Regulation (EU) No 994/2010 of the European Parliament and of the Council of 20 October 2010 concerning measures to safeguard security of gas supply and repealing Council Directive 2004/67/EC Text with EEA relevance

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 194(2) thereof,

Having regard to the proposal from the European Commission,

Having regard to the opinion of the European Economic and Social Committee⁽¹⁾,

Having consulted the Committee of the Regions,

Acting in accordance with the ordinary legislative procedure⁽²⁾,

Whereas:

1. Natural gas (gas) is an essential component in the energy supply of the European Union, constituting one quarter of primary energy supply and contributing mainly to electricity generation, heating, feedstock for industry and fuel for transportation.

2. Gas consumption in Europe has increased rapidly during the last 10 years. With decreasing domestic production, gas imports have increased even more rapidly, thus creating a higher import dependence and the need to address security of gas supply aspects. In addition, some Member States find themselves on a gas island as a result of an absence of infrastructure connections with the rest of the Union.

3. Given the importance of gas in the energy mix of the Union, this Regulation aims at demonstrating to gas customers that all the necessary measures are being taken to ensure their continuous supply, particularly in case of difficult climatic conditions and in the event of disruption. It is recognised that these objectives should be achieved through the most cost-efficient measures in order not to affect the relative competitiveness of this fuel compared to other fuels.

4. Council Directive 2004/67/EC⁽³⁾ established for the first time a legal framework at Community level to safeguard security of gas supply and to contribute to the proper functioning of the internal gas market in the case of supply disruptions. It established the Gas Coordination Group which has been useful to exchange information and define common actions between Member States, the Commission, the gas industry and consumers. The Network of Energy Security Correspondents endorsed by the European Council in December 2006 has improved the capacity to collect information and has provided early warning of potential threats to the security of energy supply. The new internal energy market legislation adopted by the European Parliament and the Council in July 2009 constitutes an important step to complete the internal energy market and has an explicit objective to enhance the Union’s security of energy supply.

5. However, under the current measures regarding the security of gas supply that have been taken at Union level, Member States still enjoy a large margin of discretion as to the choice of measures. Where the security of supply of a Member State is threatened, there is a clear risk that measures developed unilaterally by that Member State may jeopardise the proper functioning of the internal gas market and the supply of gas to customers. Recent experience has demonstrated the reality of that risk. In order to allow the internal gas market to function even in the face of a shortage of supply, it is necessary to provide for solidarity and coordination in the response to supply crises, both concerning preventive action and the reaction to concrete disruptions of supply.

6. Low calorific gas is supplied in certain regions in the Union. Given its characteristics, low calorific gas cannot be used in appliances designed for high calorific gas. It is, however, possible to use high calorific gas in appliances designed for low calorific gas, provided that it has been converted into low calorific gas, for instance by adding nitrogen. The specificities of low calorific gas should be considered at national and regional levels and should be taken into account in the risk assessment and the Preventive Action and Emergency Plans at national and regional levels.

7. The diversification of gas routes and of sources of supply for the Union is essential for improving the security of supply of the Union as a whole and its Member States individually. Security of supply will depend in the future on the evolution of the fuel mix, the development of production in the Union and in third countries supplying the Union, investments in storage facilities and in the diversification of gas routes and of sources of supply within and outside the Union including Liquefied Natural Gas (LNG) facilities. In this context particular attention should be given to priority infrastructure actions as identified in the Commission communication of 13 November 2008 entitled ‘Second Strategic Energy Review — An EU energy security and solidarity action plan’, e.g. the southern gas corridor (Nabucco and Interconnector Turkey Greece Italy), a diversified and adequate LNG supply for Europe, effective interconnection of the Baltic region, the Mediterranean Energy Ring and adequate north-south gas interconnections within central and south-east Europe.

8. In order to reduce the impact of potential crises triggered by the disruption of gas supplies, Member States should facilitate the diversification of energy sources and gas delivery routes and supply sources.

9. A major disruption of gas supply to the Union can affect all Member States, the Union as a whole and Contracting Parties to the Treaty establishing the Energy Community⁽⁴⁾, signed in Athens on 25 October 2005. It can also lead to severe economic damage across the Union’s economy. Likewise, the disruption of gas supply can have a severe social impact, in particular on vulnerable groups of customers.

10. Certain customers, including, inter alia, households and customers providing essential social services such as healthcare and childcare activities, educational activities and other social and welfare services as well as services indispensable for the functioning of a Member State, are particularly vulnerable and might need protection. A wide definition of such protected customers should not conflict with European solidarity mechanisms.

