ACTIVITY REPORT 2015 Reference document CRE Activity Report 2015 Reference document 3 THE ENERGY REGULATORY COMMISSION CRE Activity Report 2015 Reference document CONTENTS MESSAGE FROM THE BOARD 6 THE ENERGY REGULATORY COMMISSION 9 THE ORGANISATION AND MISSIONS OF CRE 10 1. The organisation of CRE ..................................................................................................10 2. The missions of CRE ........................................................................................................11 3. CRE and other institutional actors .................................................................................18 4. CRE, consultation and transparency .............................................................................20 5. Human resources and budgetary means .....................................................................21 CRE PLAYING A ROLE AT THE HEART OF EUROPE 23 1. CRE within ACER and CEER ............................................................................................23 2. Cooperation with other regulators .................................................................................26 CRE AND THE MARKETS 29 As PART OF ITS MONItoRING TASK, CRE ASSESSES THE WHOLESALE MARKET 30 1. The wholesale energy market has been affected by the significant fall in prices ........................................................................................30 2. The European regulation, REMIT, is a legal tool for monitoring the markets at European level ........................................................................................38 3. The capacity mechanism has been defined to promote the security of supply at national level ................................................................................................40 THE RETAIL MARKET WAS GROWING FAst IN 2015 44 1. The implementation of the NOME law provides a new legal framework for regulated tariffs .................................................................................................................44 2. Information for consumers on the retail market is still very much lacking ...........45 3. The end of regulated sales tariffs for businesses is a decisive step in opening up to competition ..........................................................48 CRE AND THE NETWORKS 57 The CRe’s woRk To pRomoTe non-disCRiminaToRy Access to NETWORKS 58 1. Work done by the CRE defines a stable framework for network tariffs .................58 2. The CRE’s work to ensure independence of system operators ...............................63 3. The CRE guarantees the transparent and non-discriminatory nature of the procedures and rates for connections, and the contracts for access to the networks ..............................................................................................65 4. Access to storage: moving towards a regulation of revenues for French storage operators ....................................................................67 THE CRE IS PREPARING THE FUTURE OF THE NETWORKS 69 1. The CRE approves investments in the transmission networks ...............................69 2. The electricity and gas networks are being modernised ...........................................75 3. The terms of access to data are yet to be defined .....................................................78 4 CRE Activity Report 2015 THE ENERGY REGULATORY COMMISSION Reference document CRE contRIBUtes to THE DEVELOPMENT OF THE EUROPEAN REGULAtoRY FRAMEWORK 80 1. The CRE played an active part in drafting the network codes in 2015 ...................80 2. The rest of the CRE’s work contributing to the common rules for operation of the internal energy market ..........................................................................................85 3. The involvement of the CRE in the European Commission’s consultations on “market design” ............................................................................................................87 CRE AND THE DEVELOPMENT OF RENEWABLE ENERGY SOURCES 89 A NEW FRAMEWORK FOR THE SUPPORT OF RENEWABLE ENERGIES DEFINED AT EUROPEAN LEVEL 90 1. The main conditions required of the support mechanism for renewable energies .....................................................................................................90 2. The conditions imposed on exemptions relating to financing the aid to renewable energy, applied to electro-intensive industries ....................................90 IN 2015 FRANCE UNDERtooK A MAJOR REFORM OF THE MECHANISMS to SUPPORT RENEWABLE ENERGIES 91 1. A new support mechanism for renewable energy: additional remuneration ........91 2. The tendering procedures used by CRE should be generalised for medium- and high-power facilities ..........................................................................94 3. Policy changes enacted for the development of renewable energy are resulting in increased pressure on CRE’s resources ...........................................97 CHANGES IN THE FINANCING OF PUBLIC SERVICE costs 98 1. Continued growth of public electricity service costs .................................................98 2. Level of the contribution to the public electricity service planned for 2016 before the reform was launched ...................................................................99 3. Reform of the financing of public service costs for energy ....................................100 4. Impact of the reform on CRE ........................................................................................102 FoCus on The non-inTerconneCTed TeRRiToRies 104 1. Contract follow-up in application of the methodology to review investment and operation costs in the non-interconnected territories ......................................106 2. CRE has defined a methodology to analyse investments and to manage electricity demand ..............................................................................107 3. CRE is now responsible for issuing proposals to the Ministers of Energy and of the Economy on the regulated sales tariffs for electricity in the non-interconnected territories applicable to all consumers ........................108 4. Development of renewable energy ..............................................................................109 5. Changes in governance in the non-interconnected territories with the multiannual programme for energy production .................................................113 ANNEXES 115 5 THE ENERGY REGULATORY COMMISSION CRE Activity Report 2015 Reference document MessAGE FROM THE BOARD Twenty years after the first directive to liberalise the gas and electricity markets, and after 15 years of CRE as the energy regulator, what can be said about the energy market today? It is a commonplace that the sector has seen many changes and a lot of disruption, but it is less often mentioned that the low price scenario which we see today is nothing exceptional. It is what we also saw at the end of the 90’s and the beginning of the twenty-first century. The price of electricity on the wholesale market was even slightly lower than where it is today. At that time the price of petrol was around 20 dollars a barrel. In other words, the present situation that is so strongly worrying all the companies operating in the electricity and gas sector is nothing new. What is new, is the factors that have helped to create this drop in prices. In 2000, the only factor that deter- mined the wholesale price was the price of petrol, which defined the price of gas and, curiously, also affected the price of coal. As the two components of the mar- ginal cost in Europe were basically coal and gas, the prices were low. This factor still plays a role today, and the large-scale development of shale gas in the United States has released large quantities of coal onto the world market, making them available at very low prices. The new factors, however, are the economic crisis that is affecting Europe, the increase of nearly 40% in installed capacity in Europe between 2000 and 2013, espe- cially with the large-scale arrival of renewable energy, and the growth of combined- cycle gas turbines in the European market, with consumption only growing by 7.5% during this same period. This situation, apparently, arrived unexpectedly, despite the targets set by directive 2001/77/EC of 27 September 2001, which on the one hand set a target of 22% of electricity to be produced from renewable energy sources by 2010, and then the Energy-Climate package known as “3 x 20” that was inspired by the directives of 23 April 2009 (directives 2009/28/EC, 2009/29/EC and 2009/31/EC). As far as France is concerned, two further items have affected the situation since the turn of the century. Following the Fukushima disaster, the French Nuclear Safety Authority (ASN) stepped up its requirements in terms of safety. Since these requirements increase the neces- sary maintenance investments of nuclear power plants, which are all at least 20 years old, the future investment requirements will be substantial. 6 CRE Activity Report 2015 THE ENERGY REGULATORY COMMISSION Reference document In addition, the competition that started very slowly in France, at least for electricity, has really speeded up in the last few months with the end of regulated tariffs in the industrial and professional sectors. EDF’s loss of nearly 30% of these customers came as a shock to many. Now competition has indeed become a reality and will not be going away. Already well-advanced in the natural gas