Energy in South East Europe - Regional Policy for a Regional Market

Improving the balance between energy supply and demand is crucial to boost and sustain economic development in South Eastern Europe. This requires a strong commitment by the countries of the region towards market oriented reforms in order to: improve overall energy conservation and efficiency, reduce an excessively high energy intensity of production compared to international standards, strengthen national institutional capacities and adapt legislation and regulation to EU norms and practices. It also means that countries should be prepared to draw fully on the substantial gains which can result from energy trading among themselves and with their neighbors. This implies that the current fragmentation of energy supply is overcome through cooperation among the various entities concerned and through physical connection/reconnection of the network. A regional approach to energy supply, therefore, offers significant advantages both in terms of improved utilization of existing supply and production capacities as well as optimizing future investments. Major steps have already been taken over the last couple of years towards achieving these objectives in both the electricity and natural gas sectors.

Energy Community
Building on the signed Memoranda of Understanding 2002 and 2003, the so-called Athens Memoranda, the European Commission - in conformity with the legal constraints of Article 300 of the EC Treaty (Treaty of Nice) - obtained a negotiating directive from the Council on 14 May 2004 to conclude a legally binding agreement having essentially the same content to the two Memoranda. The Energy Community Treaty was signed in Athens on October 25, 2005 and entered into force on July 1, 2006.
The signature of the Energy Community Treaty means that the European Union and nine partners of South East Europe - Croatia, Bosnia and Herzegovina, Serbia, Montenegro, the Former Yugoslav Republic of Macedonia, Albania, Romania, Bulgaria and UNMIK on behalf of Kosovo - will create the legal framework for an integrated energy market. Negotiations with Turkey are ongoing for joining the treaty at a later stage.
The development of the Regional Electricity Market is coordinated by the European Commission and the Energy Community Secretariat (ECS). The Secretariat runs the day to day work of the Energy Community and undertakes analytical work, both tasks under the co-ordination of the Commission. The Secretariat is also one of the main institutions of the Treaty and the only one that is independent of the parties of the Treaty.
The electricity sector in South East Europe has a medium to long term regional reform plan, which is set out in the Athens Memorandum of Understanding. This reform plan was extended to cover the natural gas market under the Memorandum of Understanding, which obliges full members of Energy Community to implement national legislation in accordance with Directives 2003/54/EC (electricity), 2003/55/EC (gas), 85/337/EEC (environmental impact assessment) 1999/32/EC (reduction of sulphur content of fuels) and 2001/80/EC (Large Combustion Plants).
The major commitments are:
•to create a regionally integrated energy market for electricity and natural gas networks and to integrate that market into the wider EU market;
•to establish common rules for generation, transmission and distribution of electricity;
•to similarly establish common rules for the transmission, distribution, supply and storage of natural gas;
•to establish state level national energy authorities, regulators and transmission system operators;
•to establish compatible state and regional electricity and natural gas market action plans;
•embryonic regional level dispute resolution mechanisms;
•to open the markets in line with EU commitments but with a suitable transition period (all non-domestic markets are projected to be open by 2005);
•unbundling of integrated utilities;
•authorization procedures for new infrastructure that are transparent;
• an anti-corruption programme;
• to implement grid codes and other technical and commercial codes that are necessary for the functioning of the market; and,
• regulated third party access, tariff systems that encourage trade, and technical codes necessary for the operation of a trade based regional system.