Abstract:

Liberalization and market reform have long been key themes in the European energy sector with the creation of a single European energy market high on the agenda of the European Union for many years; the first steps towards this process took place in the early 1990s with the passing of Directive 90/377/EC, which aimed to make gas and power prices more transparent. This was followed by Directives 91/296/EEC and 90/547/EEC which were aimed at making trading energy between different European Union members more efficient.

Liberalization began in earnest in late 1996 when the EU passed the electricity directive (Directive 96/92/EC) setting out common rules for power production, transmission and distribution throughout the EU. The directive also legislated for gradual market opening with a target of 33% of all power markets meant to be opened to competition by February 2003. The electricity directive was followed in June 1998 by the passing of the first gas directive (Directive 98/30/EC), which came into legal force on 10th August 1998 and was meant to have been adopted into the national legislation of all member states within 2 years. The directive established common rules for the operation of gas markets as well as outlining a market opening schedule. Under the terms of the directive, consumers of more than 25 mcm per year and all gas fired power stations were immediately able to choose their supplier, whilst phase 2 set a 28% market opening target by mid 2003 and 33% by mid 2008. At the time the first directive was criticized, mainly by gas consumers, who described it as toothless and lacking in substance for having what they saw as a slow and undemanding market opening schedule.