Investment Opportunities Offered by the Strengthening Integration of EnC

Albania Oil, Gas & Energy 2015 Summit Keynote Speech kept by Adv. Lorenc Gordani, PhD

Published: March 19, 2015

The here topic is conceived to pass through the here three main bullet points: (i) the dimension energy markets liberalization as priority toward an Energy Union; (ii) a huge possibilities in the investments open and reforms offered by the dimension of Pan-European integration; (iii) and the prospect toward a creating an effective Pan-European Internal Energy Market and the up-coming profile in the improving the dispute settlement and the investment climate.

Following the above order it want to introduce in artefacts reporting that ten years ago, the EU signed an international treaty, which created the Energy Community. The overriding objective of which almost unusual in the until praxis at least for two reasons: (i) the creation of an single pan-European energy market foreseen the transposing of EU legacy in the energy field still in devel-opment and (ii) this unprecedented initiative aimed by one part the preparing and put closer the new upcoming members (Bulgaria, Rumania and Croatia) as also by other the WBs in attempt to leave behind the reasons of the recent conflicts.

After a very short period today the EnC brings together Albania with the five other countries of the WBs, that in a strategic prospect to a fully integration have undertaken an extraordinary ef-fort to align their energy markets within EU principles. Therefore, during all this years, the core of the acquis has been several times object of adaptation. Lastly, on 6 Oct 2011, the Ministerial Council (MC) adopted the so-called Third Energy Package that set the general deadline by 1st Jan 2015. It means that currently, the CPs’ commitments have entered in the prevision of the Third Energy Package Area.

Then, its implementation remain today the key priority seen until now only one country (Serbia) to formally submit its new energy law in the December 2014. The Albania as the other major number of countries are on the verge of transposing the package in their internal legal frame-work. Then almost all the region by mid-2015 will be involved in dealing with the same frame-work as EU Member States (MS), only with a 3 to 5 years delay.

The here introduction give us the possibility to follow with the dimension of the energy markets liberalization as a priority toward a project of the Energy Union. In its establishing Political Guidelines European Commission President Juncker announced a reform and reorganisation of Europe’s energy policy into a new European Energy Union. In this regard, a fundamental im-portant element is the strengthen of the Energy Community. Projection that in its last step, only few weeks before, on 25 Feb 2015 in framework of the presentation of its strategy for a resilient Energy Union, the European Commission reaffirms the will propose to strengthen the Energy Community, ensuring effective implementation of the EU's energy acquis, the undertake of the energy market reforms and the incentivising investments in the energy sector.

Then the closer integration of the energy markets between the EU and the Energy Community is the main crucial goal. Nevertheless, the integration it is not only an aim per se: the Commission also announced it would introduce common energy crisis management through preventive and emergency plans at Regional EU level, including the CPs of the EnC. A project reinforced by the recent events at the East borders of the EU, remind us once again that there is no security of gas supply without Ukraine (the last added CPs).

As well as the above situation makes impossible to imagine any form of a future Energy Union without the open up of the route of Southern Gas Corridor (with the leading role of the TAP pro-ject interesting many of the WBs countries such as in particular the Albania). Framework that definitely, makes evident the crucial pan-European dimension of the future Energy Union.

At its last EU Energy Council on 5 March, the energy ministers welcomed the Commission's plans. Confirmation that is expected to be the goal of the next step toward the “Building an En-ergy Union” by the European Council scheduled for 19-20th March 2015. Then, a triumph and the recognition of the important role of the EnC in its core framework of the future Energy Union, that in meanwhile make inevitable a parallel upgrading the EnCT, already in discussion based on the report “An Energy Community for the Future” on 11 Jun 2014 by the High Level Reflection Group (HLRG).

Then passing to the second point, indeed a Triumph of the Pan-European dimension offer a huge possibility of investments to the WBs included Albania but also open the way to the needed re-forms. A fully functioning EnC requires investment in infrastructure generations, transmissions and not least in the distribution of energy. While some progress has been achieved, the invest-ments in Albania as in whole WB’s needs are still substantial. In regard, the Secretariat pub-lished on the 22 Dec 2014 a report on instruments to realise priority infrastructure projects. The study examines why investment flows have been relatively limited and what support is available to improve the level and pace of investment, particularly even regard the Projects of Energy Community Interest (PECIs).

For a fully assessment of the ongoing developments of the here PECIs regard the Albania the situation register until the autumn 2014, many of the PECI on track with the preparation of in-vestment documentation in the form of feasibility and environmental impact assessment studies, detailed design, etc., but only some projects have reached the status of investment decision or, even better, their started construction.

In regard, the study above concludes that while the difficult economic climate affects investment flows, the major concern of external financiers are relate to the overall investment climate (inter alia unstable regulatory regimes, opaque pricing systems, weak institutional capacity and exper-tise) rather than availability of finance per se. The Secretariat of EnC is now considering the con-clusions and recommendations proposed inter alia creating a facility to finance short-term and technical assistance to relevant institutions targeted to the investment environment for energy and strengthening coordination among EnC institutions.

The here study itself was commissioned to provide input to the ECS’s deliberations on the rec-ommendations for the future of the Energy Community made by the HLRG headed by the es-teemed chair of the Energy Committee in the European Parliament, Professor Jerzy Buzek. The overall discussing of which proposes measures some of which even do not require modifications of the Treaty (Level I), other require modifications by unanimous decision of the MC (Level II) and the latest revision of the Treaty (Level III).

