The European Union's Third Energy Package is a legislative package for an internal gas and electricity market in the European Union

European Union

The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...

. Its purpose is to to further open up the gas and electricity markets in the European Union. The package was proposed by the European Commission

European Commission

The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....

 in September 2007, and adopted by the European Parliament

European Parliament

The European Parliament is the directly elected parliamentary institution of the European Union . Together with the Council of the European Union and the Commission, it exercises the legislative function of the EU and it has been described as one of the most powerful legislatures in the world...

 and the European Council

European Council

The European Council is an institution of the European Union. It comprises the heads of state or government of the EU member states, along with the President of the European Commission and the President of the European Council, currently Herman Van Rompuy...

 in July 2009. It entered into force on 3 September 2009.

One of the core elements of the third package is ownership unbundling which stipulates the separation of companies' generation and sale operations from their transmission networks.

The EU energy market

The European Commission

European Commission

The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....

 and the Parliament

Parliament

A parliament is a legislature, especially in those countries whose system of government is based on the Westminster system modeled after that of the United Kingdom. The name is derived from the French , the action of parler : a parlement is a discussion. The term came to mean a meeting at which...

wants to reach the goals of “Europe 2020 Strategy” through a secure, competitive and sustainable supply of energy to the economy and the society. The correct transposition of the European electricity and gas legislation in all Member States is still not complete. Because of this, the Third Internal Energy Market Package was adopted in 2009 to accelerate investments in energy infrastructure to enhance cross border trade and access to diversified sources of energy. There is still a market concentration on the energy market in the EU. Together, the three biggest generators of each country hold more than 2/3 of the total capacity of 840.000 MW. The EU advises three options to deconcentrate the market power of the biggest electricity firms. The first option is ownership unbundling. The second and third options are independent system operator (ISO) and independent transmission operator (ITO).

Ownership unbundling

Ownership unbundling is proposed by the European Commission and the European Parliament. This option means to split the generation (production of electricity) from the transmission system (transmission electricity from electrical generating station via a system to a distribution system operator or to the consumer). It is the hardest form to regulate the energy market in the EU, but it is legitimate by EU-law. The criticism by that system is, who can buy the transmission networks, will it really regulate the market-place and who will pay possible compensations to the energy firms. Moreover, some economists also stress that the benefits will not pay off the costs. In 2011 none of the EU members favoured this option. Just UK implemented it before the Third Internal Energy Market Package.

Independent system operator (ISO)

The Art. 13 – 16 of directive 2003/54/EC give the member states also the opportunity to let the transmission networks remain under the ownership of energy groups, but transferring operation and control of their day-to-day business to an independent system operator (ISO). It is also a form of ownership unbundling, but with a trustee.

Independent transmission operator (ITO)

Austria, Bulgaria, France, Germany, Greece, Luxembourg, Latvia and the Slovak Republic presented at the end of January 2008 a proposal for a third option. This model, the independent transmission operator (ITO), envisages energy companies retaining ownership of their transmission networks, but the transmission subsidiaries would be legally independent joint stock companies operating under their own brand name, under a strictly autonomous management and under stringent regulatory control. However, investment decisions would be made jointly by the parent company and the regulatory authority. It is also named a legal unbundling.

Significance

The directive 2003/54/EC gives the member states three options of unbundling. One of them has to be transposed into national law. In 2011 the ownership unbundling is implemented just in United Kingdom. The next years will show, if the European Commission and the European Parliament force on achieve the ownership unbundling model or if the other models reach the goals of a secure, competitive and sustainable supply of energy to the economy and society.