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Non-discrimination obligation

2014-06-17

A book expound on a principle at the core of energy regulation in Europe, the principle of non-discrimination obligation. 

Non-discrimination obligation is to be found in laws and regulations for gas, electricity, telecommunication and contracting sectors (illustration: D Sign Graphics (www.dsigngraphics.be)/Danny Juchtmans) Non-discrimination obligation is to be found in laws and regulations for gas, electricity, telecommunication and contracting sectors (illustration: D Sign Graphics (www.dsigngraphics.be)/Danny Juchtmans)

The supply of gas and electricity relies primarily on energy network operators. Legislators of European countries have introduced the principle of non-discrimination obligation. This principle facilitates the access to the gas and electricity networks by third parties. Some of these laws and regulations have contributed to the introduction of renewable energy as well.  

Non-discrimination obligation is “at the core of energy regulation,” said in a telephonic interview Hannah Kruimer, giving her personal view on the research she has done at the University of Groningen. Since the mid-1990s, the European Union (EU) has promoted non-discrimination obligation. It has enacted a series of energy-related directives to remove barriers to competition in a liberalised European energy market.

Dr Kruimer has published a book on this topic, The Non-Discrimination Obligation of Energy Network Operators, as part of a research project on the role of law on energy networks in relation to the use of new energy resource. Amongst other topics, she explains which set of laws and regulations are needed for the introduction of renewable energy into gas and electricity networks. Energy network operators, regulatory authorities and national courts will find this book appealing.

To facilitate competition

The concept of non-discrimination obligation was aimed at facilitating competition. “It’s very much about not distorting competition basically on the gas markets,” she said. Non-discrimination obligation can be translated in several practical network operations. It concerns allocation mechanisms, congestion-management procedures, balancing rules, capacity trading, etc. 

Besides enabling competition on the European markets, non-discrimination obligation can facilitate the introduction of renewable energy. The EU has enacted a series of directives so that producers of renewable energy will not be discriminated by network operators.

The United Kingdom, the Netherlands and Germany have translated EU directives into their national laws and regulations. They have done it largely the same way. “If you look at the specific details of legislation, the national grid codes and licenses, that is where you see differences in how they have implemented the European directives,” she nuanced. 

An economic approach

Each of these country has its own way of dealing with litigious cases. In the United Kingdom, no case has been brought to the court. All litigations have been solved by regulatory decisions. In the Netherlands, on the contrary, the court has solved all cases. “In Germany, there weren’t too many cases, because the regulator has a mediation approach to complain,” Dr Kruimer said. “So, he tries to solve things in a bilateral way between the parties involved.”

The European Court of Justice has examined cases of discrimination. Who can establish an exception or a derogation to the application of non-discrimination obligation? “There is no rule for national exception,” she said. This contribute to the establishment of a European governance that replace member State’s legal and regulatory traditions. 

What happened to the principle of non-discrimination obligation? “I see a change to a more economical approach,” she said. “They are trying to see what will be the effects of regulation on transmission system operators.” The economic approach, where the efficiency of the market is important, will progressively replace the formalistic approach, for which the court should apply strictly laws and regulations. 

Dr Kruimer’s central conclusion is to build on the economic approach. It would contribute to a certain flexibility in the interpretation of laws and regulations. One question remains, though. Was the principle of non-discrimination obligation effective in facilitating the liberalization of European energy markets? “Yes, definitely,” she said. “It is still a key-instrument.” 

By Jean-François Auger