Provisional text

delivered on 5 September 2024 (1)

Case C-48/23

Alajärven Sähkö Oy and Others,

Elenia Verkko Oyj

Energiavirasto

(Request for a preliminary ruling from the markkinaoikeus (Market Court, Finland))

( Reference for a preliminary ruling – Internal market for electricity – Directive (EU) 2019/944 – Article 57(4) and (5) – Independence of national regulatory authorities – Article 59 – Duties and powers of those authorities – Establishment of monitoring methods – National legislation whose objective is to reduce the price of electricity distribution without directly interfering with transmission and distribution tariffs or their methodologies – Decision of a regulatory authority to change its monitoring methods accordingly – Right of the government of a Member State to issue general policy guidelines which do not concern the duties and powers of the regulatory authority – Scope of that right )

1.Directive (EU) 2019/944 (2) states that Member States must guarantee the independence of national regulatory authorities within the framework of the internal electricity market. In particular, those authorities have the duty of fixing or approving, in accordance with transparent criteria, transmission or distribution tariffs and/or their methodologies.

2.To what extent does that directive allow the government of a Member State to reduce the costs of electricity distribution system operators, in order to reduce tariffs for consumers, without undermining the independence of the national regulatory authority? That is, in essence, the question posed by the markkinaoikeus (Market Court, Finland).

3.The request has been made in proceedings brought by Alajärven Sähkö Oy and Others and Elenia Verkko Oyj (‘Elenia’), the system operators, concerning decisions of the Energiavirasto (Energy Authority, Finland), that is to say the national regulatory authority, to change its monitoring methods concerning the determination of the return for system operators following the adoption of a law aimed at reducing the price of electricity distribution.

II. Legal context

4.Article 1 of Directive 2019/944, entitled ‘Subject matter’, states:

‘This Directive establishes common rules for the generation, transmission, distribution, energy storage and supply of electricity, together with consumer protection provisions, with a view to creating truly integrated competitive, consumer-centred, flexible, fair and transparent electricity markets in the Union.

Using the advantages of an integrated market, this Directive aims to ensure affordable, transparent energy prices and costs for consumers, a high degree of security of supply and a smooth transition towards a sustainable low-carbon energy system. It lays down key rules relating to the organisation and functioning of the Union electricity sector … and rules on the independence of regulatory authorities in the Member States.

This Directive also sets out modes for Member States, regulatory authorities and transmission system operators to cooperate towards the creation of a fully interconnected internal market for electricity that increases the integration of electricity from renewable sources, free competition and security of supply.’

5.Article 57 of that directive, entitled ‘Designation and independence of regulatory authorities’, provides:

‘1. Each Member State shall designate a single regulatory authority at national level.

…

(a) is legally distinct and functionally independent from other public or private entities;

(b) ensures that its staff and the persons responsible for its management:

(i) act independently from any market interest; and

(ii) do not seek or take direct instructions from any government or other public or private entity when carrying out the regulatory tasks. That requirement is without prejudice to close cooperation, as appropriate, with other relevant national authorities or to general policy guidelines issued by the government not related to the regulatory powers and duties under Article 59.

(a) the regulatory authority can take autonomous decisions, independently from any political body;

…’

6.Article 59 of that directive, entitled ‘Duties and powers of the regulatory authorities’, states:

‘1. The regulatory authority shall have the following duties:

(a) fixing or approving, in accordance with transparent criteria, transmission or distribution tariffs or their methodologies, or both;

…

(m) setting or approving standards and requirements for quality of service and quality of supply or contributing thereto together with other competent authorities and monitoring compliance with and reviewing the past performance of network security and reliability rules;

…

7. The regulatory authorities, except where [the Agency for the Cooperation of Energy Regulators (ACER)] is competent to fix and approve the terms and conditions or methodologies for the implementation of network codes and guidelines under Chapter VII of Regulation (EU) 2019/943 pursuant to Article 5(2) of Regulation (EU) 2019/942 because of their coordinated nature, shall be responsible for fixing or approving sufficiently in advance of their entry into force at least the national methodologies used to calculate or establish the terms and conditions for:

(a) connection and access to national networks, including transmission and distribution tariffs or their methodologies, those tariffs or methodologies shall allow the necessary investments in the networks to be carried out in a manner allowing those investments to ensure the viability of the networks;

…’

7.Paragraph 19 of the sähkömarkkinalaki (No 588/2013) (Law on the electricity market (No 588/2013); ‘the Law on the electricity market’), as amended by the laki sähkömarkkinalain muuttamisesta (No 730/2021) (Law amending the Law on the electricity market (No 730/2021) (5)), entitled ‘Obligation to develop the system’, states:

‘In order to ensure that users of their systems have access to electricity of sufficient quality, system operators must maintain, operate and develop their electricity systems and connections to other systems in accordance with the requirements relating to the operation of electricity systems and with the reasonable needs of system users.

An electricity system must be designed, constructed and maintained in such a way that:

(1) the electricity system meets the quality requirements for the operation of electricity systems and that the technical quality of the transmission and distribution of electricity is good in all other respects;

…

(6) the system operator can provide transmission and distribution services to system users in a cost-effective manner;

…’

8.Paragraph 51 of that law, entitled ‘Quality requirements applicable to the operation of the distribution system’, contains detailed provisions in that respect.

