II-5.4: The Agency for the Cooperation of Energy Regulators (ACER) met for the first time on May 4 and 5, 2010

Context and Summary

Brief commentary

Our first observation is that there is a paradox in that regulatory systems are normally designed to mirror the sector it regulates: thereby, if the market is global, its institutions have to be, too; whereas, if the market is national, its institutions must remain within its borders. Similarly, regulatory systems are constantly confronted with Politics, in a dose depending on whether the sector is more political or more centered on economics: in the former case, regulation can be detached from the nation-state; in the latter case, regulation must limit itself to the nation-state’s borders, because that is the only place where it can rely upon political and democratic legitimacy. However, the energy sector is, by definition, a highly political sector—defining the Political as the power that is legitimate to decide on the future of the social group it represents—and does not technically constitute a global market.

Therefore, energy regulation should remain national. However, the ACER constitutes a sort of European regulatory authority, even if the vocabulary was carefully chosen in order to avoid the fundamental prohibition of the European Union, which, according to the European Court of Justice’s jurisprudence, forbids the EU from establishing organizations that dispossess Member States of their sovereignty, even though the financial sector, which is technically a global market, has not been truly internationally regulated. Why?

This is due to the fact that the ACER’s constitution is in and of itself a political decision. Indeed, the ACER is not the reflection of a hypothetical reality in which there is an already unified European energy market, but rather, is the attempt at creating the tools necessary to create such a zone. This is the primary, historical definition of Regulation, as it can be understood from the treaty establishing the European Coal and Steel Community (ECSC).

Indeed, pragmatism is a philosophy that posits that necessity knows no law. Therefore, pragmatism is opposed to other philosophies that posit that action is only legitimated by a conception (for example, sovereignty). Here, we have two perfectly parallel examples: currency and energy, which are both economic and political objects. Therefore, a market is being birthed “using forceps”, a market that could not exist simply via free-market forces, in order to politically construct an economic Europe, the European energy market being a simple tool to achieve the Common Market as a whole. In the same current of thought, the creation of a European banking and financial agency is being actively considered, in order to create an EU regulatory framework for the finance sector.

If, however, we adhere to conceptual philosophy, we give primary importance to the political nature of the object at hand: currency is an attribute of sovereignty, so it is obviously a national issue, and not an European issue. This is why we are seeing a resurgence of the issue of sovereign currency in academic literature (Aglietta, Michel, Orléan, André (eds.), {La monnaie souveraine}, Odile Jacob, 1998). Similarly, energy is a political object, which engages the future of the social group. Therefore, it is necessarily national.

But, if we adhere to the other philosophy, usually called pragmatism, we will simply say that we need this object to create a market, and we will give primary importance to the economic dimension of this object, and that in order for ordinary European markets to function, there has to be a European currency and a European energy market. But, the energy market and the currency cannot spontaneously be created, especially because of their residual political nature. Therefore, a very strong political initiative must cause these markets to exist.

Thirdly, we will observe that this European Agency does not cause national regulatory authorities to disappear; on the contrary, it is superimposed upon them and is in charge of coordinating their action and harmonizing their statements of intent. We are not confronted so much with a hierarchical phenomenon—which the previously cited EU principle would be opposed to—but rather a “spiral” mechanism, as we can observe in the field of finance with the Lamfalussy Proceedure, or more generally, through the European method of committees. This results in a system whose institutional structure better corresponds to reality—a requirement for regulatory systems, which must mirror what they regulate—but which is achieved at the expense of simplicity, with a great risk of uncertainty and internal complexity, even though legal simplicity and certainty are becoming fundamental norms. However, this is the price to pay for markets’ international nature, as long as law remains national, which is justified by their political dimension. Therefore, complexity is legitimate because it is necessary and politically justified ({cf.}, more generally: Audit, Mathias, ‘Les autorités de régulation, la confrontation des autorités nationales de régulation à la transnationalité des marchés’, {in} Audit, Mathias; Muir-Watt, Horatia; and Pataut, Etienne (eds.), {Conflits de lois et régulation économique}, coll. “Droit et Economie” L.G.D.J, 2008, p. 3-15.)

Fourthly, and finally, we will remark that the Agency must give its approval to the Network Code, as elaborated by the transport systems operators. We will observe (in a method that has become habitual in economic law) that codes of good practice, ‘soft law’, benefit from an increase in normative power from the Agency’s {imprimatur}. But, to take the French case as an example, the Commission de Régulation de l’Energie (CRE — French Commission for the Regulation of Energy) is also in charged of approving such a code every year. This double validation could cause contradictions, and doubtlessly, in a more hierarchical manner, the European agency will see its views prevail over the national agency’s. The constitutive text of the May 4-5, 2010 meeting shows this, because it expounds upon the way that it will exert its power over national authorities—an area the European Regulation of July 13, 2009 remained silent on—using opinions and recommendations, against which it organizes a possibility of appeal, open to national authorities. Of course, this makes the system more complex, and increases its cost: the cost of regulation can become a true political concern, but especially, such a movement participates in the increasingly jurisdictional nature of regulation.

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