11. The Report on the Implementation of the European Security Strategy approved by the European Council in December 2008 highlights the growing reliance on imported energy as a significant additional risk for the Union’s security of energy supply and stresses energy security as one of the new challenges for security policy. The internal gas market is a central element to increase the security of energy supply in the Union and to reduce the exposure of individual Member States to the harmful effects of supply disruptions.

12. For a well functioning internal gas market it is essential that measures taken to safeguard the security of gas supply do not unduly distort competition or the effective functioning of the internal gas market.

13. The failure of the single largest gas infrastructure, the so-called N – 1 principle, is a realistic scenario. Using the failure of such an infrastructure as a benchmark of what Member States should be able to compensate is a valid starting point for an analysis of the security of gas supply of each Member State.

14. Sufficient and diversified gas infrastructure within a Member State and across the Union, including in particular new gas infrastructure connecting current isolated systems forming gas islands to their neighbouring Member States, is essential for tackling supply interruptions. Common minimum criteria on security of gas supply should ensure a level playing field for security of gas supply while taking into account national or regional specificities and should create significant incentives to build the necessary infrastructure and to improve the level of preparedness in case of crisis. Demand-side measures such as fuel switching may have a valuable role to play in ensuring energy security where they can be applied quickly and reduce demand appreciably to react to a supply disruption. The efficient use of energy should be further promoted, in particular where demand-side measures are needed. The environmental impact of the proposed demand and supply-side measures should be taken into due account and preference should be given as far as possible to measures with the least impact on the environment while taking into account security of supply aspects.

15. Investments in new gas infrastructure should be strongly promoted and should be effected only after an appropriate environmental impact assessment, in accordance with the relevant legal acts of the Union. Such new infrastructure should enhance the security of gas supply while ensuring the proper functioning of the internal market in gas. Investments should as a matter of principle be made by undertakings and be based on economic incentives. Due account should be taken of the need to facilitate the integration of gas from renewable energy sources into the gas network infrastructure. Where an infrastructure investment is of cross-border nature the Agency for the Cooperation of Energy Regulators (the Agency) established by Regulation (EC) No 713/2009 of the European Parliament and of the Council⁽⁵⁾ and the European Network of Transmission System Operators for Gas (the ENTSO for Gas) established by Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks⁽⁶⁾ should be closely involved, within the areas of their respective competences, in order to take better account of the cross-border implications. It is recalled that, in accordance with Regulation (EC) No 713/2009, the Agency may issue opinions or recommendations on cross-border issues within its area of competence and activity. The Agency and the ENTSO for Gas, together with other market participants, play an important role in the establishment and implementation of the Union-wide 10-year network development plan which will include, inter alia, a European supply adequacy outlook and, regarding cross-border interconnections, should, inter alia, build on the reasonable needs of different network users.

16. The Competent Authorities or the Member States should ensure that the gas market is tested as one of the necessary steps in the course of the process leading to compliance with the infrastructure standard.

17. In carrying out the tasks specified in this Regulation, the Competent Authorities should closely cooperate with other relevant national authorities, in particular national regulatory authorities, as appropriate and without prejudice to their competences under Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas⁽⁷⁾.

18. Where new cross-border interconnections are needed or existing ones need to be extended, close cooperation between the Member States concerned, Competent Authorities and the national regulatory authorities, where they are not the Competent Authorities, should take place at an early stage.

19. Different sources of Union funding are available to support Member States to finance the necessary investment in production, infrastructure and energy-efficiency measures at regional and local level, notably loans and guarantees from the European Investment Bank or funding from regional, structural or cohesion funds. The European Investment Bank as well as the Union’s external instruments such as the European Neighbourhood and Partnership Instrument, the Instrument for Pre-accession Assistance and the Financing Instrument for Development Cooperation can also finance actions in third countries in order to improve security of energy supply.

20. This Regulation should enable natural gas undertakings and customers to rely on market mechanisms for as long as possible when coping with disruptions. It should also provide for emergency mechanisms to be used when markets alone are no longer able to deal adequately with a gas supply disruption. Even in an emergency, market-based instruments should be given priority to mitigate the effects of the supply disruption.

21. Following the entry into force of the new internal energy market legislation adopted in July 2009, new provisions will apply to the gas sector, creating clear roles and responsibilities for Member States, national regulatory authorities, transmission system operators and the Agency, and improving the transparency of the market to enhance its functioning, the security of supply and the protection of customers.