9.Paragraph 52 of that law, entitled ‘Plan for developing the distribution system’, provides:

‘The development of a distribution system operator’s distribution system must be based on an open distribution system development plan including:

(1) a plan on the key investments in the distribution system necessary to maintain the transmission capacity of the distribution system and to connect new electricity generation capacities and new loads to the distribution system over the following 10 years, including charging stations for electric cars and shoreside electricity requirements for maritime and inland vessels;

(2) measures the implementation of which will result in the requirements provided for in Paragraphs 51 and 119 being met and maintained in the distribution system;

(3) a plan for the possible use of flexible electricity consumption, electricity storage facilities, energy efficiency measures of the distribution system operator and other resources as alternatives to the expansion of the transmission capacity of the distribution system;

…’

10.Paragraph 119 of that law, entitled ‘Transitional provision relating to the operational reliability of distribution systems’, states:

‘The distribution system operator is obliged to meet the requirements set out in points 2 and 3 of the first subparagraph of Paragraph 51 in its area of responsibility by 31 December 2028. The requirements must be met by 31 December 2019 in respect of at least 50% of all distribution system users, excluding second homes, and by 31 December 2023 in respect of at least 75% of all distribution system users, excluding second homes.

If the proportion of underground cables of the medium-voltage system in the distribution system operator’s area of responsibility is no more than 60% on 31 December 2018, the distribution system operator must comply with the requirements laid down in points 2 and 3 of the first subparagraph of Paragraph 51, in its area of responsibility, by 31 December 2036. In that case, the requirements must be met in respect of at least 75% of all distribution system users by 31 December 2028, excluding second homes.’

11.In the travaux préparatoires relating to Law No 730/2021, the detailed justifications for amending the provision of Paragraph 119 of the Law on the electricity market state, in particular, as follows. The extension of the deadline for complying with the requirements for operational reliability of distribution systems significantly changes the regulatory environment of distribution system operators. The governance effects of the provisions in the second and third subparagraphs of Paragraph 119 of that law should be on a par with other forms of system supervision. Consequently, due to the proposed amendments to those provisions, the methods for monitoring the setting of system charges should also take into account the extension of the deadline for complying with the security of supply requirements and the associated changes to the investments of distribution system operators and their financing. The impact of the change in the regulatory environment should, for example, be taken into account in various elements involved in the methods used to calculate the distribution system operators’ tariffs, which are linked to the financing of investments and create incentives for investments.

12.Paragraph 6 of the laki sähkö- ja maakaasumarkkinoiden valvonnasta (No 590/2013) (Law on the supervision of electricity and natural gas markets (No 590/2013)), in the version applicable to the dispute in the main proceedings (‘the Law on Supervision’), entitled ‘Tasks of the Energy Authority as the national regulatory authority’, is worded as follows:

‘The Energy Authority, acting as a national regulatory authority within the meaning of EU legislation applicable to the electricity and natural gas sectors, is to be responsible in particular for:

(1) laying down, in accordance with the procedure laid down in this Law, the methodology for setting transmission and distribution tariffs for electricity and natural gas system operators;

…

(7) monitoring compliance with the rules on the safety and reliability of the electricity and natural gas systems, assessing past system performance and participating in the development of requirements relating to the quality of service of the electricity and natural gas systems and the supply of electricity and natural gas.

…’

13.Under Paragraph 10 of that law, entitled ‘Conditions and methods established by the Energy Authority’:

‘The Energy Authority shall, by decision (determination decision), lay down, for system operators, main system operators responsible for the system, transmission system operators responsible for the system and operators of a liquefied natural gas processing facility, conditions for the use of services and the methodology for setting the tariffs for the following services, prior to their introduction:

(1) the methodology for determining, during the monitoring period, the return on system operations for system operators and the charges to be levied for transmission services;

…

14.Paragraph 13 of that law, entitled ‘Amendment of the determination decision’, states:

‘The [Energy] Authority may amend a determination decision by adopting a new decision if the proceedings in respect of that decision were initiated by the [Energy] Authority of its own motion or at the request of the addressee of the determination decision. A determination decision that is valid for a fixed period can be amended by the [Energy] Authority of its own motion or on the initiative of the addressee of the decision and a determination decision that is valid for an indefinite period can be amended by the [Energy] Authority of its own motion if:

…

(2) the amendment is based on a change in legislation.

…’

III. The dispute in the main proceedings, the questions referred for a preliminary ruling and the procedure before the Court

15.By decisions of 30 November 2015 (‘the decisions of 30 November 2015’), the Energy Authority established monitoring methods for the fourth monitoring period from 1 January 2016 to 31 December 2019 and for the fifth monitoring period from 1 January 2020 to 31 December 2023, concerning the determination of the return on system operations for operators and the charges to be levied for electricity transmission services (‘the initial monitoring methods’).

16.By decisions of 15 December 2021 (‘the decisions of 15 December 2021’), the Energy Authority amended its decisions of 30 November 2015, for the period between 1 January 2022 and 31 December 2023, as regards the initial monitoring methods. The decisions of 15 December 2021 state that the matter of the monitoring methods was raised by the Energy Authority of its own motion after Law No 730/2021 entered into force on 1 August 2021.

17.On 17 and 19 January 2022, Alajärven Sähkö and Elenia brought actions respectively before the markkinaoikeus (Market Court), which is the referring court, seeking, inter alia, annulment of the decisions of 15 December 2021 on the ground that they had amended the initial monitoring methods by updating the unit prices to be applied in calculating the return for electricity system operators and by removing the alternative calculation method applicable in determining the risk-free interest rate. In their actions, the applicants submitted that the Energy Authority had not adopted those decisions autonomously as an independent regulatory authority, unlike what is required by Article 57 of Directive 2019/944.

18.In its response, the Energy Authority requested that the referring court dismiss those actions, submitting, inter alia, that the amendment to the initial monitoring methods fell within the scope of amendments to the Law on the electricity market and the Law on Supervision. It argued that the national legislature had concluded that those amendments satisfied the requirements of EU law relating to the independence of the national regulatory authority and that the amendments in question were merely rules equating to general guidelines.

19.The referring court notes that it must decide whether the Energy Authority was able, during the monitoring period, to change the initial monitoring methods by its decisions of 15 December 2021. In the context of that examination, it is necessary to consider whether the amendments to the Law on the electricity market introduced by Law No 730/2021 undermined the independence of that authority, which is the national regulatory authority, within the meaning of Article 57 of Directive 2019/944.

