In the wake of the coming into force of the First Gas and Electricity Directives, it became apparent that they were implemented very unevenly throughout the EU with access to networks and interconnectors often being granted on a discriminatory basis. Further, market concentration in the energy sector remained very high after the implementation of the First Gas and Electricity Directives.

In 2003, the EU Parliament and Council introduced, amongst other measures2, the Second Gas and Electricity Directives as the key European legislation to establish the internal electricity market. Both Directives had to be implemented by Member States by 1 July 2004. In addition, the European Commission published “Notes for Implementation”3 (the “Notes”) on how the Second Gas and Electricity Directives were to be implemented in practice. Whilst not of binding character, the Notes provide substantive guidance on key issues of the Second Gas and Electricity Directives, such as:

  •  unbundling 
  • role of regulators 
  • public service obligations 
  • the Third Party Access regime 
  • security of supply 
  • origin –identifying labelling of electricity supplied to end users 
  • gas

Whilst most EU Member States have now legally implemented the Second Gas and Electricity Directives, their application remains patchy in practice. In November 2005, the Commission published a “Report on progress in creating the internal gas and electricity market”4 which pointed to a lack of integration between national markets and criticised the absence of price convergence across the EU and the low level of cross-border trade. This was felt to be due to high barriers to entry, inadequate use of existing infrastructure and – in the case of electricity – insufficient interconnection between many Member States. Finally, the Commission found that the high degree of concentration in the energy sector needed to be addressed.

The Commission has since invited contributions5 to its country-by-country assessment of the regulatory and legislative measures put in place and expects to publish its findings by the end of 2006.