcome confirmation of adoption of the legislative acts in due course. This chapter is drawn to the attention of the Business, Energy and Industrial Strategy Committee.

Full details of the documents:

(a) Proposal for a Regulation on the internal market for electricity (recast): (38346), 15135/16 + ADDs 1–11, COM(16) 861; (b) Proposal for a Regulation establishing a European Agency for the Cooperation of Energy Regulators (recast): (38347), 15149/16 + ADD 1, COM(16) 863; (c) Proposal for a Directive on common rules for the internal market in electricity: (38348), 15150/16 + ADD 1, COM(16) 864 and (d) Proposal for a Regulation on risk-preparedness in the electricity sector and repealing Directive 2005/89/EC: (38349), 15151/16 + ADD 1, COM(16) 862.

Previous Committee Reports

Thirtieth Report HC 301–xxix (2017–19), chapter 5 (6 June 2018); Fifth Report HC 301–v (2017–19), chapter 4 (13 December 2017); Fourth Report HC-301–iv (2017–19), chapter 31 (29 November 2017); Fortieth Report HC 71–xxxvii (2016–17), chapter 6 (25 April 2017); Twenty-ninth Report HC 71–xxvii (2016–17), chapter 4 (25 January 2017).


71 Twenty-ninth Report HC 71–xxvii (2016–17), chapter 4 (25 January 2017).

72 Letter from Claire Perry to Sir William Cash, dated 6 December 2018.

73 Tempus v Commission Case T-793/14, 15 November 2018.




Published: 18 December 2018