20.In that regard, the Energy Authority based those decisions essentially on the travaux préparatoires relating to Law No 730/2021. Those decisions stated, inter alia, that, following the amendments to the Law on the electricity market resulting from that law, the Energy Authority started amending the initial monitoring methods in order to adapt to the requirements arising from national legislation. According to those decisions, the central objective of those amendments was to provide the Energy Authority with new tools to influence the evolution of electricity transmission tariffs without jeopardising the development of secure and smart electricity systems.

21.The referring court notes, moreover, that, according to the government bill which led to the adoption of Law No 730/2021 (‘the bill’), the objective of the amendments to the Law on the electricity market was to curb an increase in electricity distribution prices by taking measures to reduce the cost level of the distribution system operators and to keep an increase in the cost level under control. In that regard, the bill addressed amendments to the monitoring methods made by the Energy Authority after Law No 730/2021 entered into force, emphasising that a revision of those methods does not require there to be legislation directly related to the content of those methods.

22.The bill also makes clear that the Energy Authority had stated, in a background report drawn up for the Työ- ja elinkeinoministeriö (Ministry of Economic Affairs and Employment, Finland) in connection with the travaux préparatoires relating to Law No 730/2021, that, as a result of the proposed amendments to the national legislation applicable to electricity system operators, it would have to change the initial monitoring methods for the ongoing monitoring period. According to an assessment by that ministry referred to in the bill, the changes to the methods for calculating distribution tariffs notified by that authority had a significant impact on the returns of the system operators and those recorded by their owners. Moreover, the bill contained assessments of the financial impact that the changes to the monitoring methods had on the permissible level of return for distribution system operators and on the distribution charges which they levied on their customers.

23.Furthermore, a report of the Finance Committee, drawn up as part of the parliamentary debate on the bill, states. inter alia, that it would be appropriate to intervene in the unreasonable returns of the system operators made possible by the calculation methods applied. According to that report, under the initial monitoring methods the system value was set on the basis of component-related unit prices set by the Energy Authority. However, those unit prices were fixed for eight years, from 2016 to 2023, and no longer reflected actual cost level. The report highlighted the fact that a key factor underlying the rules for setting the transmission charges for electricity and the methods for calculating tariffs is the valuation of the electricity system by means of which the return is determined, and that the purpose of the proposals to amend national legislation was specifically to allow a change in the monitoring model during the ongoing monitoring period.

24.The referring court adds that Alajärven Sähkö and Elenia claimed before it that the implementation of the objectives resulting from the travaux préparatoires relating to Law No 730/2021 and the influence on the independence of the Energy Authority were also apparent from the documents which they submitted, in particular the presentation material provided by the Ministry of Economic Affairs and Employment at a press conference on 15 October 2020 and the presentation material used by the Minister for Economic Affairs at a press conference on 28 January 2021.

25.According to the referring court, the amendments to the Law on the electricity market resulting from Law No 730/2021 did not, as such, directly concern the monitoring methods for system operators applied by the Energy Authority in determining the reasonable return of distribution system undertakings. Similarly, those amendments did not directly relate to the unit prices to be applied in calculating the return or the risk-free interest rate to be applied in determining the reasonable rate of return. As was also stated in the travaux préparatoires relating to Law No 730/2021, the objective of those amendments was to bring about a reduction in the electricity distribution price. As was indicated in the travaux préparatoires, the Energy Authority was given the means and justification to change the calculation methods in order to reduce the price of electricity distribution from the middle of the monitoring period, those changes and the effects thereof having been explained and assessed in advance. Those statements seemed to have played a clear role also in the adoption of that authority’s decisions of 15 December 2021.

26.The referring court contends that it is necessary for the Court of Justice to interpret whether the objective of curbing the increase in electricity distribution prices and bringing those prices down can be regarded as something other than a matter concerning the duties and powers of the national regulatory authority as provided for in Article 59 of Directive 2019/944, in particular where the objective of the legislative amendment is, for example, to improve the cost effectiveness of system undertakings, or whether it may also constitute, in that regard, general policy guidelines which are not related to those duties and powers of the national regulatory authority and, if so, what the conditions for that would be. The referring court also considers that it is necessary to examine the importance to be attached to the fact that the statements referred to are set out in the travaux préparatoires relating to Law No 730/2021 (6), and whether they may be regarded as policy guidelines within the meaning of Article 59 of that directive.

27.In those circumstances, the markkinaoikeus (Market Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘(1) What factors must be taken into account and considered in assessing what constitutes interference with the core regulatory duties and powers of the national regulatory authority in a way that undermines the independence of the national regulatory authority in accordance with Article 57(4) and (5) of [Directive 2019/944], and what constitutes general guidelines not related to the regulatory duties and powers within the meaning of Article 59 of the [that directive]?

(2) Is an amendment to national legislation [such as that at issue in the main proceedings] the purpose of which was to influence electricity distribution prices in the manner set out in the travaux préparatoires relating to the legislative amendment by making amendments to the national Law on the electricity market which affect the regulatory environment of system operators and which did not, in themselves, directly interfere with transmission or distribution tariffs or with the methods for calculating them, but as a consequence of which the national regulatory authority was forced to change its monitoring methods in the middle of the monitoring period, considered to be compatible with Article 57(4) and (5) of [Directive 2019/944] with regard to the requirement of independence of the regulatory authority?’

28.Written observations were submitted to the Court by Alajärven Sähkö, Elenia, the Energy Authority, the Finnish and Cypriot Governments and the European Commission.

29.By its questions, which it is appropriate to examine together, the referring court asks, in essence, whether Article 57(4) and (5) of Directive 2019/944 relating the independence of national regulatory authorities must be interpreted as precluding legislation of a Member State whose objective is, as indicated in the travaux préparatoires relating to the law at issue, to reduce electricity distribution prices without, as such, directly interfering with electricity transmission and distribution tariffs and/or their methodologies within the meaning of Article 59(1)(a) of that directive, but the effect of which has been that the national regulatory authority has changed its monitoring methods in the middle of a monitoring period.

