Tdjmkkjh Dbm.11.07) Eng

CONTRIBUTION FROM THE BASQUE GOVERNMENT TO ANALYSIS ON THE PRINCIPLE OF SUBSIDIARITY / PROPORTIONALITY within the subsidiarity test framework organised by the Committee of the Regions on the following proposals:

COM(2007) 530 final

2007/0197 (COD)

Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing an Agency for the Cooperation of Energy Regulators

COM(2007) 528 final

2007/0195 (COD)

Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2003/54/EC concerning common rules for the internal market in electricity

COM(2007) 531 final

2007/0198 (COD)

Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCILamending Regulation (EC) No 1228/2003 on conditions for access to the network forcross-border exchanges in electricity

COM(2007) 529 final

2007/0196 (COD)

Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2003/55/EC concerning common rules for the internal market innatural gas

COM(2007) 532 final

2007/0199 (COD)

Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCILamending Regulation (EC) No 1775/2005 on conditions for access to the natural gas transmission networks

Methodological introduction

Following the success of the first and second subsidiarity pilot tests carried out between 31 October 2005 and 9 December 2005, the Committee of the Regions has decided to launch its third subsidiarity test

The Committee of the Regions has approached this third test with the same methodology used in the first and second tests and included in the report “Better Lawmaking 2004” (CoR 121/2005 fin) adopted 12 October 2005 and confirmed in its report “Guidelines for the application and monitoring of the subsidiarity and proportionality principles” (CoR 220/2004 fin) adopted 16 November 2005.

The Basque Government has shown interest in becoming part of the Subsidiarity Monitoring Network from the beginning and this interest was demonstrated through the Basque Government taking part in the second subsidiarity test.

Within the framework of the third test, this report is the result of the following bodies working in partnership: the Basque Government’s General Secretariat for Foreign Action within the President’s Office or Lehendakaritza, the Deputy-Office for Innovation and Energy within the Department of Trade, Industry and Tourism and the General Secretariat for Institutional Policy and Regional Development within the Basque Government’s Vice-Presidency.

Likewise, a partnership mechanism has been set up with the Basque Parliament, which is also an official partner in the Subsidiarity Monitoring Network from this third test onwards. Once three weeks have passed from the beginning of the test, the Basque Government has committed itself to sending the preliminary technical reportso that it can be used as a basis for political discussion in the Basque Parliament.

We should highlight that during 2005, and through the General Secretariat for Foreign Action and the Basque Parliament, the Basque Government already held a number of meetings to reflect on the methodology to be applied when working together if the Protocol on Subsidiarity from the Treaty establishing a Constitution for Europewas to come into effect and be applied. With the adoption of the Treaty of Lisbon, which strengthens the subsidiarity protocol and the role of national and regional parliaments where applicable, this cooperation agreement between both Basque institutions becomes, if possible, even more relevant.

Thought previously given to this task has been very useful when coordinating the two institutions, in this case the Basque Government and Parliament. Given the participation of the different and already mentioned departments and bodies in this analysis, the Office for European Affairs, attached to Secretary General for Foreign Affairs, has been required to coordinate this work within the Basque Government itself. This coordination workgreatly helps when integrating the Community aspect, which is always more sectoral, into the work of our government’s departmentsand is in itself a driving factor between the departments of the Basque Government and Parliament.

All of the parties involved met during October 2007 in order to define the conceptual scope and the methodology to be employed in this test, as well as the political repercussions and the appropriate communications policy to be adopted in order to disseminate the results of this subsidiarity test partnership.

Following this meeting, we are able to draw some interestingconclusions, as noted below:

For the second time, we are presented with the opportunity to undertake a pilot test within the scope of our executive power and within the field of energy, which is one of the areas where the Basque Autonomous Community holds a wide range of autonomous powers.

More than 90% of Community legislation could be affected by this subsidiarity monitoring principle, given that we are talking about the type of competence named shared powers. As a result, the majority of our government’s powers are also affected by Community legislation.

We are able to report that the benefits of implementing a subsidiarity and proportionality monitoring procedure within this Autonomous Community are, without doubt, fundamental both for preserving and exercising self-government. The cost of not implementing this procedure would be high, as it would imply surrendering our own powers as well as our civic responsibility.

The opportunity to implement monitoring of this principle likewise implies the possibility to forecast legislative action, both from a strictly legislative perspective, as well as from an economic point of view with the positive consequences that this could have in terms of cost control.

To summarise, the opportunity to implement monitoring of the subsidiarity principle implies, definitively, another tool with which to develop the self-government of this country.

