Sectoral and business associations contribute to the strengthening of regulatory institutions by providing their expertise in developing new regulatory framework and mechanisms for its implementation. Business associations are usually voluntary organizations uniting companies from one branch, which carry out joint activities aimed at improving the market environment in a particular sector. Associations serve as a platform for cooperation between companies (members). Members can discuss key issues, share knowledge of industry trends, good practices and more.
In developed markets, business associations are in direct dialogue with the institutions and support the development and adoption of policies in favor of many economic sectors. Institutions and regulators, on the other hand try to ensure public protection and address the interests of a wide range of market participants.
Figure 1. Relationships and exchange of information between stakeholders and institutions
At European level, an example of a well-functioning business association is the European Federation of Energy Traders (EFET). It includes more than 130 energy companies from all over Europe, which are the main suppliers, traders and producers of electricity and natural gas on the continent. The framework contracts for electricity and gas supply developed and updated by EFET are the standard used by almost all leading companies in concluding bilateral wholesale transactions. Another main area of action of EFET is to promote improvements in the design of the wholesale markets and to facilitate a dialogue between traders, market operators and suppliers on one hand and network operators, regulators and legislators on the other.
As a result of the cooperation between its members, EFET has defined the basic principles that form the basis of successful energy markets. Adherence to these principles aims to ensure fair market operation and level playing field for all participants:
– Competition and market access – Wholesale markets in all energy commodities and related products and services should be open to competition and intermediation;
– Access to transmission networks – The management, operation – and ideally the ownership – of transmission and distribution systems should be fully unbundled from other energy businesses. TSO unbundling helps ensure objective, transparent and non-discriminatory access to the network.;
– Transparency – All market participants need access to disaggregated information about underlying supply and demand fundamentals to facilitate wholesale trading of power and gas on a level playing field;
– Freedom of choice of trading venue – Wholesale energy market participants should have the freedom to choose how and where to carry out their trading activities. A harmonious co-existence of OTC trading (with or without clearing as appropriate) and exchange-based trading opportunities is the fairest and most cost-effective outcome;
– Cross-border markets – The European single markets in power and gas can only transcend national borders if trade in energy commodities is unimpeded by artificial barriers, including tariffs;
– Intraday markets and system balancing – IDM and system balancing as close as possible to the delivery period will ensure that price signals correctly reflect the current market situation in terms of supply and demand;
– Ancillary services – Arrangements for the procurement of ancillary services by TSOs should be market based and help ensure the efficient functioning and integration of wholesale energy markets;
– Sound market design and implementation of uniform or at least harmonised market rules – A sound market design and governance framework at EU level must be recognized by national governments and Brussels institutions as crucial for the completion of the European single markets in power and gas;
– Market integrity and financial regulation – The legislative and regulatory framework needed to strengthen the integrity of the wholesale market must be flexible while being predictable and transparent;
– Decarbonisation;
– Integration of renewable energy in wholesale markets – The integration of renewable energy in wholesale markets requires the elimination over time of all operational (grid access priority, priority dispatch, balancing immunity) and financial (support scheme) privileges enjoyed by RES-E generators;
– Flexibility and storage – The efficient energy market provides the right combination of flexible capacity – production, demand and storage;
– Generation and demand adequacy;
– Security of supply – Ensuring that nothing unduly prevents the proper market response is the most efficient way to maintain supply security. Publication of real-time information can optimize supply and demand and deliver security of supply;
– Standardization – Standard contracts and standard IT protocols for the exchange of transaction data should remain among the tools which facilitate open, liquid and transparent energy markets;
– Retail market and demand side – Regulated or fixed prices for power and gas, starting with those applying to industrial or commercial consumers, should be phased out as quickly as possible;
– Freedom from licensing and obligation of secondary establishment- Wholesale market participants legally operating in one European nation and wishing to expand their activities to others should not incur undue cost nor have to cope with duplicative licensing or reporting obligations, in order to operate in another Member State;
These basic principles have been achieved at a different level in EU member states. At the national level, business organizations seek to support their implementation in order to establish competitive and equitable markets.