Public service obligations from the European Union Energy Package foresee the right of consumers to be connected to the electricity grid as much as the right to be supplied with electricity at an affordable price, which is termed a universal service in the Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity (Article 3(3) - see box).
Article 3(3) of the Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC
Member States shall ensure that all household customers, and, where Member States deem it appropriate, small enterprises (namely enterprises with fewer than 50 occupied persons and an annual turnover or balance sheet not exceeding EUR 10 million), enjoy universal service, that is the right to be supplied with electricity of a specified quality within their territory at reasonable, easily and clearly comparable, transparent and non-discriminatory prices. To ensure the provision of universal service, Member States may appoint a supplier of last resort. Member States shall impose on distribution companies an obligation to connect customers to their network under terms, conditions and tariffs set in accordance with the procedure laid down in Article 37(6). Nothing in this Directive shall prevent Member States from strengthening the market position of the household, small and medium-sized consumers by promoting the possibilities of voluntary aggregation of representation for that class of consumers.
The first subparagraph shall be implemented in a transparent and non-discriminatory way and shall not impede the opening of the market provided for in Article 33.
The same Directive envisions that suppliers of last resort (SOLR) might be appointed by the EU Member States to ensure the provision of universal service.
A universal service is included into responsibilities, which energy service companies have to meet to protect the general economic interest (services of general economic interest - SGEI).
ACER/CEER Annual Report of 22 October 2018 on the Results of Monitoring the Internal Electricity and Natural Gas Markets in 2017, Consumer Empowerment Volume underlines that the European legislation, and in particular Article 3 of the Electricity and Gas Directives, equips the EU Member States with the opportunity to introduce a series of obligations on energy sector undertakings in relation to, inter alia, the quality of supply and universal service, i.e. consumers’ right to be supplied with electricity of a specified quality at reasonable, easily comparable, transparent and non-discriminatory prices.
Despite the fact that the 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 and repealing Directive 2003/55/EC does not foresee universal service, it nonetheless promotes a supply of last resort mechanism for gas consumers.
In addition, some EU Member States have introduced default suppliers.
Despite being functionally distinct from supply of last resort, they are often addressed together with supply of last resort, since they also secure energy supply to consumers in precarious situations.
However, to fully guarantee market liberalisation and consumer protection, neither supply of last resort nor default supply should provide a backdoor to price regulation (ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Gas Markets in 2015, Consumer Protection and Empowerment, November 2016, p. 7).
Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market in electricity (recast),
Member States should take the necessary measures to protect vulnerable and energy poor customers in the context of the internal market for electricity. Such measures may differ according to the particular circumstances in the Member States in question and may include social or energy policy measures relating to the payment of electricity bills, to investment in the energy efficiency of residential buildings, or to consumer protection such as disconnection safeguards. Where universal service is also provided to small enterprises, measures to ensure universal service provision may differ according to whether those measures are aimed at household customers or small enterprises.
1.Member States shall ensure that all household customers, and, where Member States deem it to be appropriate, small enterprises, enjoy universal service, namely the right to be supplied with electricity of a specified quality within their territory at competitive, easily and clearly comparable, transparent and non-discriminatory prices. To ensure the provision of universal service, Member States may appoint a supplier of last resort. Member States shall impose on distribution system operators an obligation to connect customers to their network under terms, conditions and tariffs set in accordance with the procedure laid down in Article 59(7). This Directive does not prevent Member States from strengthening the market position of the household customers and small and medium-sized non-household customers by promoting the possibilities for the voluntary aggregation of representation for that class of customers.
2.Paragraph 1 shall be implemented in a transparent and non-discriminatory way, and shall not impede the free choice of supplier provided for in Article 4.
When accessing universal service under the provisions adopted by Member States pursuant to Article 27, final customers shall be informed about their rights regarding universal service.
Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU, Article 9, Article 7(5), Recitals 15, 22 - 29, 86
Public service obligations
1. Without prejudice to paragraph 2, Member States shall ensure, on the basis of their institutional organisation and with due regard to the principle of subsidiarity, that electricity undertakings operate in accordance with the principles of this Directive with a view to achieving a competitive, secure and environmentally sustainable market for electricity, and shall not discriminate between those undertakings as regards either rights or obligations.
2. Having full regard to the relevant provisions of the TFEU, in particular Article 106 thereof, Member States may impose on undertakings operating in the electricity sector, in the general economic interest, public service obligations which may relate to security, including the security of supply, regularity, quality and price of supplies and environmental protection, including energy efficiency, energy from renewable sources and climate protection. Such obligations shall be clearly defined, transparent, non-discriminatory and verifiable, and shall guarantee equality of access for electricity undertakings of the Union to national consumers. Public service obligations which concern the price setting for the supply of electricity shall comply with the requirements set out in Article 5 of this Directive.
3.Where financial compensation, other forms of compensation and exclusive rights which a Member State grants for the fulfilment of the obligations set out in paragraph 2 of this Article or for the provision of universal service as set out in Article 27 are provided, this shall be done in a non-discriminatory and transparent way.
4.Member States shall, upon implementation of this Directive, inform the Commission of all measures adopted to fulfil universal service and public service obligations, including consumer protection and environmental protection, and their possible effect on national and international competition, whether or not such measures require a derogation from this Directive. They shall subsequently inform the Commission every two years of any changes to those measures, whether or not they require a derogation from this Directive.
5. Member States may decide not to apply Articles 6, 7 and 8 of this Directive insofar as their application would obstruct, in law or in fact, the performance of the obligations imposed on electricity undertakings in the general economic interest and insofar as the development of trade would not be affected to such an extent as would be contrary to the interests of the Union. The interests of the Union include, inter alia, competition with regard to customers in accordance with Article 106 TFEU and this Directive.