22. The completion of the internal gas market and effective competition within that market offer the Union the highest level of security of supply for all Member States, provided that the market is allowed to function fully in the event of disruption of supply affecting a part of the Union, whatever the cause of the disruption. To this end, a comprehensive and effective common approach to security of supply is required, particularly transparency, solidarity and non-discriminatory policies compatible with the functioning of the internal market, avoiding market distortions and the undermining of market responses to disruptions.

23. Security of gas supply is a shared responsibility of natural gas undertakings, Member States, notably through their Competent Authorities, and the Commission within their respective areas of activities and competence. Where appropriate, the national regulatory authorities, where they are not the Competent Authorities, should also contribute to security of gas supply within their areas of activities and competence in accordance with Directive 2009/73/EC. Moreover, customers using gas for electricity generation or industrial purposes may also have an important role to play in security of gas supply through their ability to respond to a crisis with demand-side measures, for instance interruptible contracts and fuel switching, as this directly impacts on the supply/demand balance.

24. The precise definition of the roles and responsibilities of all natural gas undertakings and Competent Authorities is therefore crucial in maintaining a well-functioning internal gas market, particularly in supply disruptions and crisis situations. Such roles and responsibilities should be established in such a way as to ensure that a three-level approach is respected which would involve first the relevant natural gas undertakings and industry, then Member States at national or regional level, and then the Union. In the event of a supply crisis, market players should be given sufficient opportunity to respond to the situation with market-based measures. Where the reactions of market players are not sufficient, Member States and their Competent Authorities should take measures to remove or mitigate the effects of the supply crisis. Only where these measures are insufficient should measures be taken at regional or Union level to remove or mitigate the effects of the supply crisis. Regional solutions should be sought as far as possible.

25. In a spirit of solidarity, regional cooperation, involving public authorities and natural gas undertakings, will be widely established to implement this Regulation in order to optimise the benefits in terms of coordination of measures to mitigate the risks identified and to implement the most cost-effective measures for the parties concerned.

26. Sufficiently harmonised security of supply standards covering at least the situation that occurred in January 2009, taking into account the difference between Member States, should be established, taking into account public service obligations and customer protection measures as referred to in Article 3 of Directive 2009/73/EC. Such security of supply standards should be stable, so as to provide the necessary legal certainty, should be clearly defined, and should not impose unreasonable and disproportionate burdens on natural gas undertakings, including new entrants and small undertakings, or on end users. Those standards should also guarantee equality of access for natural gas undertakings of the Union to national customers. Measures necessary to ensure the fulfilment of the supply standard may include additional storage capacities and volumes, linepack, supply contracts, interruptible contracts or any other measures that have a similar effect, as well as the necessary technical measures to ensure the safety of gas supply.

27. It is essential in the interests of a well-functioning gas market that the necessary investments in indigenous production and infrastructures, such as interconnections, in particular those providing access to the gas network of the Union, equipment allowing physical bi-directional gas flows on pipelines as well as storage and LNG re-gasification facilities, be made by natural gas undertakings in good time, bearing in mind possible supply disruptions such as the one that occurred in January 2009. When forecasting the financial needs for gas infrastructure in relation to Union instruments, the Commission should give, as appropriate, priority to the infrastructure projects which support the integration of the internal gas market and security of gas supply.

28. Transmission system operators should not be prevented from considering the situation where investments enabling physical capacity to transport gas in both directions (bi-directional capacity) in cross-border interconnections with third countries could contribute to improving security of supply, especially in the case of third countries which ensure transit flows between two Member States.

29. It is important that gas supply be maintained particularly as regards household customers, as well as a limited number of additional customers, especially customers delivering essential social services, which can be defined by the Member States concerned, in cases in which the market cannot continue to supply them. It is essential that the measures to be taken during a crisis be defined in advance and respect safety requirements, including where protected customers are connected to the same distribution network as other customers. Such measures may involve the use of pro-rata reductions in proportion to the originally booked capacity in cases where capacity for access to infrastructure is reduced for technical reasons.

30. As a rule, the Competent Authorities should abide by their Emergency Plan. In duly justified exceptional circumstances they may take action which deviates from those Plans.

31. A large choice of instruments is available to comply with security of supply obligations. Those instruments should be used in national, regional and Union contexts, as appropriate, to ensure that they deliver a consistent and cost-effective result.

32. The security of supply aspects of long-term planning of investments in sufficient cross-border capacities and other infrastructures, ensuring the long-term ability of the system to guarantee security of supply and meet reasonable demands, are addressed by Directive 2009/73/EC. Meeting the security of supply standards may require a transitional period to allow the necessary investments to be made. The Union-wide 10-year network development plan drawn up by the ENTSO for Gas and supervised by the Agency is a fundamental tool to identify the required investments needed at Union level, inter alia, in order to implement the infrastructure requirements laid down in this Regulation.

