EUROPEAN COMMISSION

Brussels, 10.3.2011 COM(2011) 105 final

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND
THE COUNCIL

under Article 7 of Decision 2006/500/EC
(Energy Community Treaty)

This report is established pursuant to Council Decision 2006/500/EC of 29 May 2006 on the conclusion by the European Community of the Energy Community Treaty which provides that "three years after the entry into force of this Decision, the Commission shall submit to the European Parliament and to the Council a report on the experiences gained from the implementation of this Decision, accompanied, if appropriate, by a proposal for further measures". The present report reviews the achievements of the Energy Community and also its main challenges for the future.

1. Introduction – From disintegration to working together

The Energy Community is based on a Treaty signed between, on the one hand, the European Union1 and, on the other hand, the following nine Contracting Parties: Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav Republic of Macedonia, Moldova, Montenegro Serbia, Ukraine and UNMIK. Fourteen European Union Member States have moreover a special bond with this organisation, reflected in their status as "participants" in the process (Austria, Bulgaria, Cyprus, the Czech Republic, France, Germany, Greece, Hungary, Italy, the Netherlands, Romania, Slovakia, Slovenia and the United Kingdom). To date, Georgia, Norway and Turkey have the status of Observers. The Energy Community is about investments, economic development, security of energy supply and social stability; but – more than this – the Energy Community is also about solidarity, mutual trust and peace. The very existence of the Energy Community, only ten years after the end of the Balkan conflict, is a success in itself, as it stands as the first common institutional project undertaken by the non-European Union countries of South East Europe.

The Energy Community has three levels of ambition: national, regional and pan-European. In the short term, it aims at creating open and transparent national energy markets based on stable regulatory and market frameworks capable of attracting investments in power generation and networks (security of energy supply being essential for economic development and social stability); in the medium term, an integrated energy market should be in place across the region which allows for cross-border trade in energy, guarantees energy supply and takes into consideration climate and social aspects; in the long term, the regional market should be fully integrated in the European Union's internal energy market. To achieve these objectives, the Energy Community Treaty foresees appropriate courses of action by the Contracting Parties, either unilaterally or together with some EU Member States or with the European Union as a whole.

By joining the Energy Community, the Contracting Parties have committed themselves to implement the relevant EU rules on energy, environment and competition; the Treaty moreover provides the tools for the adoption of an ad hoc regulatory framework facilitating the cross border operation of the energy markets in the region and for the establishment of a single energy market. The Energy Community has its own institutional framework. In close cooperation with the Commission's services, the Energy Community Secretariat, based in Vienna, represents the key administrative actor; it ensures the necessary coordination and provides support for the work of the other institutions: the Permanent High Level Group, the Ministerial Council, the Energy Community Regulatory Board and the Fora.

The Secretariat is also responsible for reviewing the proper implementation by the Contracting Parties of their obligations under the Treaty and it submits yearly progress reports to the Ministerial Council. To this extent, the Secretariat acts as a "guardian of the Energy Community Treaty"; for its part, the European Commission plays a general coordinator role under the same Treaty. The Energy Community budget for 2011 amounts to EUR 3,380,000 and is financed to a 98% by the European Union (EUR 3,312,400). Since 2009, the European Union contribution is being paid from an ad hoc IPA Regional Programme. This budget serves basically to finance (1) the operation of the Secretariat; (2) the organisation of +/- 60 institutional meetings and events per year and participation of the Contracting Parties and Observers in those events; and (3) Studies. The bi-annual budget (2012-2013) for an enlarged Energy Community should be established and adopted in 2011. The Energy Community was created for a period of 10 years, expiring in July 2016 and it can be extended by unanimous decision of its Ministerial Council.

Although the Treaty has been in force since July 2006, the fact is that the Energy Community did not become fully operational until 2007, when the Secretariat was set up. While the Energy Community was originally conceived as a European Union pre-accession instrument, its membership has in the meantime been opened to countries in the European Neighbourhood Policy area (the first newcomer being Moldova since 1st May 2010; and Ukraine having joined with effect from 1st February 2011) and beyond (Armenia has applied to become an observer).Since the signature of the Energy Community Treaty, the importance of strengthening the external dimension of the EU energy market has become more and more evident, starting with the 2008 Commission's Second Strategic Energy Review. The recent Communication "Energy 2020 – A strategy for competitive, sustainable and secure energy" identifies the Energy Community concept as a key component for a strong international partnership with the EU's neighbours.

NOTE: To Read the rest of the report please access:

http://www.ec.europa.eu/energy/gas_electricity/community/doc/20110310_report_en.pdf