Make ACER more acerate
November 26th, 2007 by Giulio Napolitano, Università della TusciaThe Commission has recently proposed, within the framework of the Third Energy Package, the establishment of an Agency for the cooperation of energy regulators (ACER) to advise the Commission, facilitate national regulators to cooperate and adopt individual decisions on cross-border issues. Here are some proposals to make the Agency more independent and efficient.
In order to carry out these tasks, according to the regulation proposed by Commission, the Agency shall comprise four bodies:
- an Administrative Board – composed of twelve members (six appointed by the Commission, and six by the Council) – shall bear planning and monitoring responsibilities;
- a Board of Regulators – having the same composition of the present ERGEG – shall exercise all the main regulatory responsibilities of the Agency, by providing the director with the relevant opinions and advice;
- a Director – appointed by the Administrative Board “on the basis of merit as well as skills and experience, from a list of at least two candidates proposed by the Commission, following a call for expression of interest” – shall exercise administrative responsibilities and formally adopts the opinions, recommendations and decisions of the Agency, subject to the assent of the Board of Regulators;
- a Board of Appeal – composed of six members and six alternates with relevant experience in the energy sector, who are appointed by the Administrative Board, on a proposal from the Commission, following a call for expression of interest – shall decide over the appeal against any agency decision addressed to the recurrent person.
It could be interesting to observe that this organisational arrangement strictly follows the general institutional design outlined in the 2005 Draft Inter-institutional Agreement on the operating framework for the European regulatory agencies (hereinafter, DIA). In the light of the its general purpose and its would-be binding nature (once approved), reference to this draft is helpful for a better understanding and evaluation of the choice made by the Commission with regard to the proposed ACER structure.
First of all, the good news is that the ERGEG will not disappear. It will be transplanted within ACER and wear the clothes of a Board of Regulators. Such a transplant was not granted, for the DIA generically predicts the possibility to set up scientific or expert committees, while not requiring the establishment of a NRAs’ representative body.
Another welcome feature concerns the mechanism of dispute resolution. Whenever the agency adopts an individual decision, interested parties are granted a right of appeal to an independent Board of Appeal, established within ACER. The Board of Appeal shall decide upon the appeal within two months. Actions may be brought before the Court of Justice only after this appeal procedure has been exhausted. Such a mechanism has the merit to speed up the dispute resolution and to avert the overburden of the non-specialized European judges.
So much granted, a major concern regards the provisions related to the Administrative Board. The Commission proposal, following the general scheme advanced in the 2005 DIA, determines that the Administrative Board shall be composed of twelve members, six of appointed by the Commission and six by the Council. It also states that the main programming and monitoring tasks will be assigned to this body. This solution, though complying with the regulatory agencies’ organization foreseen in the DIA, is not convincing. It is true that ACER exercises executive powers (even if of a special kind) at Community level; but this does not necessarily imply – as the DIA suggests – that «an equal representation of the two branches of the Community executive within the administrative board» should be provided, and that «the Commission and the Council should therefore designate an equal and limited number of members within the administrative board». Moreover, within the EU, the executive power in the energy sector rests primarily with the national governments. The same argument followed by the Commission could paradoxically imply involving also national governments in the appointment procedure. In short, the rationale behind the proposed composition of the Administrative Board is at least questionable.
This is all the more true if we consider the specific regulatory functions to be performed by the Agency. Independent technical advice, regulatory coordination of NRAs, individual decision on cross-border issues and the regulatory oversight of the TSOs all require an enhanced degree of independence from all regulated interests. Since the Council’s and Commission’s power of appointment is not bound to respect any criteria of neutrality or expertise of the nominee, nothing prevents the national influence or the regulatory capture of the Administrative Board. Moreover, this body could pursue its own agenda, eventually affecting the (assumed) neutral pro-competitive orientation of the board regulators. Such an unfortunate outcome would, at best, trigger the internal efficiency of the Agency; at worst, jeopardize the independence of ACER and of the overall continental regulatory network.
Therefore, in order to preserve the independence of the Agency, the following amendments (listed from the less to the more demanding) would be highly beneficial:
- The introduction of stronger requirement of expertise and independence
As far as expertise is concerned, according to para.11.2 sub 5 of the DIA, “All the members of the administrative board shall be appointed on the basis of their experience in the sector concerned”. Unfortunately, the proposed ACER regulation does not meet such a clear – and crucial – requirement. As for independence, it could be strengthen, for instance, by expanding the term of members’ office from 5 to 7 years, and by preventing the renewal.
- The consideration of a different composition formula
As already mentioned, the DIA foresees a general formula of “equal representation of the two branches of the Community executive within the administrative board” (art. 11.2.2). Yet, the incipit of the same provision openly states that “The three institutions agree that there cannot be a single formula for the composition of the administrative board”. Accordingly, legislative discretion is particularly broad in this respect. It is also worth noting that none of the existing European agencies’ management boards are appointed according to the proposed ACER formula. The institutional practice is, thus, silent on its assumed merits. Some of the already experienced formulas could perhaps be adjusted to the energy agency: this is probably the case of the European Food Safety Authority (EFSA).
According to article 25, reg. 178/2002, the EFSA administrative board is “composed of 14 members appointed by the Council in consultation with the European Parliament from a list drawn up by the Commission [...], plus a representative of the Commission. Four of the members shall have their background in organisations representing consumers and other interests in the food chain. [...] The members of the Board shall be appointed in such a way as to secure the highest standards of competence, a broad range of relevant expertise and, consistent with these, the broadest possible geographic distribution within the Union”. Whatever the opinion with respect to the already experienced options, the broad legislative discretion on the issue allows the Commission to explore further innovative solutions, that hopefully would better satisfy the sector-specific needs.
- Questioning the need itself of a Administrative Board.
This is the most demanding – and perhaps beneficial – amendment to consider. A strong political stance would be required to support it, since the stifling of the Administrative Board would affect the general organizational scheme defined by the DIA. The argument runs as follows. The Administrative Board performs, within a European agency, essentially two kinds of tasks: planning and monitoring. In the case of ACER, both these functions could be presumably assigned to other internal bodies. As for the planning function, the Director, on the advice of the Board of regulators, would be probably the best suited to carry out tasks such as the adoption of the agency’s annual work programme. As for the monitoring activities, an ad hoc audit unit could perform the pertinent tasks, under the supervision of the Director. A much more careful assessment, of course, would be required in order to show that the Administartive Board is redundant. The relevant point, however, is that the suppression of this board would confer on ACER a lighter and, at the same time, more independent structure. In short, a strong option in favour of bureaucratic streamline and enhanced agency independence should call into question the necessity itself of an Administrative Board.
Does a would-be thin and independent regulatory agency really need to superimpose a hybrid administrative-political board to a framework where an administrative body (the director with its staff) and a high-level politically independent body (the regulators board) are already available?
Giulio Napolitano and Mario Savino, University of Tuscia