The Second Gas Electricity Directives make it clear that public service requirements are a fundamental requirement for
the proper functioning of the internal energy market. PSOs are generally understood to be obligations which the
undertaking in question would not shoulder if it were following its own commercially driven interests. Measures to ensure security of supply, the protection of the environment and private customers in remote areas are obvious
examples.

Article 3 (2) of both the of the Second Gas Directive and the Second Electricity Directive provide that Member States
may impose on undertakings operating in the relevant sector, in the general economic interest, public service
obligations which may relate to: 

  • security (including security of supply) 
  • regularity 
  • quality and price of supplies 
  • environmental protection, including energy efficiency and climate protection

The PSOs must be clearly defined, transparent, non-discriminatory, verifiable and guarantee equality of access for EU
gas (or electricity, respectively,) companies to national consumers. In relation to security of supply, energy
efficiency/demand-side management and the fulfilment of environmental goals, Member States may introduce the
implementation of long term planning, taking into account the possibility of third parties seeking access to the system.

There was some concern that Member States might utilise PSOs to impede the opening of the market, in particular
where the incumbent utilities are state-owned. As such, the need to honour PSOs needed to be balanced with the
interests of market opening and those of competition, and the Notes provide guidance in this respect. The Notes clarify
that PSOs must be: 

  • related to the supply of a service of general interest 
  • transparent. Amongst other things, this will enable all concerned undertakings to compete for the PSO if the PSO
    becomes the subject of a tender. PSOs must also be non-discriminatory 
  • verifiable in the sense that the Commission will evaluate whether the PSOs accord with the principle of
    proportionality. This means that the Commission will evaluate the need and scope of the proposed PSO, whether it is
    in line with Community interest, and whether it is appropriate to attain its objective

Furthermore, PSOs imposed in one Member State must not adversely affect the interests of the Community. The
interests of the Community include, amongst others, the maintenance of its competition regime with regard to eligible
customers.