Sweden: Implementation of the Electricity Directive

The government has recently presented a bill¹ for the implementation of the revised EU Electricity Directive (2003/54/EC). The changes mainly concern the Electricity Act.² Since Sweden reformed its electricity market in 1996, the government must implement only a limited number of the directive's provisions.

Firstly, the directive's unbundling requirement will be implemented as regards to network undertakings belonging to a group of companies with at least 100,000 offtake/extraction points. A board member, managing director or authorized signatory may not occupy such positions simultaneously in an undertaking generating or trading electricity. Thus, the government decided to avail of the possibility afforded by the directive to exempt integrated electricity undertakings serving fewer than 100,000 customers from the unbundling requirements (the vast majority of the Swedish network undertakings serve fewer than 100,000 customers).

Since the 1996 reform, there has been a general obligation on legal unbundling. A network undertaking is not allowed to generate or trade electricity.

Secondly, the directive's provisions on compliance programmes for transmission and distribution system operators will be implemented by a general provision. A more precise definition of this obligation will be elaborated in regulations to be issued by the Energy Agency.

Finally, Sweden will implement the directive's provision on fixing or approving the terms and conditions for (i) connection and access to national networks, and (ii) provision of balancing services.³ Under the directive, such supervision shall be made before the entry into force of the terms and conditions. However, Sweden has always used an ex-post supervisory method. The undertakings set their terms and conditions without needing prior fixing or approval, while customers or the regulatory authority may initiate supervision after the entry into force of the terms and conditions. Therefore, the undertakings set their tariffs with the risk of having to adjust them and reimburse customers should the regulatory authority find the tariffs to be incompatible with the Energy Act.

The government proposed initially that the obligation on prior supervision of tariffs could be implemented simply by stating the methodologies in the Electricity Act - with no obligation of prior fixing or approval of the tariffs or methodologies by the regulatory authority. The government considered that this proposal should fulfil the requirement of prior supervision of tariffs. However, the Legal Council strongly opposed the proposal, arguing that it contravened the directive. The government decided to adhere to the views of the council and will soon propose a requirement for the Energy Agency to fix or approve either tariffs or methodologies in advance. Until this requirement has been implemented, the Electricity Act will state the principles which should be applied when setting tariffs.

The Parliament will vote on the proposed bill on May 25 2005. The changes to the Electricity Act are to come into force on July 1 2005, and the implementation of the directive will therefore be untimely, since the deadline expired on July 1 2004.