30.In order to answer that question, I will examine, first, the extent of the independence conferred on the national regulatory authorities by Directive 2019/944 (Section A) and, secondly, respect for the independence of those authorities as regards their duty to set or approve transmission and distribution tariffs and/or their methodology (Section B).

31.As a preliminary point, it should be borne in mind that Article 194(1) TFEU states that, in the context of the establishment and functioning of the internal market and with regard for the need to preserve and improve the environment, Union policy on energy is to aim, in a spirit of solidarity between Member States, to ensure the functioning of the energy market; ensure security of energy supply in the Union; promote energy efficiency and energy saving and the development of new and renewable forms of energy; and promote the interconnection of energy networks. (7) Article 194(2) provides that, without prejudice to the application of other provisions of the Treaties, the European Parliament and the Council, acting in accordance with the ordinary legislative procedure, are to establish the measures necessary to achieve the objectives in paragraph 1 of that article, which are not to affect a Member State’s right to determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply, without prejudice to Article 192(2)(c) TFEU. Consequently, the TFEU, while establishing the European Union’s powers in the field of energy, expressly confers on the Member States the right to decide, inter alia, on the conditions for exploiting their energy resources. It is ultimately the relationship between those two powers, European and national, which lies at the heart of the present case.

32.Directive 2019/944 was adopted on the basis of Article 194(2) TFEU and must be read in conjunction with other acts relating to the electricity market and published on the same date, that is to say, inter alia, Regulation (EU) 2019/941 (8) and Regulation 2019/943. The second paragraph of Article 1 of that directive states that it lays down key rules relating to the organisation and functioning of the Union electricity sector, in particular rules on the independence of regulatory authorities in the Member States. According to the third paragraph of that article, that directive sets out modes for Member States, regulatory authorities and transmission system operators to cooperate towards the creation of a fully interconnected internal market for electricity that increases, inter alia, security of supply.

33.In that context, Article 57(4) of Directive 2019/944 states that Member States are to guarantee the independence of the regulatory authority and to ensure that it exercises its powers impartially and transparently. In order to guarantee such independence and when carrying out the regulatory tasks conferred on it by that directive and related legislation, that provision provides, first, in subparagraph (a) thereof, that the regulatory authority is to be legally distinct and functionally independent from other public or private entities and, secondly, in subparagraph (b)(i) and (ii) thereof, that the staff of that authority and the persons responsible for its management are to act independently of any market interest and not seek or take direct instructions from any government or other public or private entity when carrying out the regulatory tasks, that requirement being without prejudice to close cooperation, as appropriate, with other relevant national authorities or to general policy guidelines issued by the government not related to the regulatory powers and duties under Article 59 of that directive. They include the duty, set out in Article 59(1)(a), to fix or approve, in accordance with transparent criteria, transmission or distribution tariffs or their methodologies, or both. In addition, under Article 57(5)(a) of that directive, in order to protect the independence of the regulatory authority, Member States are to ensure that that authority can take autonomous decisions, independently of any political body. (9)

34.While the Court has not yet had occasion to interpret Article 57(4) and (5) of Directive 2019/944, it has delivered several judgments on Article 35(4) and (5) of Directive 2009/72, the wording of which is similar to that of Article 57(4) and (5). The Court’s case-law provides the following guidance relevant to this case.

35.With regard to the concept of ‘independence’, neither Article 57 of Directive 2019/944 nor any other provision thereof defines it. In that regard, the Court has already held that, as regards public bodies, that term refers in its usual meaning to a status that ensures that the body in question is able to act completely freely in relation to those bodies in respect of which its independence is to be ensured, shielded from any instructions or external influence. (10) Independence in decision-making implies that, within the sphere of the regulatory duties and powers referred to in Article 59 of that directive, the regulatory authority takes its own decisions autonomously and solely in the public interest, so as to ensure compliance with the objectives pursued by that directive, without being subject to external instructions from other public or private entities. (11)

36.Respect for that independence is mandatory de jure and de facto. Thus, in accordance with the case-law of the Court of Justice, the powers attributed exclusively to the regulatory authority by Directive 2019/944, and its independence, must be ensured in relation to any political body, and so not only the government, but also in relation to the national legislature, which can and must establish such powers in legislative acts but cannot, however, take powers away from the regulatory authority and attribute them to other public bodies. (12)

In that sense, the Court has held that the attribution to an authority other than the regulatory authority of the power to define criteria which are decisive for the calculation of tariffs as regards certain electricity transmission installations, such as the profit margin, is not consistent with EU law. (13)

Furthermore, it is apparent from the Court’s case-law that Article 57(4) and (5) of Directive 2019/944 requires that the representatives of the national ministries must not be able to use their participation in tariff regulation procedures to put any pressure whatsoever on the regulatory authority or to give it instructions that might influence its decisions within the framework of its duties and powers under Article 59 of that directive. Although that directive does not preclude the government of a Member State, in particular by means of the participation of representatives of its ministries, from being able to state its position before the national regulatory authority on the way in which it considers that that authority might take the public interest into account in the framework of its regulatory tasks, that participation and, in particular, the views expressed by those representatives during the tariff regulation procedures cannot be binding or in any case be regarded by the regulatory authority as instructions with which it would be required to comply when exercising its duties and its powers. (14) Moreover, the rules on the participation of representatives of national ministries in tariff regulation procedures must not affect the scope of the regulatory authority’s decisions, adopted in application of the duties and powers provided for in Article 59. In particular, where such duties or powers so require, those rules on participation cannot affect the mandatory nature and the direct applicability of the decisions of that authority, for example by requiring that those decisions be first approved or authorised by those representatives before being implemented. (15)