33. The ENTSO for Gas and the Agency, as members of the Gas Coordination Group, should be fully involved, within their areas of responsibility, in the process of cooperation and consultations at Union level.

34. The Gas Coordination Group is the main body to be consulted by the Commission in the context of the establishment of the Preventive Action Plans and the Emergency Plans. It is recalled that the ENTSO for Gas and the Agency are members of the Gas Coordination Group and will be consulted in that context.

35. In order to ensure the highest level of preparedness in the event of supply disruption, Emergency Plans should be established by the Competent Authorities, after consulting the natural gas undertakings. Such plans should not be inconsistent with each other at national, regional or Union level. Their content should follow best practices among existing Plans and should define clear roles and responsibilities for all natural gas undertakings and Competent Authorities concerned. Joint Emergency Plans at regional level should be established where possible and necessary.

36. To strengthen solidarity between Member States in the event of a Union emergency and in particular to support Member States which are exposed to less favourable geographical or geological conditions, Member States should devise measures to exercise solidarity. Natural gas undertakings should devise measures such as commercial agreements, which may comprise increased gas exports or increased releases from storages. It is important to encourage the conclusion of arrangements between natural gas undertakings. The actions of the Emergency Plan should include mechanisms, where appropriate, ensuring fair and equitable compensation of the natural gas undertakings. Solidarity measures may be particularly appropriate between Member States for which the Commission recommends the establishment of joint Preventive Action Plans or Emergency Plans at regional level.

37. In the context of this Regulation, the Commission has an important role to play in the event of an emergency, be it at Union or regional level.

38. European solidarity should also, where needed, take the form of civil protection assistance provided by the Union and its Member States. Such assistance should be facilitated and coordinated by the Community Civil Protection Mechanism established by Council Decision 2007/779/EC, Euratom⁽⁸⁾.

39. The sovereign rights of Member States over their own energy resources are not affected by this Regulation.

40. Council Directive 2008/114/EC of 8 December 2008 on the identification and designation of European critical infrastructures and the assessment of the need to improve their protection⁽⁹⁾ lays down a process with a view to enhancing the security of designated European critical infrastructures, including certain gas infrastructures, in the Union. Directive 2008/114/EC together with this Regulation contribute to creating a comprehensive approach to the energy security of the Union.

41. Emergency Plans should be updated regularly and published. They should be subject to peer review and tested.

42. The Gas Coordination Group should act as adviser to the Commission to facilitate the coordination of security of supply measures in the event of a Union emergency. It should also monitor the adequacy and appropriateness of measures to be taken under this Regulation.

43. This Regulation aims at empowering natural gas undertakings and Competent Authorities of the Member States to ensure that the internal gas market works effectively for as long as possible in the event of a supply disruption, prior to measures being taken by Competent Authorities to address the situation in which the market can no longer deliver the required gas supplies. Such exceptional measures should be fully compliant with Union law and should be notified to the Commission.

44. Since gas supplies from third countries are central to the security of gas supply of the Union, the Commission should coordinate the actions with regard to third countries, working with the supplying and transiting third countries on arrangements to handle crisis situations and to ensure a stable gas flow to the Union. The Commission should be entitled to deploy a task force to monitor gas flows into the Union in crisis situations, in consultation with the third countries involved, and, where a crisis arises due to difficulties in a third country, to assume a mediation and facilitation role.

45. It is important that the conditions for the supply from third countries do not distort competition and are in accordance with internal market rules.

46. Where there is reliable information of a situation outside the Union that threatens the security of supply of one or several Member States and that may trigger an early warning mechanism between the Union and a third country, the Commission should inform the Gas Coordination Group without delay and the Union should take appropriate actions to try to defuse the situation.

47. In February 2009, the Council concluded that transparency and reliability should be increased through the meaningful exchange of information between the Commission and Member States on energy relations with third countries, including long-term supply arrangements, while preserving commercially sensitive information.

48. While rules contained in the Treaty on European Union and in the Treaty on the Functioning of the European Union, in particular the rules on competition, apply to services of general economic interest in so far as the application of such rules does not obstruct the performance of such services, Member States enjoy a wide discretion in providing for, commissioning and organising public service obligations.

49. Since the objective of this Regulation, namely to ensure the security of gas supply in the Union, cannot be sufficiently achieved by the Member States alone and can therefore, by reason of the scale or effects of the action, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective.

50. Directive 2004/67/EC should be repealed,

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