The results of this analysis will be presented at the Governing Council (the highest decision-making body at the heart of the Basque government). Likewise, it is foreseen that the results of this second analysis on subsidiarity/proportionality will be published in the Basque press.

In relation to the methodology and in order to analyse the scope and relevance of the subsidiarity/proportionality principles in the two quoted documents, the Basque Government has fundamentally focused on applying the subsidiarity/proportionality form provided for this purpose on the CoR website, with the aim of making it easier to compare our data with those provided by other European regional and local institutions.

SUBSIDIARITY analysis

Verification that the apportionment of competences principle has been respected

1. LEGAL BASIS

1.1.On which Treaty articles is the document based?

Achieving a truly internal energy market is one of the EU’s main objectives. For this reason, the aim of these new legislative proposals, which make up the third package of energy measures for an internal energy market, is to create a true internal energy market in the EU that will guarantee safe supply and the real ability to choose a supplier. The aim is to offer energy users in the EU, whether individuals or companies, the real possibility of choice and to drive the large investments that the energy field needs. As well as aiming to secure a real and not just legal internal energy market, this package of proposals is one of the three pillars of the new European energy policy championed by Community institutions.

Therefore, the legal basis upon which these 5 proposals (two directive proposals and three regulation proposals) is based, is article 95 of the Treaty, relating to the setting up and functioning of the internal market and using the procedure set out in article 251 of the TEC (codecision procedure). Furthermore, the two directive proposals on common rules for an internal market in electricity and natural gas are based on both section 2 of article 47 TECconcerning the taking-up and pursuit of activities asself-employed persons within the framework of the right ofestablishmentand on article 55 TEC concerning services.

There are two other areas of this policy that are also the target of regulation in this third EU package of energy measures and these are the security of supply and environmental sustainability.These two areas are closely linked to the main objective, given that the securing of a single market not only favours competitiveness, but also security and environmental sustainability.

Despite the fact that Community institutions hope to develop a Community energy policy, energy policy isn’t a common EU policy. The problem lies in the fact that there is no specific legal basis for energy in the Treaty. In fact, there is no chapter dedicated explicitly to energy that would serve as a legal basisupon which tolegislate directly on energy issues. This means that any action taken by the EU that affects energy should be taken within the framework of other policies such as the policy on the environment (article 175.1 TEC), trans-European networks (article 156 TEC), security of supply in emergency situations (article 100 TEC) or the internal market, as in this case. The fact that there is no EU energy policy makes it very difficult to design national, harmonised energy policies. In fact, it is fairly illogical to try and create an internal energy market when there are 27 national energy policies coexisting.

The idea of drawing up a European energy policy has been a feature at the heart of the European project, including the ECSC Treaty (the European Coal and Steel Community) in 1951 and EURATOM (Treaty establishing the European Atomic Energy Community) in 1957. Despite the economic and geopolitical changes that have occurred since then, this policy continues to be inescapable and the European Commission has made various attempts to introduce it into the treaties and to coordinate its actions, although these attempts have always been unsuccessful. Only once did we come close to achieving a common energy policy and this was in 1974. The Member States reached an agreement on common energy objectives that were to serve as directives for national policies. These objectives were updated during the 1980’s.

Aware of the need to drive this policy, in January 2007 the Commission launched a package of measures for the creation of a new energy policy, where these proposals for an internal energy market were announced. Furthermore, the Community energy policy needs a legal basis on which to base its proposals. For this reason, a Treaty has been drawn up that explicitly includes energy for the first time and provides a legal basis. Thus, the new energy policy will be undertaken using the new legal basis created by the new Lisbon Treaty, upon which the institutions will be able to base their legislation.

The new legal basis is in line with the setting up or functioning of the internal market and with the need to protect and improve the environment and has three objectives: to ensure the functioning of the energy market; to ensure energy supply security in the EU and to promote energy efficiency and energy saving as well as the development of new and renewable energy sources. This legal basis would speed up the achievement of an internal market.

Article176 A(Treaty of Lisbon)

1. Within the context of the setting up and functioning of an internal market and addressing the need to protect and improve the environment, the Union’s energy policy, with a spirit of solidarity between Member States, aims to:

a) ensure the functioning of the energy market;

b) ensure energy supply security in the Union;

c) promote energy efficiency and energy saving, as well as to develop new and renewable energy sources; and

d) promote the interconnection of energy networks.

2. Subject to the application of other regulations in the Treaties, the European Parliament and Council shall set out the measures required to meet the objectives in section 1 using the ordinary legislative procedure. These measures shall be adopted on consultation with the Committee of the Regions and the Economic and Social Committee.

