Mediterranean National Regulatory Authorities (NRAs) have comparable and satisfactory levels of independence, a report by MEDREG, which presents the status of energy regulation in the Mediterranean Basin, shows.
The MEDREG Regulatory Outlook report, which was finalised in December and was exclusively shown to New Europe on January 10, aims to provide a complete overview about how the national energy sectors are ruled, ranging from independent entities to governmental bodies. MEDREG is the Association of Mediterranean Energy Regulators.
“It’s a very important report because it is the first time we have a complete overview of the energy regulatory framework in the Mediterranean,” MEDREG’s institutional Working Group Chairman Nicolò di Gaetano said in an interview, highlighting the main findings of the report.
He stressed the importance of “a stable, long-term and transparent regulation” and improving the regulatory framework in order to attract investment, to foster competition and “to protect the consumers giving them cheaper energy and security of supply”.
“Sometimes there is the most important need of the independence of the regulator, to be truly transparent, to be autonomous from political choice but just to approve and to put in place evidence-based regulation so these are very good signals for the transparency of the markets,” di Gaetano said.
According to the findings of the Regulatory Outlook report, in most countries, national energy regulatory issues are addressed by either primary (such as laws, decrees, acts) or secondary legislation (such as regulations, codes, by-laws).
In terms of independence, almost all MEDREG members are distinct and functionally independent from any other public and private entity, the report shows. Almost every NRA is autonomous with regards to carrying out any regulatory task.
In nearly every NRA there are some formal rules that prevent the regulatory authority staff such as board members and experts from having interests in regulated utilities or occupying leading political functions.
According to the MEDREG report, board members’ independence is safeguarded by law and an internal regulation applies to staff members as well. Moreover, the regulatory authority’s decisions are binding in every NRA, which is a significant institutional power. As an indication of financial independence of the regulatory authorities, almost every regulatory body is financed by own resources.
Overall, Mediterranean NRAs have comparable and satisfactory levels of independence, which guarantees regulatory stability and neutrality and avoids situations in which the decisions of the regulator are constantly modified or taken under influence, according to the report, which shows that almost every NRA supports full opening in the electricity and where possible gas markets.
With the exception of Israel, Malta and Turkey, there are national timetables for the full opening of the electricity and gas markets in all Mediterranean countries.
Market opening is an extremely important feature for Mediterranean energy markets, which are oriented towards increasing competition between utilities and correspondingly improve the quality of service for consumers. In this sense, answers shows that all the responded NRAs approve the necessity of market opening in energy sector for the reason of its advantageous features and all regulatory authorities cooperate with Competition/Anti-trust authorities, so as to establish or maintain the competition environment, the report found.
The report shows how the level of competence in tariff setting is satisfactory among the NRAs, although some have room to improve their competences.
Regarding the tariff-setting regime, there are some differences among the MEDREG countries that responded to the questionnaire. As a general comment, almost all NRAs have the power to fix and approve tariffs, although in several cases the role of regulator could benefit from clarifications and improvements, according to the report.
Not all NRAs are responsible for dispute settlement between industry and customers. Indeed, the report highlights that some NRAs may be entrusted with more powers in terms of dispute settlement, according to the findings of the report.
Every NRA that answered the questionnaire sets or approves rules regarding the management and allocation of interconnection capacity. Every NRA indicated that they are responsible for customer protection, although the level of responsibility differs, especially in terms of addressing vulnerable consumers’ needs, the report found.
The large majority of NRAs has the power to decide on its own internal organisation. In addition, most of NRAs decide on human resource policy.
All NRAs have the power to sanction sector participants, however the extent of this power widely differs and would benefit from further analysis.
Most NRAs publish the information on the regulatory authority (missions, duties, organization chart, and reports) and make these information available to stakeholders, including the publication of an Annual Report and the regular use of consultations to inform their decisions.
The majority of respondents have reporting obligations to regularly report to another public body such as government, ministry or parliament.
According to MEDREG, the aim of this Regulatory Outlook report is to contribute to the development of a more independent and solid governance model of regulation by assessing the current situation of each MEDREG member regulator and help identifying scope for improvement.
Each regulator is analysed according to a number of dimensions – such as independence, organisation, transparency and accountability. These features are directly linked to the principles for good regulators defined by MEDREG Members, in order to support the development and reinforcement of national regulations along the same directions, in order to create a harmonised environment to foster investments, competitiveness and consumer protection.
Taking into account the work MEDREG carried out in 2014 to identify good regional regulatory principles, this report was based on the answers to a questionnaire divided into six sections, covering several aspects of national regulatory frameworks: Independence, competences, internal organisation, enforcement, transparency and accountability.