Member States may refuse to authorise a direct line if the granting of such an authorisation would obstruct the application of the provisions on public service obligations in Article 9. Duly substantiated reasons shall be given for such a refusal.
Market rules allow for the entry and exit of producers and suppliers based on their assessment of the economic and financial viability of their operations. That principle is not incompatible with the possibility for Member States to impose on undertakings operating in the electricity sector public service obligations in the general economic interest in accordance with the Treaties, in particular with Article 106 TFEU, and with this Directive and Regulation (EU) 2019/943 of the European Parliament and of the Council.
Member States should maintain wide discretion to impose public service obligations on electricity undertakings in pursuing objectives of general economic interest. Member States should ensure that household customers and, where Member States consider it to be appropriate, small enterprises, enjoy the right to be supplied with electricity of a specified quality at clearly comparable, transparent and competitive prices. Nevertheless, public vice obligations in the form of price setting for the supply of electricity constitute a fundamentally distortive measure that often leads to the accumulation of tariff deficits, the limitation of consumer choice, poorer incentives for energy saving and energy efficiency investments, lower standards of service, lower levels of consumer engagement and satisfaction, and the restriction of competition, as well as to there being fewer innovative products and services on the market. Consequently, Member States should apply other policy tools, in particular targeted social policy measures, to safeguard the affordability of electricity supply to their citizens. Public interventions in price setting for the supply of electricity should be carried out only as public service obligations and should be subject to specific conditions set out in this Directive. A fully liberalised, well-functioning retail electricity market would stimulate price and non-price competition among existing suppliers and provide incentives to new market entrants, thereby improving consumer choice and satisfaction.
Public service obligations in the form of price setting for the supply of electricity should be used without overriding the principle of open markets in clearly defined circumstances and beneficiaries and should be limited in duration. Such circumstances might occur for example where supply is severely constrained, causing significantly higher electricity prices than normal, or in the event of a market failure where interventions by regulatory authorities and competition authorities have proven to be ineffective. This would disproportionately affect households and, in particular, vulnerable customers who typically expend a higher share of their disposable income on energy bills compared to high-income consumers. In order to mitigate the distortive effects of public service obligations in price setting for the supply of electricity, Member States applying such interventions should put in place additional measures, including measures to prevent distortions of price setting in the wholesale market. Member States should ensure that all beneficiaries of regulated prices are able to benefit fully from the offers available on the competitive market when they choose to do so. To that end, those beneficiaries need to be equipped with smart metering systems and have access to dynamic electricity price contracts. In addition, they should be directly and regularly informed of the offers and savings available on the competitive market, in particular relating to dynamic electricity price contracts, and should be provided with assistance to respond to and benefit from market-based offers.
In order to ensure that the opening of support schemes is reciprocal and brings mutual benefits, cooperation agreements should be signed between participating Member States. Member States should retain control over the pace of deployment of renewable electricity capacity on their territory in order, in particular, to take account of associated integration costs and required grid investments. Member States should thus be allowed to limit the participation of installations located on their territory to tenders opened to them by other Member States. Those cooperation agreements should address all relevant aspects, such as accounting for costs relating to a project built by one Member State on the territory of another, including the expenditure relating to strengthening networks, energy transfer, storage and back-up capacity, as well as possible congestions in the network. In those agreements Member States should also take into account measures that may allow for the cost-effective integration of such additional renewable electricity capacity, whether they are of a regulatory nature (for instance related to market design) or provide for additional investments in various sources of flexibility (for instance interconnections, storage, demand response or flexible generation).
Member States should avoid distortive situations resulting in the extensive importation of resources from third countries. A life-cycle approach should be considered and promoted in that respect.
Member States should ensure that renewable energy communities can participate in available support schemes on an equal footing with large participants. To that end, Member States should be allowed to take measures, such as providing information, providing technical and financial support, reducing administrative requirements, including community-focused bidding criteria, creating tailored bidding windows for renewable energy communities, or allowing renewable energy communities to be remunerated through direct support where they comply with requirements of small installations.
The planning of the infrastructure needed for the production of electricity from renewable sources should take into account policies relating to the participation of those affected by the projects, in particular local populations.
Consumers should be provided with comprehensive information, including information on the energy performance of heating and cooling systems and on the lower running costs of electric vehicles, to allow them to make individual consumer choices with regard to renewable energy and avoid technology lock-in.
To the extent that measures taken by Member States to fulfil public service obligations constitute State aid under Article 107(1) TFEU, there is an obligation under Article 108(3) TFEU to notify them to the Commission.
Regulatory authorities should also be granted the power to contribute to ensuring high standards of universal and public service obligations in accordance with market opening, to the protection of vulnerable customers, and to the full effectiveness of consumer protection measures. Those provisions should be without prejudice to both the Commission's powers concerning the application of competition rules, including the examination of mergers with a Union dimension, and the rules on the internal market, such as the rules on the free movement of capital. The independent body to which a party affected by the decision of a regulatory authority has a right to appeal could be a court or another tribunal that is empowered to conduct a judicial review.
Universal service - regulatory chronicle
Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market in electricity (recast), Recital 58, Article 27, Article 10(10), Article 9, Article 7(5), Recitals 15, 22 - 29, 86
Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC, Article 3(3)
Proposal for a Directive of the European Parliament and of the Council on the internal market for electricity (recast) on common rules for the internal market in electricity (recast), 30.11.2016, COM(2016) 864 final 2016/0380 (COD), Article 27
ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Gas Markets in 2015, Consumer Protection and Empowerment, November 2016