EU worried by budget cuts on energy watchdogs

Brussels - The European Commission is worried that in some of the EU's member states, energy watchdogs lack the staff and resources to properly do their job.

It is also concerned about the independence of some national watchdogs.

In its report Progress towards completing the Internal Energy Market, published on Monday (13 October), the EU's governing body notes that “in some countries the regulators appear to be structurally under-resourced”.

The commission hopes to complete the so-called internal energy market by the end of the year. Monitoring electricity prices and investigating competition will still be done on a national level, by the national regulators.

In the annex of the report, the commission discusses the staff and budget of each member state's regulator. It expresses its worry on the budgetary resources of the watchdogs in Bulgaria, Cyprus, Estonia and France.

In Bulgaria, the energy regulator is part of a larger agency, the SEWRC, which has a budget of about €1.86 million. According to the commission, that “does not allow SEWRC to build up the stable and high quality staff that is demanded to carry out its legal tasks”.

The Estonian Competition Authority, which monitors the energy market but also has other tasks, has a budget of €1.83 million and the commission “questions” if this is enough “to carry out its regulatory tasks”.

The Cyprus Energy Regulatory Authority employs only 11 people. Its “lack of resources is a source of concern”.

The report does not state how large the staff and the budget of an energy watchdog should be to be effective.

"There is not an absolute benchmark on the numbers of staff or the budget that an NRA [national regulatory authority] should have", a spokesperson for the commission told EUobserver by e-mail.

According to EU law, the authorities should receive "adequate human and financial resources to carry out its duties".

In her e-mailed statement, the commission spokesperson expressed the organisation's "general concern … that the tasks of NRAs have increased substantially in recent years … but that their resources and budgets have not always increased accordingly."

Take France for example. Its French National Regulatory Authority has received additional tasks in recent years, yet had its budget reduced from €19.3 million in 2013 to €18.9 million this year. The reduction worries the commission, but in absolute terms, it is still one of the higher budgets.

As a percentage of total government budget however, the commission certainly has a point.

France spends 0.002 percent of its budget on its national energy regulator, making it one of the lowest in the EU.

But it still seems somewhat arbitrary why some countries receive a scolding where others did not.

Just like France, Germany spends 0.002 percent of its government budget on energy market monitoring. But the commission does not raise any worries on the German side.

The Netherlands (0.003 percent), Denmark (0.004 percent), Poland (0.005 percent) and Sweden (0.005 percent), have only a slightly higher proportion of their budgets appropriated to monitoring the energy market, but also received no reprimand.

Meanwhile, the commission did not scold France as explicitly as it did the others.

Instead, it wrote that it was the French authority itself that “expressed once more serious concerns about the situation as this puts at risk the fulfilment of its tasks”.

The report points out that the “staff limit will decrease in 2014 to 130, thus reinforcing the pressure on the resources of the regulator.”

Because the report does not always mention which portion of the broader tasked regulators were devoted to energy, it is difficult to compare their budgets and staffing with other member states.

But even with that in mind, it's still interesting to note that very similar scoring countries receive different grades.

Excluding the member states which did not provide data, France is the country with proportionally the lowest number of regulator employees. Its 130 staff translates to 2 employees for every million of its citizens.

But is that much worse than Italy? The Italian National Energy and Water Service Regulatory Authority had a staff of 172 - 3 employees for every million - while also having to monitor Italy's water service.

Five or 6 employees per million (The Netherlands and Belgium, respectively) was apparently sufficient to quell the commissions worries (some countries, like Austria, have as much as 20 employees per million)

The European Commission also has some worries about the Bulgarian, Croatian and Slovakian regulator's independence.

On the EU's newest member state, the report says: “Competition in Croatia’s energy market is still very limited. Market opening is needed to improve the investment climate and create incentives for new entrants.”

Slovakia has not sufficiently converted the so-called Third Energy Package, a European directive on electricity and gas markets, into national law.

“The laws transposing the Directives of the Third Energy Package do not fully ensure that URSO [Slovakia's Regulatory Office for Network Industries] can take autonomous decision independently from the Ministry and the State Inspection and do not foresee that decisions taken be URSO have to be fully reasoned and justified.”

The report urged Bulgaria to be more transparent about the way it appoints the chairperson of the national energy regulator, the SEWRC.

“The fact that SEWRC's Chairpersons changed four times in the course of 2013, raises concerns about the independence, professional stability and continuity of the management of the regulator”, it said.