Thus, the powers reserved to the regulatory authority are executive powers that are based on the technical and specialist assessment of factual realities and, in the exercise of those powers, the regulatory authority is subject to principles and rules established by an equally detailed legislative framework at EU level, which limit its discretion and prevent it from making political choices. (16)

Why must the independence of the regulatory authorities be mandatory? In that regard, the Court has made clear that the complete independence of regulatory authorities from economic actors and public entities, be they administrative bodies or political bodies, and, in the latter case, be they the holders of executive power or of legislative power, is instrumental in ensuring that the decisions taken by those authorities are truly impartial and non-discriminatory, while the possibility of undertakings and economic interests connected with the government, the majority or political power being treated more favourably is excluded and that, furthermore, the strict separation of regulatory authorities from political power enables them to coordinate their actions on a long-term basis, which is necessary to meet the objectives of directives relating to the energy market. (17) The purpose of that independence is thus to avoid conflicts of interest to the detriment of consumers. One author observed that independence from the regulated sector has gradually been given a legal basis by means of the case-law of the Court and subsequently in secondary legislation. (18) There are various aspects to safeguarding the independence of regulatory authorities, which have been analysed inter alia by the Council of European Energy Regulators (CEER). (19)

Although the system of EU law favours a broad understanding of the concept of independence with regard to the specific powers entrusted to the regulatory authorities, (20) it does not exclude the possibility for the Member States to intervene, under certain conditions, in the functioning of the electricity market. Article 59 of Directive 2019/944 sets out the list of duties and powers conferred on the regulatory authorities. Whilst that list concerns many areas, it does not cover the entire electricity market. Member States may therefore adopt their own regulations relating to the national electricity market outside those duties and powers. Furthermore, Article 57(4)(b)(ii) of that directive states that the requirement of independence of the staff of the regulatory authority and of the persons responsible for its management is without prejudice to general policy guidelines issued by the government of the Member State concerned. According to the case-law of the Court, it is clear from the wording of that provision that such general guidelines do not concern the duties or regulatory powers referred to in Article 59 of that directive. (21)

As stated in recital 87 of Directive 2019/944, that directive and Directive 2009/73/EC (22) ‘do not deprive Member States of the possibility of establishing and issuing their national energy policy. It follows that, depending on a Member State’s constitutional arrangements, it might be within [a] Member State’s competence to determine the policy framework in which the regulatory authorities are to operate, for example concerning security of supply. However, the general energy policy guidelines issued by the Member State should not impinge on the independence or autonomy of the regulatory authorities.’

That recital thus establishes an explicit link between, on the one hand, the general policy guidelines issued by the government of a Member State, which concern not only the staff and persons responsible for the management of the regulatory authority, within the meaning of Article 57(4)(b)(ii) of Directive 2019/944, but also all the electricity market participants and, on the other hand, security of supply, which, under Article 59(1)(m) of that directive, does not necessarily fall within the scope of the regulatory authority’s powers. (23) It also follows from that recital that Member States may establish, more generally, their national energy policy, as provided for in Article 194(2) TFEU. (24) Consequently, the government of a Member State is entitled to issue general policy guidelines, in particular relating to the ‘security of supply’ of electricity.

Directive 2019/944 does not define the concept of ‘security of supply’. In that respect, it is worth referring to Regulation 2019/941, point 1 of Article 2 of which defines ‘security of electricity supply’ as ‘the ability of an electricity system to guarantee the supply of electricity to customers with a clearly established level of performance, as determined by the Member States concerned’. That capacity is translated into a ‘reliability standard’, which indicates the necessary level of security of supply of the Member State in a transparent manner, (25) and which is calculated using at least the value of lost load and the cost of new entry over a given time frame and is to be expressed as ‘expected energy not served’ and ‘loss of load expectation’. (26)

In conclusion, as the Commission pointed out in its written observations, Directive 2019/944 aims to strike a balance between, on the one hand, the requirement that national regulatory authorities be independent and, on the other hand, the right of a Member State to establish its national energy policy in areas that do not fall within the exclusive powers of those regulatory authorities, particularly as regards the security of electricity supply.

Under Article 59(1)(a) of Directive 2019/944, the regulatory authority is to have the duty of fixing or approving, in accordance with transparent criteria, transmission or distribution tariffs or their methodologies, or both. (27) Furthermore, paragraph 7(a) of Article 59 of that directive states that, as a rule, the regulatory authorities are to be responsible for fixing or approving sufficiently in advance of their entry into force at least the national methodologies used to calculate or establish the terms and conditions for connection and access to national networks, including transmission and distribution tariffs or their methodologies, those tariffs or methodologies allowing the necessary investments in the networks to be carried out in a manner allowing those investments to ensure the viability of the networks. It follows from the case-law of the Court that an interpretation of those provisions as meaning that it is possible for a national government to fix or approve the methodologies for calculating rates for access to the network would counteract the objectives pursued by that directive. (28)

In the present case, as is apparent from the wording of the second question referred, the referring court considers that Law No 730/2021 does not, as such, directly interfere with transmission or distribution tariffs or their methodologies. However, it is uncertain whether or not that law indirectly undermined the independence of the Energy Authority, which subsequently changed its monitoring methods in the middle of a monitoring period.

Although that court refers to Law No 730/2021, it is concerned, more specifically, with the travaux préparatoires relating to that law, that is to say the bill drawn up by the government. It is apparent from the order for reference and from the written observations of Alajärven Sähkö and the Finnish Government that, by adopting that law, the Finnish Parliament approved, in that form, the legislative proposals contained in the bill. In those circumstances, in answer to the referring court’s question set out in point 26 of this Opinion, I take the view that the travaux préparatoires relating to that law can be regarded as general policy guidelines issued by the government of the Member State concerned within the meaning of Directive 2019/944. (29) In any event, taking account of the case-law cited in point 36 of this Opinion, the independence of the national regulatory authority must be ensured in relation to any political body, and so not only the government of the Member State concerned, but also in relation to the national legislature.

