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The new regulation on security of gas supplies

Submitted by on 30 Nov 2010 – 15:17

By Alejo Vidal-Quadras, Vice-president of the European Parliament

This September the European Parliament approved by a large majority the Regulation on the Security of Gas Supply. The Regulation is a historic improvement in achieving energy supply security, and this in several optics. Not only is a Regulation the strongest legal instrument that the Union possesses, but it has also established different sets of standards through which it primarily ensures the supply to the most vulnerable European gas consumers.

We all remember the winters of 2005-2006 and 2008-2009, during which thousands of European citizens were left without gas, due to unresolved issues between third countries.  And so one of the key achievements of the Regulation is the adoption of a definition of “protected customers” in the EU. Having identified European “households” as protected customers, the Regulation will safeguard the supply of each and every one of the European citizens. A certain flexibility has, however, been left to the Member States to widen this definition to certain essential social services such as schools and hospitals, provided that these extensions do not exceed 20% of the total gas demand of that country. However, any potential over dimensioned zeal of a National Authority has been balanced by the mutual solidarity obligation resting on all the Member States towards the protected customers of any European Union neighbour.

As regards the supply standards, the Regulation states that the Member States will have to ensure that the different gas undertakings supply the protected customers during at least 30 days in case of a crisis. Since it is a fact that some countries depend on one gas supplier only, and that those countries would be in great difficulties in case of a crisis, the Regulation foresees that the supply standard can be ensured by national stockpiles of another Member State. In this sense, the supply standard obligation towards the protected customers cannot be understood without the obligation to respect certain infrastructure standards, also imposed by the Regulation. Indeed, these infrastructure standards lead, on the short and middle term, to increased interconnections between the Member States, the installation of reverse flows capacity and the establishment of stockpiles. In a nutshell, the Regulation’s main objective is to reduce to a minimum the risk of not being able to supply one’s protected customers due to a lack a diversified supply.

With regard to the management of potential or existing supply threats, the Member States will be obliged to previously establish preventive and emergency plans. During their elaboration, those plans will have to be consulted with the other Member States and sent to the European Commission for its approval (for the preventive plans) and for its consultation (for the emergency plans). The European Parliament strongly insisted on this point, since the competence as such attributed to the Commission is to be considered a great advance compared to today’s situation. Indeed, once having received all the different national preventive plans from the Member States, the Commission will enjoy a global European vision and be able to identify possible and potential inconsistencies between the different national plans. This way, it will detect infringements of the single market or the solidarity obligation between the Member States, and ask the Member State in question to modify the disposition.

More than extinguishing a fire, these measures are about preventing it. Of course this does not mean that a fire may never occur, which would activate the emergency plan of a Member State. Moreover, in case of a crisis the European Commission has also been endorsed with the responsibility to declare a Union or regional emergency. This way, an early warning mechanism will be triggered, which will allow for a quick and adequate reaction from the different Member States that will have been previously determined in their emergency plans, and this under an unprecedented coordination and supervision of the Commission.

Once correctly implemented by the different Member States, the two intrinsically linked supply and infrastructure standards, will allow for the market to operate as the adequate response to any gas supply problem. It was crucial for the Parliament to limit the possibility for Member States, when invoking a crisis, to take measures that intervene in the market in such way as to disrupt the competition. For instance, if a supplier were to be unable to supply its customers, it would have to buy its gas from another supplier that has available gas, in the same Member State or in a neighbouring one. This will be the logical working of the market in which Government intervention will only be considered as a very last resort. This Regulation is historical in the sense that the Member States have finally accepted and enforced the principle that the solution to an external threat can be found within the Union and by joint action, rather than exclusively through bilateral diplomatic initiatives.