Introduction

On 4 May 2015, the Bill 'Rules in relation to production, transportation, trade and supply of electricity and gas' was submitted to the Dutch House of Representatives. This Bill is the last in a series that constitutes the legislative package referred to as 'STROOM', which stands for Streamlining, Optimization and Modernization. STROOM aims to create a new, clear and simple regulatory framework for the Dutch electricity and gas market, based on European law. This new framework shall form the basis for an optimal fulfilment of the different roles and responsibilities within the energy sector, facilitate a competitive economy and support the transition to sustainable energy.

This Newsflash - the first in a series of six articles on the STROOM Bill - sets out the rationale for the Bill, its structure and the envisaged time schedule for its coming into force. The subsequent newsflashes in this series will each focus on a different aspect of STROOM, such as system management, tasks and obligations of system managers, tariff regulation, the offshore grid and envisaged other future amendments once the STROOM Act has become effective.

Background

Both the Electricity Act 1998 and the Gas Act have been amended numerous times since entering into effect in respectively 1998 and 2000. As a result, these acts have become complex and are no longer transparent and consistent, while costs for implementation and supervision are substantial. Moreover, these acts originate from a time in which there was a strong focus on the liberalization of the energy market, whereas it is now felt that the energy legislation should also provide a framework for the envisaged energy transition.        

Structure

The STROOM Bill comprises a merger between the Electricity Act 1998 and the Gas Act, which aims, inter alia, to avoid discrepancies between electricity and gas regulation and to facilitate the energy transition. Only where deemed absolutely necessary the Bill distinguishes between electricity and gas. According to the Council of State, this integration makes the Bill complex. Since the current electricity and gas legislation is based on separate European directives, any future amendment or replacement of such directives may result in further complications, which are contrary to the Bill's objectives of clarity and transparency. Consequently, there seems to be an area of tension between the different objectives of Bill.

Since the form and pace of the transition to sustainable energy management is still uncertain, the STROOM Bill intends to merely provide the basic structure of Dutch energy law in order to offer flexibility in relation to the manner in which the transition can be achieved, while allowing for the introduction of more detailed rules and regulations in subordinate legislation.  In view of this envisaged energy transition, the STROOM Bill also extends the possibilities to deviate from current legislation by way of experiment in order to promote the development of local energy generation and to evaluate whether a special regulatory regime should be made applicable to local energy generation.

The Bill is structured to follow the energy chain, starting with electricity and gas production and subsequently addressing gas storage and LNG, the structure and organization of system management, tasks and obligations of system managers, tariff regulation, electricity and gas markets and trade and finally the supply of electricity and gas.   

An important new element of the Bill is that it provides the legal basis for the development of an offshore grid. Given the government's ambitious time schedule for the construction of the offshore wind parks that will be connected to this grid, there is considerable pressure on the government to ensure that the Bill enters into effect on 1 January 2016. For this reason it was decided to introduce only a limited number of changes of substance in the Bill with a main focus on system management and tariff regulation. Other material substantive amendments have been postponed. As a consequence, the Bill will not be the keystone of the STROOM legislative package, as originally intended. Although the other amendments may not be as urgent, it will be important to ensure that this gradual implementation will not erode the objects of the Bill by creating fragmented legislation.