The referring court notes that the objective of Law No 730/2021, as is evident from the travaux préparatoires relating to it, was to reduce electricity distribution prices in Finland. In that regard, in particular, the bill contains estimates of the economic impact of changes in the monitoring methods as regards the authorised level of return for distribution system operators and the distribution charges which they are to levy on their customers. Alajärven Sähkö and Elenia further maintain in their written submissions that the bill included very precise calculations of how the Energy Authority’s decisions on methodology are affected by that law.

The Finnish Government states in its written observations that storms and significant amounts of snow caused considerable disruption to the electricity distribution networks in Finland during the 2000s, resulting in power cuts. Consequently, the Law on the electricity market, in its initial version, which entered into force on 1 September 2013, placed targets on system operators to improve the security of distribution systems, which were to be met in stages by the end of 2028 in their respective areas of responsibility. (30) During 2016, electricity distributors informed their customers of particularly high price increases, which led the government to introduce into that law provisions, which entered into force on 1 September 2017, aimed inter alia at facilitating the extension of the implementation period for requirements relating to the security of distribution systems, in order to reduce the level of costs for distribution system operators and curb the increase in electricity transmission prices. The government which took office in 2019 planned to pursue those measures by proposing measures relating to the development and security of distribution systems since the Energy Authority was competent to change the methodology for calculating electricity transmission and distribution charges.

Again, according to the Finnish Government, Law No 730/2021 made the following changes: first, an additional period of eight years has been adopted for the implementation of the safety requirements for the operation of the distribution system, in accordance with the new Paragraph 119 of the Law on the electricity market; secondly, a provision, namely point 6 of the second subparagraph of Paragraph 19 of that law, has been inserted, under which the system operator must be able to provide transmission and distribution services to system users in a cost-effective manner and; thirdly, Paragraph 52 of that law, relating to the plan for developing the distribution system, has been supplemented so that that plan can in future be used to encourage and monitor the cost-effectiveness of the development of the distribution system, inter alia by requiring that the plan state whether the system operator is using demand response, energy efficiency measures, energy storage or other resources as an option for the expansion of the transmission capacity for the distribution system. The Finnish Government adds that, in view of the easing of security of supply requirements brought about by those amendments, the Energy Authority was justified in changing the methods for calculating distribution tariffs in order to prevent system operators from levying unduly high distribution charges on their customers.

In that regard, it must be borne in mind, as regards the jurisdiction of the Court to reply to the questions referred for a preliminary ruling, that the system of cooperation established by Article 267 TFEU is based on a clear division of responsibilities between the national courts and the Court of Justice. In proceedings brought on the basis of that article, the interpretation of provisions of national law is a matter for the courts of the Member States, not for the Court of Justice, and the Court has no jurisdiction to rule on the compatibility of rules of national law with provisions of EU law. However, the Court does have jurisdiction to provide the national court with all the guidance as to the interpretation of EU law necessary to enable that court to determine whether those national rules are compatible with EU law. (31)

Generally, the mere fact that the government of a Member State seeks to lower electricity distribution prices does not, as such, appear to be incompatible with Article 57(4) and (5) of Directive 2019/944. As was noted above, that directive does not deprive Member States of the possibility of establishing their national energy policy.

The exercise by a Member State of its own powers to establish its national energy policy, by its very nature, inevitably has repercussions on the costs of operating the electricity system. Therefore, it is not always easy in practice to draw a distinction between implementing a national energy policy and respecting the powers of the regulatory authority. (32) Although the case-law of the Court has been criticised, (33) it appears to me, on the contrary, that it enables a dividing line to be drawn between the powers of the regulatory authority and those of the Member State.

In the context of establishing its national energy policy, a Member State has the power to decide on the level of security of electricity supply where it has not conferred that power on that regulatory authority. Thus, a Member State has the right to opt for a lower reliability standard for its energy systems if it considers that the previous standard leads to excessive overall costs, while not undermining the viability of those systems. That lowering of the reliability standard leads, as a rule, to lower investment costs for transmission and distribution system operators, which should ultimately lead to lower tariffs for consumers. That exercise does not mean that the Member State de facto sets the transmission and distribution tariffs, and/or the methodologies. Influencing the methodology used by distribution system operators to calculate tariffs appears to be a wholly indirect result of the Member State’s legitimate interest in choosing the level of its security of electricity supply.

Furthermore, under Article 194(2) TFEU, a Member State is competent to determine the conditions for exploiting its energy resources. Prima facie, the fact that a Member State requires system operators to provide transmission and distribution services to users in a cost-effective manner and that the distribution network development plan may in future make it possible to encourage and monitor the cost-effectiveness of the development of that network appears to be a matter concerning that power. Member States are entitled to seek the best possible use of their electricity resources.

On the other hand, since it is the duty of the regulatory authority to fix or approve transmission and distribution tariffs and/or their methodologies, pursuant to Article 59(1)(a) of Directive 2019/944, it is for that authority alone to determine the methodology for calculating those tariffs and the amount thereof. In that regard, the Court has noted that the government of a Member State may not fix the methodologies for determining charges for access to the network and decide in which cases and under what conditions the national regulatory authority may define those conditions or methodologies, or approve them at the request of the network operator, or in what particular cases of use of the network and under what conditions that authority may, in individual cases, authorise or withhold authorisation for individual tariffs for network access. (34)

Therefore, as the Commission points out in its written observations, changes to national legislation do not comply with Directive 2019/944 if they determine in detail their effects on transmission and distribution tariffs and/or their methodologies, in so far as, under Articles 57 and 59 of that directive, the regulatory authority has the exclusive power to assess the consequences of changes made, inter alia, to the reliability standard and to reflect them in the methodologies for setting prices.

