Regulation is the keystone of the energy market

Regulation is the keystone of the energy market

Since energy is a need, associated with public service imperatives, and since it is transported by infrastructures in a monopoly position, energy regulation is a central issue. Discover who the players in this regulation are and the reference texts governing the activities of grid operators like Teréga.

Why is the gas market and more generally the energy market regulated?

Energy is essential for the consumer and the consumer has a “right” to a good quality supply, including in particular supply continuity, at a reasonable price. Because the energy infrastructures are in a natural monopoly position, they are primarily regulated to guarantee that the price of the services provided by their operators is fair. This regulation is therefore aimed to ensure economic competitiveness and balanced territorial development while encouraging operators to adopt the energy policy guidelines, for example
by taking account of the environment.

Two distinct schemes currently apply:

  • The energy production and supply activities are in free competition but governed by the French Directorate General for Energy and Climate administrative authorisation scheme.

  • The transport and distribution grids, gas storage facilities and methane terminals are entrusted to independent grid operators, like Teréga, and regulated in France by the Energy Regulation Commission.

What are the energy regulatory authorities in France and Europe?

The Energy Regulation Commission (CRE)

The Energy Regulation Commission guarantees the access to the infrastructures and to the national energy markets. The Commission must ensure that each player, in free competition in the gas and electricity market, enjoys the same access conditions to the regulated infrastructures and benefits from the best possible price.

The tariffs for the use of these infrastructures, intended to cover the expenditure of reasonable and prudent operators, are established in a transparent, non-discriminatory and participative manner.

The approach consists of:

  • public consultations by the regulator with all parties concerned,

  • close discussions between regulator and operators to find a balance between the expenditure to be covered and the tariffs,

  • deliberations by the regulator which implement the economic and tariff trajectories with which the operators must comply.

The definition of these tariffs and the validation of the associated investments are key challenges for infrastructure operators like Teréga.

The French Energy Commission also ensures that the different players in the energy market contribute to reaching the energy policy targets in France and at European level.

The Agency for the Cooperation of Energy Regulators (ACER)

ACER is a European Union Authority created in 2011 which assists the European Commission and helps national regulators to fulfil their role and to coordinate their actions. ACER participates in establishing the European Network codes and advises the European institutions on energy market questions. It also ensures compliance with Community rules relating to price, access to the grid or consumer rights within EU and Common Market Member States.

French regulatory control of the energy market

In parallel with this regulation the energy market is also governed by specific regulations in France and in Europe in which the different players participate.

The Regulatory Authorities in France

It prepares and implements the national policy on the major issues: sustainable development, environment and green technologies, energy transition, climate, and even the security of industrial facilities and infrastructures.

It was created in 2008 and establishes and deploys the French policy in the following sectors: energy, raw materials for energy, and the fight against global warming and air pollution. It coordinates the preparation and application of the national programme on climate change. The DGEC is responsible for defining the security and competitiveness of France’s supply and for the decisions relating to renewable energies. Lastly, it implements the French Strategy for Energy and the Climate which encompasses and coordinates the various French actions for the climate and integrates the Five-year Energy and Climate Action Plan (NECP), Multiannual Energy Plan (MEP) and National Low-Carbon Strategy (SNBC) (see below).

What legislation regulates the energy sector in France?

It is France’s strategic roadmap for achieving the carbon neutrality target in 2050. It contains the first Five-year Energy and Climate Action Plan (NECP) which must be adopted in 2023 and will be set out, among other things, in issue 3 of the National Low-Carbon Strategy (SNBC) and also in the new Multiannual Energy Plan (MEP) for the 2024-2033 period. The French Strategy for Energy and the Climate (SFEC) was opened by a public consultation to which Teréga responded by submitting a Gas Opinion Document.

The MEP is an energy policy management tool created by the Energy Transition for Green Growth Law (LTECV) and defines the government’s priority actions for energy. Every 5 years it sets out the guidelines and priority actions of the public authorities regarding energy management in Metropolitan France in order to reach the energy policy targets. It contains sections relating to supply security, energy efficiency, development of renewable and recovered energies, grids, energy storage, development of clean mobility, consumer purchasing power, skills and the competitiveness of energy prices. The MEP includes an economic and social impact study as well as a strategic environmental assessment.

The National Low-Carbon Strategy was introduced by the Energy Transition for Green Growth Law and is France’s roadmap to combat climate change. It provides guidelines to implement the transition to a low-carbon, circular and sustainable economy in all activity sectors. It defines a trajectory for greenhouse gas emissions up to 2050 and sets out short-to-medium term targets: the carbon budgets.

The Energy Code contains legislative and regulatory measures relating in particular to gas and electricity. Its latest developments have reinforced gas supply security and incorporated the provisions of the regional plans for connection to the renewable energy grid.

The Energy Transition for Green Growth Law adopted in 2015 aims to increase the efficiency of France’s contribution to environment protection and to reinforce its energy independence while offering access to energy at a competitive cost. This law sets out the reduction targets for greenhouse gas emissions and energy consumption, especially the proportions of fossil, renewable and nuclear energies.

The Energy and Climate Law of 2019 enshrines the climate and ecological emergency in the Energy Code, as well as the objective of carbon neutrality in 2050. Among other measures it determines the gradual phase-out of fossil energies by a 40% reduction in the consumption of fossil energies by 2030 compared to 2012, the development of renewable energies, combating poor thermal performance in buildings, introduction of new tools for climate policy management, governance and assessment, and also the regulation of the electricity and gas sector. The Energy and Climate Law of 2019 also introduces the adoption of a Five-year Energy and Climate Action Plan the aims of which will be defined through the National Low-Carbon Strategy (SNBC) and the Multiannual Energy Plan (MEP).

Resulting from the work of the Citizens’ Convention for Climate, the Law of 22 August 2021 on combating climate change and strengthening resilience to its effects, commits France to respect the European target of reducing greenhouse gas (GHG) emissions by at least 55% by 2030. Among other provisions, the law proposes many energy-related measures: ban on fossil energy advertising, creation of regional targets for the development of renewable energies, creation of a Regional Energy Committee, increasing the reduction rate from 40 to 60%, underground storage of hydrogen, creation of biogas production certificates by the government.

The Five-year Action Plan, introduced by the Energy and Climate Law of 8 November 2019 will set out, from 2023, the priority actions of the national climate and energy policy, taking into account the increase in the European objective for reducing net greenhouse gas emissions by 55% by 2030.

Its main aims will be defined through the National Low-Carbon Strategy (SNBC) and the Multiannual Energy Plan (MEP). These aims will be updated to take into account the guidelines of the new law before 1st July 2024.

European regulatory control of the energy market

The European Commission establishes the community’s regulatory framework which is designed in particular to guarantee the supply security of the Member States, guarantee competitive energy and implement energy transition. Its desire to harmonise the rules in force in the Member States is intended to create a common energy market within the European Union. In this respect, it has formalised:

  • The European Green Deal, a series of proposals designed to adapt the EU’s climate, energy, transport and tax policies in order to reduce net greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels.

  • The “Energy Package”, which sets out the common rules for energy and combating climate change.