1. - Prepared by ECS - 1 Implementation and Application of Energy Community Law in the Contracting Parties of the Energy Community Energy Community Secretariat Rozeta Karova, Ph.D. Jean Monnet Seminar in European Union Law 11 April 2012, Kyiv, Ukraine

2. - Prepared by ECS - 2 Outline of the presentation  Energy Community - objectives and means  Benefits from regional energy cooperation  Stakeholders  Institutional framework  Energy Community Treaty - activities -The Energy Community Acquis – Title II - Mechanism for Operation of Network Energy Markets – Title III - Creation of a single energy market, Title IV  Implementation of energy acquis in the Contracting Parties  Decision Making Process  Enforcement - Dispute Settlement Mechanism  Concluding remarks

3. - Prepared by ECS - 3 Energy Community objectives and means OBJECTIVES a) Create a single and stable regulatory space coupled with a stable market framework attracting investment b) Integrated regional energy market that increases cross-border trade in energy, guarantees energy supply and takes into consideration climate and social aspects c) The regional energy market should be fully integrated in the EU internal energy market MEANS - application of the EU acquis communautaire - through the implementation of the Energy Community Treaty

4. - Prepared by ECS - 4 Benefits from Regional Energy Cooperation  Removal of legal and administrative barriers Legal certainty Attracting more investments  Access to larger and predictable energy markets Free movement of network energy Title IV: The Creation of a Single Energy Market 9 Contracting Parties & 27 EU member states  Establishment of Coordinated Auction Office Common cross-border capacity allocation – better, transparent capacity utilization  Coordinated approach to investments Projects with regional dimension identified  Availability of reliable, low-cost and environmental friendly sources of energy Improving the energy security

5. - Prepared by ECS - 5 Stakeholders Parties, Participants, Observers  Parties: The EU and 9 Contracting Parties: AL, BiH, CR, FYR MK, MNE, SR, UNMIK + MD (1 May 2010); UA (1 February 2011)  15 Participants: EU MS  4 Observers: Armenia, Georgia; Norway; Turkey  Donors

6. - Prepared by ECS - 6 Institutional framework Energy Community Ministerial Council Permanent High Level Group Energy Community Regulatory Board Electricity - Athens; Gas - Maribor; Social – Presidency; Oil - Belgrade Secretariat European Union Council of the EU: Transport, Telecommunication and Energy COREPER Electricity – Florence; Gas – Madrid; Citizens – London; Oil - Berlin ERGEG / ACER European Commission FORA NRA Gov. Min. Indep.

7. - Prepared by ECS - 7  The acquis adopted by the Energy Community Treaty  Electricity  Gas  Environment  Competition  Renewable energy  Evolution of the acquis Energy Community Treaty – activities (1): The Energy Community Acquis, Title II Adopted by the Ministerial Council: - Security of electricity & gas supply, 2007 - Energy efficiency, 2009, 2010 - Third package (6 October 2011) Recommendations, 2010: - RES -Third energy package Planned for adoption  RES, Oil stocks and harmonisation of energy statistics (2012)

8. - Prepared by ECS - 8 Energy Community Treaty – activities (2): Mechanism for Operation of Network Energy Markets, Title III  Setting up specific regulatory framework for the efficient operation of gas and electricity markets -Single mechanism for cross-border transmission (Art. 28) -Provision of energy to citizens (Art. 31-33) -Harmonisation of market designs & measures fostering free establishment of Network Energy companies (Art. 34) -Promoting RES & EE (Art. 35) -Safeguard measures (Art. 36-39)

9. - Prepared by ECS - 9 Energy Community Treaty – activities (1): Creation of a single energy market, Title IV  Creation of gas and electricity market without internal frontiers: -Removal of internal frontiers for trade in Network Energy (Art. 41- 42)  External energy trade policy - Regulation of imports and exports of Network Energy to and from third countries (Art. 43)  Mutual assistance in the event of disruption (Art. 44-46)

10. - Prepared by ECS - 10 Energy Acquis in the Contracting Parties State of play  National dimension  Transposition of the acquis – progress in 2011 o primary legislation - gap between the Contracting Parties o secondary legislation – Implementation Partnership memoranda signed with few CPs  Practical implementation – challenges ahead o regulated end-user prices and cost-reflectivity of tariffs o bad debts, losses, collection rates o unbundling o market opening o ensuring eligibility  Regional dimension o Low level of energy trading o Opening of the wholesale markets and CAO – electricity o Gas infrastructure projects o Security of supply

11. - Prepared by ECS - 11 Implementation of the Energy Community Acquis Focus on Ukraine  Recent activities and challenges - Legal framework to be developed further: o draft Electricity Law and draft Natural Monopolies Law under preparation o No State aid Law adopted yet o Gas Law adopted in 2010 - Eligibility to be ensured: o from 1 January 2012 for all non-household customers o from 1 January 2015 for all customers - Institutions established o NERC and Antimonopoly Commission - Market and regulatory reforms

12. - Prepared by ECS - 12 Decision Making Process Title VI EnCT Ministerial Council PHLG or ECRB Proposal by: - European Commission; - Contracting Party; - Secretariat. Voting & quorum: - Each CP = 1 vote - Quorum = 2/3 members of the institutions Measures: - Decisions; - Recommendations

13. - Prepared by ECS - 13 Decision Making Process (2) TitleMeasures concerning (Art of EnCT) ProposalMajorityGeog. scope II: Extension of the acquis * ex. 3 rd package -Art. 24 & 25 ECSimple majority CPs III: Mechanism for Operation of Network Energy Markets * establishing CAO -Art. 28 -Art. 31-39 Party ECS 2/3 majority * Positive vote-EC CPs + AT, GR, HU, IT, SI IV: The Creation of Single Energy Market -Art. 41-46Contracting Party UnanimityCPs + 27 EU MS Article 100 EnCT: -amendments of the EnCT -implement new acquis & extend EnCT to other energy products (ex. oil) -accession of new CP (ex. MD & UA)

14. - Prepared by ECS - 14 Enforcement: Dispute Settlement Mechanism (1) Articles 90-93 EnCT: Failure of a CP to comply with EnC law Reasoned Opinion by ECS (or CP or ECRB) Detailed statement of reasons CP concerned to comply with EnC law Reply by CP concerned Opening Letter by ECS CP concerned submits observations in 2 months Reply by CP concerned Preliminary procedure Complaint by private body *Broad standing Notification by Party or ECRB ECS initiative

15. - Prepared by ECS - 15 Enforcement: Dispute Settlement Mechanism (2) Ministerial Council – binding decision Existence of a breach Existence of a serious and persistent breach + sanctions Dismissal of a complaint (partially / entirely) Advisory Committee opinion * 3 members + EU representative Procedure before the Ministerial Council Request by ECS, Party or ECRB Proposal for a decision Reply by CP concerned

16. - Prepared by ECS - 16 Concluding Remarks  From a pre-accession tool for the SEE countries to step towards the creation of a pan-European energy market The Contracting Parties - not only participants into the Stabilisation and Association Process, but also participants into the European Neighbourhood Policy  Strong benefits from regional cooperation in energy - not related only to the EU membership Regional Energy Market - even after some of the Contracting Parties accede the EU Regional Energy Markets = steps towards establishing the internal energy market  The Energy Community is a “success and model for regional cooperation on energy matters” (European Commission, 10 March 2011)

17. - Prepared by ECS - 17 Thank you for your attention! Rozeta KAROVA Energy Lawyer Energy Community Secretariat Am Hof 4, Level 5 A-1010 Vienna Email: rozeta.karova@energy-community.org website: http://www.energy-community.org/