In that regard, Alajärven Sähkö and Elenia argue that the Ministry of Economic Affairs and Employment, the minister responsible for the electricity market and the Finnish Parliament gave the Energy Authority very detailed instructions on the changes which it was to make, following the adoption of Law No 730/2021, to the monitoring methods which it had previously established, which were a roundabout means of setting transmission and distribution tariffs and/or their methodology. For its part, the Energy Authority maintains that its framework report, which concerned the methodology for monitoring the reasonableness of the setting of tariffs for the operation of the electricity network, was carried out autonomously and that, in order to ensure predictability as regards the legislative process, it is desirable for the regulatory authority to be able to provide an independent expert opinion on the potential impact of changes to national legislation. Since such an opinion is intended to give the national legislature guidance as to the impact of those changes on transmission and distribution tariffs and/or their methodology, I consider that it does not undermine the independence of the regulatory authority if it has been able to act autonomously, on the sole basis of the public interest, to ensure compliance with the objectives pursued by that directive, without being subject to external instructions from other bodies, (35) which it is for the referring court to determine.

I would add that, according to the wording of the second question, the Energy Authority ‘was forced to change its monitoring methods’ following the adoption of Law No 730/2021, which can be understood as imposing an obligation on that authority. At the same time, it is apparent from the order for reference that, in its decisions of 15 December 2021, that authority states that it took up the question of monitoring methods on its own initiative after that law had entered into force. Furthermore, in its written observations, that same authority states that the correct wording of the question was ‘deemed necessary to change its monitoring methods’ in the sense that, under point 2 of the first subparagraph of Paragraph 13 of the Law on Supervision, it may amend its decision to establish monitoring methods in the light of developments in national legislation, and that that provision explicitly leaves to the regulatory authority the power to assess the need for and bases of the monitoring methods and changes to them. Consequently, the Energy Authority itself considers that it did not exercise the related power as regards the setting of transmission and distribution tariffs and/or their methodology.

Furthermore, in its written observations, the Cypriot Government observes that, according to the wording of the second question, the national regulatory authority changed its monitoring methods in the ‘middle of a monitoring period’. The Cypriot Government therefore deduces that such a change does not appear to comply with Article 59(7) of Directive 2019/944, under which regulatory authorities are to be responsible for fixing or approving ‘sufficiently in advance of their entry into force’ at least the national methodologies used to calculate or establish the transmission or distribution tariffs or their methodologies, and would undermine the independence of the national regulatory authority if it were imposed. However, it should be noted that the referring court does not ask the Court about the temporal application of the decisions of 15 December 2021. Indeed, the order for reference contains no indication to that effect. In those circumstances, there is no need to examine that matter.

It is ultimately for the referring court to examine whether Law No 730/2021 falls within the power conferred on a Member State by Directive 2019/944, namely whether the action of the Member State concerned was strictly limited to the establishment of its national energy policy, in particular as regards the security of supply of the electricity system and the conditions for exploiting its energy resources, or whether it encroached on the exclusive power of the national regulatory authority to set transmission and distribution tariffs, and/or their methodology.

In the light of all of the foregoing, I am of the view that Article 57(4) and (5) of Directive 2019/944 must be interpreted as not precluding legislation of a Member State whose objective, as indicated in the travaux préparatoires relating to it, is to influence a reduction in electricity distribution prices without, as such, directly interfering with electricity transmission and distribution tariffs and/or their methodology, but the effect of which has been that the national regulatory authority has changed its methodology, in so far as that legislation reflects the general policy guidelines issued by the government of the Member State concerning its national energy policy, in particular with regard to determining the level of security of supply and the conditions for exploiting energy resources, which is not a matter concerning the duties and powers of the regulatory authority within the meaning of Article 59 of that directive.

Conclusion

In the light of the foregoing considerations, I propose that the Court answer the questions referred by the markkinaoikeus (Market Court, Finland) as follows:

Article 57(4) and (5) of Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU

must be interpreted as not precluding legislation of a Member State whose objective, as indicated in the travaux préparatoires relating to it, is to influence a reduction in electricity distribution prices without, as such, directly interfering with electricity transmission and distribution tariffs and/or their methodology, but the effect of which has been that the national regulatory authority has changed its methodology, in so far as that legislation reflects the general policy guidelines issued by the government of the Member State concerning its national energy policy, in particular with regard to determining the level of security of supply and the conditions for exploiting energy resources, which is not a matter concerning the duties and powers of the regulatory authority within the meaning of Article 59 of that directive.

1 Original language: French.

Directive of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU (OJ 2019 L 158, p. 125). Pursuant to Article 72 of that Directive 2009/72/EC, it repealed Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC with effect from 1 January 2021.

Regulation of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (OJ 2019 L 158, p. 54).

Regulation of the European Parliament and of the Council of 5 June 2019 establishing a European Union Agency for the Cooperation of Energy Regulators (OJ 2019 L 158, p. 22).

Law No 730/2021 entered into force on 1 August 2021.

The referring court refers, in that regard, to the judgment of 29 April 2004, Björnekulla Fruktindustrier (C‑371/02, EU:C:2004:275)

See judgment of 15 July 2021, Germany v Poland (C‑848/19 P, EU:C:2021:598, paragraph 37 and the case-law cited).

Regulation of the European Parliament and of the Council of 5 June 2019 on risk-preparedness in the electricity sector and repealing Directive 2005/89/EC (OJ 2019 L 158, p. 1).

Likewise, recital 80 of Directive 2019/944 states that regulatory authorities need to be able to take decisions in relation to all relevant regulatory issues if the internal market for electricity is to function properly, and need to be fully independent from any other public or private interests. That recital also makes clear that that precludes neither judicial review nor parliamentary supervision in accordance with the constitutional laws of the Member States.