These measures shall not affect the right of a MemberState to determine the use of its natural energy resources, its options for choosing between different energy sources and the general energy supply structure,subject toletter c), section 2 of article 175.

3. In spite of what is set out in section 2, the Council, via a special legislative procedure, unanimously and on previous consultation with the European Parliament, shall set out the measures stated in this section when they are primarily of a fiscal nature.

1.2.Are all the individual measures proposed covered by the correct legal basis?

More than correct,the problem lies in the fact that there is no legal basis specifically relating to energy in the Treaty, which means that the legislative package must therefore be based on another legal basis. In this case, the legal basis adopted for all legislative proposals is article 95 of the TEC on internal markets, as well as section 2 of article 47 TEC, concerning the taking-up and pursuit of activities asself-employed persons within the framework of the right ofestablishment and article 55 TEC concerning services for the two directive proposals on common rules for an internal market in natural gas.

The 5 proposals (a Regulation for the creation of a Community Agency for the Cooperation of National Energy Regulators, a Directive that amends and complements current Directive 2003/54/CEconcerning electricity, a Directive that amends and complements current Directive 2003/55/CEconcerning gas, a Regulation that amends and complements current Regulation (EC) No1228/2003 concerning electricity and a Regulation that amends and complements current Regulation (EC) No1775/2005 concerning gas) include the following measures:

-the separation of production and supply activities from network operations

-cooperation between transmission system operators

-more effective national regulatory authorities

-an agency for the cooperation of national regulators

-greater transparency

-greater solidarity

-consumer protection

Some of the main measures proposed affect the general functioning of markets whereas others are aimed at making cross-border trade easier, so the legal basis is therefore correct. As there is no specific legal basis relating to energy on which to base legislation at the moment, the only possible legal basis is article 95 TEC. This situation will change with the adoption of the new Treaty, which will set out a more suitable legal basis, as we have previously highlighted.

Despite the fact that consumer protection -a necessary requirement of the current directives concerning the internal energy market- is however translated into consumer’s freedom to choose their supplier, requiring the liberalisation of those markets where the supply is provided by retailers, we consider that explicit mention should have been made to the legal basis of article 153 TECregarding consumer protection.

1. TYPE OF COMPETENCE

2.1.Is power exclusive to the Community or MemberStatesor does it correspond to the areas of competence shared with the Member States?

The internal market is a Community power shared with the Member States and as a result, the internal market for energy also.The EU has power over the internal market for energy and legislates by a qualified majority. Using article 95 of the Treaty as a basis, a number of directives have been created on the generation, importation, transport and distribution of gas and electricity. Likewise, the EU has shared power over the protection of the environment (article 174TEC) and security of supply in emergency situations (article 100TEC).

Member States however hold exclusive power in terms of choice between different sources of energy and the general structure of their energy supply, in other words, the States’ energy policy as such. This means that the States decide their own energy mix and it is this mix that determines the energy policy of this State. Energy policy falls therefore within the exclusive area of competence of the States, unlike the internal market for energy, which as we have highlighted is a shared power with the Member States. What happens is that the Council may also intervene unanimously,and when justified to do so, in order to adopt measures that significantly affect the MemberState’s choice between different sources and on its supply structure (article 175 TEC). The EU’s power in the field of energy is therefore limited, because if it wishes to legislate on this matter, it needs to be able to justify it and unanimously. Any State may veto this EU intervention to set out measures that affect choice.

Although under article 95 TEC the EU may set the rules to offer European consumers a choice between the different suppliers of gas and electricity at fair prices and to allow access to the market to all companies, especially the smallest companies and those that invest in renewable energy sources, it is the Member States who determine the use of their energy resources and choose between the different energy sources making up their national energy supply.

The new Treaty of Lisbon aims to resolve all these questions using 2 mechanisms. On the one hand, energy will have a legal basis in order to create a true Community energy policy whose objective will be to ensure the functioning of the energy market; to ensure the security of energy supply in the Union and to promote efficient energy use and energy saving as well as to develop new and renewable energy sources. On the other hand, the Treaty shall explicitly clarify the question of competence. Energy shall be a shared power between the EU and the MemberStates, which will give both authorities the legal power to legislate and adopt legally binding acts in this field. Thus, the EU and the States shall share the power to adopt legislative regulations on those matters specifically highlighted by the Treaty. This means that the EU shall only intervene when doing so contributes considerable added value to the Member States. In terms of the Member States, they will have the right to determine the use of their energy resources, the opportunityto choose between different energy sources and the general structure of their energy supply, although always within the framework of the common objectives set out in the new energy policy.