DSOs has pledged allegiance for their future EU Entity

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DSOs has pledged allegiance for their future EU Entity

The DSOs have opened a new chapter in Florence, on the banks of the Arno, as they solemnly affixed their signatures on a parchment proclaiming a covenant on Statutes for the DSO Entity and delivered it to Prof.Dr. Klaus-Dieter BORCHARDT of the European Commission.

One of the cornerstones for the achievement of the internal energy market, set out in the EU Clean Energy Package[1], is the establishment of a new EU Institution to foster cooperation between DSOs who have been catapulted to a central role in the energy transition.  This DSO Entity is a major development and is warmly embraced by the DSOs as it promotes “the completion and functioning of the internal market in electricity, […][2]” which already includes the Commission (for the civil service), ACER (for regulators) and ENTSO-E (for TSOs). Not less importantly, the EU DSO Entity will also have to promote an “[…] optimal management and a coordinated operation of distribution and transmission systems.”[3]

In order to cover the increasing and complex role of the DSOs in the energy transition, its numerous tasks would include, among others, to play a key role in the development of demand response, the elaboration of network codes, the digitalisation of the distribution networks which includes the deployment of smart grids and smart metering or the integration of renewable energy resources and distributed generation sources (which includes storage).[4]

The design and establishment of this Entity is a major undertaking as there are more than 2,500 DSOs who come in all shapes and sizes, with different organisational forms, facing different operational circumstances. It will take some years to complete this start-up.

As a first step, the Commission’s proposal had few provisions sketching out the Entity at a high-level and contemplating that the detail would be set out in the organisation Statutes, which would be originated by the DSOs themselves, as members, in the fullness of time. The Statutes would be an important public law instrument and approved by the Commission taking on board an opinion from ACER. The Commission has proposed restricted membership criteria, meaning that less than 1/5 by number of DSOs could participate and those eligible DSOs would have been the larger ones. This would have deprived the Entity of legitimacy and accordingly we launched a priority lobby line for universal direct eligibility.

If under the Estonian Presidency the Council has reached a general approach, extending the eligibility to all DSOs, it has also troublingly amplified the provisions setting out in exquisite detail a range of matters that would ordinarily be properly ‘housed’ in the Statutes. For instance, these refer to specific voting rights, decision making-procedures or specific criteria for participation/exclusion from the various bodies of the EU DSEO Entity. They did this ostensibly to guard against the ‘blank cheque’ problem. For example, the Commission’s proposal was so high-level the Entity could eventually take many forms and could be different from the original legislative intent. In short order, the ITRE Committee has also adopted this text in its report.

On one hand, legal certainty is welcome and it also gives to DSOs a better understanding of the blueprint of their future EU Entity. On the other hand, in a longer-term perspective, “housing” all this detail in the Regulation subjects it too a lengthy change process (4 years and more) and deprives the Entity of the flexibility needed as this complex Institution takes shape, becomes established and gains operational experience. Indeed, it needs the flexibility to adjust and modify itself as the energy transition presents challenges to DSOs, for which they need themselves to be flexible to accomplish them.

Under the leadership of Dr Landeck, chairman of the Taskforce “EU DSO Entity, we prepared a “Side Letter” jointly with other DSO associations, Geode and EDSO for Smart Grids, in order to “re-house” the troubling provisions.  This Side Letter can be thought of a “solemn pledge” by the DSOs to produce Statutes to include all of these provisions at a minimum. The Commission and ACER could also publish guidance on this point as well i.e. the minimum requirements for approvable Statutes. This way, the co-legislators could feel safe in removing the provisions from the Regulation in the “sure” knowledge that would re-appear in the Statutes.   

The challenge has arisen as to what status the Side Letter would have – the DSOs could just tear it up once the Regulation passes and create a different kind of Institution.  Indeed, the Side Letter is not legally enforceable against the DSOs, but it does carry the weight of their reputation.  That is why the DSOs in a ceremonial and social way, converted the Side Letter to a medieval parchment and handed it over to Pr.Dr. Klaus-Dieter BORCHARDT of the Commission.  More formally, the DSOs introduced it to the Florence Forum. 

Next move is for the Commission and ACER to play out during the Trialogues.


[1] From art. 49 to art. of the proposal for a regulation of the European Parliament and of the Council on the internal market for electricity

[2] Art. 49 of the proposal for a regulation of the European Parliament and of the Council on the internal market for electricity

[3] Idem

[4] Art. 51 of the proposal for a regulation of the European Parliament and of the Council on the internal market for electricity