See, to that effect, judgment of 2 September 2021, Commission v Germany (Transposition of Directives 2009/72 and 2009/73) (C‑718/18, ‘the judgment in Commission v Germany’, EU:C:2021:662, paragraph 108 and the case-law cited).

See, to that effect, the judgment in Commission v Germany, paragraph 109 and the case-law cited.

See, to that effect, the judgment in Commission v Germany, paragraph 130.

See judgment of 29 October 2009, Commission v Belgium (C‑474/08, EU:C:2009:681, paragraphs 29 to 31).

See, to that effect, judgment of 11 June 2020, Prezident Slovenskej republiky (C‑378/19, EU:C:2020:462, paragraphs 62 and 63). On that judgment, see Rizzuto, F., ‘The independence of national regulatory authorities: Is there now an autonomous EU LAW concept of independence of general application?’, European Competition and Regulatory Law Review, 2021, Vol. 5, No 1, p. 64 to 75.

See, to that effect, judgment of 11 June 2020, Prezident Slovenskej republiky (C‑378/19, EU:C:2020:462, paragraph 64).

See, to that effect, the judgment in Commission v Germany, paragraph 132.

See the judgment in Commission v Germany, paragraph 112. In paragraph 126 of that judgment, the Court also notes that that the principle of democracy does not preclude the existence of public authorities outside the classic hierarchical administration and more or less independent of the government, which often exercise regulatory functions or carry out tasks which must be free from political influence, whilst still being required to comply with the law subject to the review of the competent courts and conferring on regulatory authorities a status independent of the general administration does not in itself deprive those authorities of their democratic legitimacy, in so far as they are not shielded from all parliamentary influence.

See Delzangles, H., ‘L’indépendance des autorités de régulations sectorielles, communications électroniques, énergie et postes’, doctoral thesis defended on 30 June 2008 at the University of Bordeaux IV (France), in particular p. 234.

See CEER report (available only in English) entitled ‘Safeguarding the independence of regulators – Insights from Europe’s energy regulators on powers, resources, independence, accountability and transparency’, 13 December 2016, which can be consulted at the following address: https://www.ceer.eu/wp-content/uploads/2024/04/C16-RBM-06-03_SafeguardingNRAIndependence_PUBLIC-13-Dec-2016.pdf.

See Opinion of Advocate General Pitruzzella in Commission v Germany (Transposition of Directives 2009/72 and 2009/73) (C‑718/18, EU:C:2021:20, point 128).

See, to that effect, the judgment in Commission v Germany, paragraph 110.

Directive of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (OJ 2009 L 211, p. 94).

In its written observations, the Finnish Government points out that, under point 7 of the first subparagraph of Paragraph 6 of the Law on Supervision, the national legislature conferred on the regulatory authority not the power to approve or to set rules relating to the security and development of electricity distribution systems, but the duty to monitor compliance with those rules and to participate in the development of those requirements relating to the quality of service of the systems and of the supply of electricity.

See point 31 of this Opinion.

See Article 25(1) of Regulation 2019/943.

See Article 25(3) of Regulation 2019/943. By way of example, the Kingdom of Belgium has set the reliability standard at three hours. See, to that effect, the arrêté royal du 4 septembre 2002 modifiant l’arrêté royal du 31 août 2021 relatif à la détermination de la norme de fiabilité et à l’approbation des valeurs du coût de l’énergie non distribuée et du coût d’un nouvel entrant (Royal Decree of 4 September 2002 amending the Royal Decree of 31 August 2021 on the determination of the reliability standard and the approval of values for the cost of undistributed energy and the cost of a new entry) (Moniteur belge of 14 September 2022, p. 67240).

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Furthermore, recital 82 of that directive states that regulatory authorities should fix or approve individual grid tariffs for transmission and distribution networks or a methodology, or both, and that, in either case, the independence of the regulatory authorities in setting network tariffs pursuant to point (b)(ii) of Article 57(4) of that directive should be preserved.

See, to that effect, the judgment in Commission v Germany, paragraph 113.

In addition, Alajärven Sähkö and Elenia submit in their written observations that, in the Finnish legal system, preparatory documents relating to a law, such as reports of working groups, opinions of parliamentary committees and commissions and government bills, play an important role in the interpretation of legislation and are regularly used to help clarify the legislature’s intentions, and that the more detailed and recent the preparatory documents relating a law, the greater their actual weight in the interpretation and application of the legislation.

The Finnish government points out that, in its initial version, that law required distribution systems to be designed, built and maintained in such a way that a breakdown of those systems due to a storm or the weight of snow would not lead to an interruption in electricity distribution of more than 6 hours in urban areas and 36 hours in other areas.

See judgment of 8 May 2024, Asociaţia ‘Forumul Judecătorilor din România’ (Associations of judges) (C‑53/23, EU:C:2024:388, paragraph 14 and the case-law cited).

See, in that regard, Huhta, K., ‘C‑718/18 Commission v. Germany: Critical reflections on the independence of national regulatory authorities in EU energy law’, European Energy and Environmental Law Review, 2021, Vol. 30, No 6, p. 255 to 265, in particular p. 261. According to that author, the judgment in Commission v Germany further obscured the demarcation between general policy guidelines issued by a Member State and the matters that fall exclusively within the competence of the national regulatory authorities, in so far as Member States, not regulatory authorities, enjoy a broad margin of discretion in determining what constitutes a public interest. That author also stressed that no national energy policy can avoid taking a stand on energy prices and energy pricing as a consequence of which general energy policy guidelines are highly likely to affect the conditions under which tariffs are set.

See Huhta, K., op. cit., p. 261.

See the judgment in Commission v Germany, paragraphs 114 to 116. See also judgment of 3 December 2020, Commission v Belgium (Markets in electricity and natural gas) (C‑767/19, EU:C:2020:984, paragraphs 98 to 115).

See point 35 of this Opinion.

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