Actions against Member States by the European Commission for EU law infringements – The Third Energy Package

Summary

The European Commission (Commission) actively supervises the application of EU law by Member States. This is particularly well illustrated by its ongoing review of the implementation of the EU's Third Energy Package (Energy Package) which is one of the measures which seeks to an internal gas and electricity market in the EU. On 20 July 2016, the Commission sent a Reasoned Opinion to France calling on it to ensure compliance with an aspect of the Energy Package. Ireland and other Member States have also been the subject of similar infringement proceedings.  The implications for failure to comply with EU law are significant and can lead to financial penalties being imposed by the EU on Member States.

System of Infringement Proceedings against Member States 

In the context of the single market, the Commission can initiate infringement procedures against Member States which fail to comply with EU law. Each month the Commission publishes a list infringement decisions against Member States. The Commission also takes decisions (including Reasoned Opinions, referrals to the Court of Justice of the European Union (CoJ), and closure of proceedings (essentially where a Member State resolves the problem and complies with EU law). Ireland has been the subject of reasoned opinions and referrals to the CoJ down the years.

The Energy Package 

The Commission oversees that Member States fully and correctly apply EU energy law including the Package. The Package is designed to improve the functioning of the internal energy market and resolve structural problems by covering 5 main areas: 

• unbundling energy suppliers from network operators;
   
• strengthening the independence of regulators;
   
• establishment of the Agency for the Cooperation of Energy Regulators;
   
• cross-border cooperation between transmission system operators and the creation of European Networks for Transmission System Operators; and
   
• increased transparency in retail markets to benefit consumers.

When a Member State fails to comply with its obligations under the Package, the Commission can take legal action by launching an infringement procedure and eventually referring the case to the CoJ for a ruling. In around 95% of infringement cases, Member States comply with their obligations under EU law before they are referred to the CoJ. If the CoJ rules against a Member State, the Member State must then take the necessary measures to comply with the judgment. Where Member States have failed to implement Directives within the EU deadline, the Commission may request the CoJ to impose a financial penalty on the Member State concerned.

The Commission has issued a number of reasoned opinions and referrals to the CoJ in relation to the internal market for energy and this can be expected to continue given the high priority of the Commission regarding the Third Energy Package.

Commission action against France regarding the Energy Package

On 20 July 2016, the Commission has formally called on France to ensure implementation and application of the Electricity Directive (Directive 2009/72/EC). This Directive is part of the Energy Package and includes rules on:

(i) the unbundling of transmission system operators from energy suppliers and producers;

(ii) strengthening provisions on the independence and powers of national regulators; and

(iii) the improved functioning of retail markets to the benefit of consumers.

The Commission found that French legislation prevents undertakings (other than the national incumbent system operator for electricity) from building and operating interconnectors to other Member States. A letter of formal notice was sent to France in February 2015. Since compliance with EU law has not yet occurred, the Commission has sent France a Reasoned Opinion. France has two months to inform the Commission of the measures taken to remedy the situation; otherwise, the Commission may decide to refer the case to the CoJ. 

Commission action against Ireland regarding the Energy Package

On 20 February 2014, the Commission referred Ireland to the CoJ for failure to fully transpose the EU internal energy market rules. Ireland had only partially transposed the Electricity Directive (2009/72/EC) (Directive). The aim of the Directive is to ensure that electricity is generated, transported and sold in competitive markets which create a level-playing field. The Directive should have been transposed by Ireland by 3 March 2011. The Commission proposed a daily penalty of €20,358. The penalty proposed takes into account the duration and the gravity of the infringement. In the case of an affirmative judgement of the CoJ, the daily penalty is to be paid from the date of the judgment to the transposition date. After the application was lodged, Ireland implemented the required provisions of the Directive and the case was discontinued. A number of other Member States have been targeted by the Commission for failure to implement the Energy Package.

For further information please contact Alan McCarthy or your usual A&L Goodbody EU, Competition & Procurement contact.

Date published: 25 July 2016