However, in same time based on assessment of the HLRG, the 12th MC enacting on the 23 Sept 2014 the Procedural Act 2014/02/MC-EnC for the establishing of a roadmap to steer the work on the reform proposals to be submitted in its annual meeting of Sept. 2015. However, even in this stage the MC agreed that some measures could already be introduced in the short term, in par-ticular in areas, which are of keys importance, such as the proposal for the enhancing the im-plementation of acquis and improving the investment climate.

And regard the ongoing the Secretariat according to the same procedural act, undertook the prepare of an analytical paper identifying options for the implementation that regroups the pro-posals made into 9 thematic sections. In specific, among the proposes at least the half of measure concern directly the enabling the core of the EnC objectives (art. 2, par. a) means attract invest-ment in power generation and networks. Recommendation that are very interesting to be tackle today in view of the fresh outcome Review of the Responses to the Public Consultation on 13 Mar 2015, which see the take part of more than 62 entity (that see also our contribute as ACERC).

Then entering to the third part of the here discussion the prospect offered toward a creating of an effective Pan-European Internal Energy Market and the upcoming action profile in the im-proving of the dispute settlement and the improving the investment climate starting by first with the “Opening and Protecting Energy Markets” the measure foresee the Enhancing of the Effec-tiveness of Competition Law Enforcement through procedural rules related to competition and State aid in accordance with the EU model, and the Secretariat strengthen competences in exec-utive and investigative terms. In second, broadening the scope of the EnC by Introducing Rules on Public Procurement including the Dir. 2004/17/EC and 2004/18/EC. Albania Government posi-tion expressed clearly for a further strengthening the Secretariat position, a full alignment with the EU acquis and the need for a central enforcement as in EU level.

The second direction of affords aims the creation of A Pan-European Single Energy Market en-visaged in Art. 42, 43 and 45 of the Title IV until now not activate. Then by first action regard the using more systematically in order to governing fully integrated pan-European energy markets. However, managing these changes is politically, financially and technically challenging reflect also in the opinion expressed by only few stakeholders and with a quite balanced outcome.

The second action see the Creation of an Entity allowing for Gas Demand Aggregation. Albania Governments reminding that the discussion about gas demand aggregation has started in the context of the Energy Union, therefore, suggest that the Secretariat tasked to elaborate a concept for a gas demand aggregator in the Energy Community (based on Article 43) should be further discussed within the institutions and through public consultations. An opinion match with ours as ACERC that notwithstanding, the multiple benefit coming by the here propose a milestone to be kept in focus is a better settle between of above positions and that to stimulate a fair competition.

In third, see the Interconnectors regardless of whether they are interconnectors between MSs and CPs. The until now unsatisfactory results is caused by the incorporation of the 3rd Package into Energy Community law based on Title II that concern only the CPs, making the connection as originally intended been obstructed. In confront of a Status quo that see the Ministerial Coun-cil Interpretation to provide legal certainty the major part opting toward proposal that see sup-port using Title IV or Title III of the Treaty to establish measures so as to create a regime appli-cable to the borders between the Contracting Parties and EU MSs.

Regard a “Better Enforcement and Dispute Settlement” among the action is foreseen by first the “Encouraging Private Enforcement” of the Treaty before national courts. In second, the “Strengthening the framework for enforcement and dispute settlement”. In regard the options going by the establishing of a Regional Investment Court among CPs in the amending the current Dispute Settlement Procedures to creation of a Court of Justice and the incorporation of the EU approach to the sanctions for infringements.

In third, regard the Conditionality of financial assistance, the Albanian Government opinion has support the option for exclude any directly or indirectly financial support to the energy sector of a Contracting Party which has been declared in breach of its obligations under Article 91 and 92 of the Treaty and all relevant institutional donor should be requested to ask the Secretariat for an opinion before granting financial support to the energy sectors of a given Contracting Party.

In last of directions, here in consideration, the “Improving the Investment Climate” with a first action foreseen the “Increase and managing of available funding”. Albania Governments in ac-cordance with HLRG express that it is still room for decision to support more infrastructure pro-jects. And as a second the Creation of an investments-friendly area, reducing risks by sharing advice and experience on the regulatory frameworks, and planning and managing a coherent transition to an integrated market.

As a third action the creation of an Energy Community Risk Enhancement Facility to address risks such as breach of contract by public bodies, retroactive measures, discriminatory taxation, payment default by public entities, and similar risks which are a strong deterrent to both lenders and investors, and are difficult to be mitigate effectively. And as last one the creation of a Plat-forms of complementary or similar projects which reinforce each other (e.g., an ‘energy security project’ or a ‘networks enhancement project’ involving pieces of infrastructure in several CPs.

In the here conclusion regard the Implementation Approach of the ongoing proposes the time-lines for transposition see the discussion on 26 March of 36TH PHLG on the results and the pre-pare with follow-up for the political meeting of the MC (the decision making body that meets on annual basis). However, taking in the consideration priorities expressed by the Albanian Presi-dency of the MC 2015, it can well be predicted, an adaptation at least of relevant part of the above measures in next meeting of Sept. 2015.

In last seen that the above topic has been here only shortly reported, important is the stress that the highly ambitious proposals are actually in act on upgrade of the Energy Community and will regard directly which country as also the Albania. In addition, decisive in the above adaptation became the ongoing orientation of the EU regard the dimension of the WBs as an integral part (or a pillar) on the new strategy of the Energy Union. Therefore, it seems quite obviously in say-ing that the concerns about the issues that we tackle above will be seen as a good possibility not to go waste in the creation of an Energy Union for the benefit of all!

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