The Eu'S Third Internal Energy Market Legislative Package: Victory of Politics over Economic Rationality?

After more than twenty years of debate, regulatory under-enforcement and weighing overall welfare benefits against particular stakeholder concerns, the EU's third legislative package, as adopted by the Council on 29 June 2009, offers Member States a menu of regulatory futures to choose from. Even if these options were functionally equivalent in creating 'effective unbundling', their respective regulatory requirements are clearly not. Broadening the definition of unbundling may turn out to be the political price that the Commission is willing to pay for ultimately seeing its preferred model of ownership unbundling (OU) adopted across the EU. However, it is not the economic evidence supporting OU that makes it an attractive option. Rather, the regulatory burden imposed on its alternatives will cause integrated operators to consider transmission ownership a liability rather than an asset. Meanwhile regulatory diversity may persist and by negatively affecting investments and competition in energy-markets delay the attainment of the EU's primary energy goals. To push ahead with its Single Energy Market initiative, the EU needs to 'sell' the overall efficiency of OU as a regulatory standard and limit itself to settling only those true cross-border concerns that are not sufficiently covered by existing competition rules.