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ACER and CEER present recommendations to enhance the effectiveness of the EU’s hydrogen package

The EU Agency for Cooperation of Energy Regulators (ACER) and the Council of European Energy Regulators (CEER) have welcomed the European Commission’s legislative proposals on Hydrogen and Decarbonised Gas Markets. In particular, they welcomed the willingness to establish core principles for the regulation of a dedicated hydrogen sector, entrusted to national energy regulatory authorities; the extensive mirroring of the consumer protection provisions already in place for electricity consumers to the benefit of gas consumers; and the proposed role for regulatory authorities in approving and amending national development plans for gas as a way to promote a user-oriented and efficient development of the energy system.

However, both regulators presented recommendations to enhance the effectiveness of the provisions in the Package, with a focus on comprehensive system design, integrated network development and inclusive consumer protection.

Regarding the first one, the regulators are underlining the importance of ensuring flexibility to phase in the regulation of hydrogen networks by allowing derogations and exemptions, while keeping the 2030 target date. Also, to ensure that national regulatory authorities (NRAs) have a primary role in the governance of the Inter-TSO compensation (ITC) mechanism for tariff discounts and in the financial compensation for cross-border hydrogen networks. ACER and CEER are also urging the Commission to clarify the scope of entry-exit systems to avoid misinterpretations and overregulation of the distribution level and to reinforce the use of cost-benefit assessments in the processes for gas quality coordination. Basically, the legislation should allow the possibility of maintaining a restriction on cross-border flows. Also, it should include the possibility to lower the 5 per cent threshold where costs are expected to be excessive compared to the benefits.

Regarding an integrated network development, regulators are asking to put in place alternative models to a cross-border cost allocation (CBCA) based on proven user needs. In particular, market-based approaches should be put in place in the form of open seasons or long-term contracts that offer visibility to investors and bring together producers, network operators and consumers.

With respect to consumer protection and engagement, regulators observe different approaches for consumers of renewable and low-carbon gas vis-à-vis consumers of hydrogen, reflecting the expectation that industrial users will be the primary hydrogen consumers. In this context, ACER and CEER highlight the importance of protecting natural gas consumers, in particular, vulnerable consumers and those facing or risking energy poverty as the energy transition and decarbonisation efforts intensify. Similarly, the ongoing security and price crises underline the importance of ensuring the security of supply, whilst mitigating the impact of high costs on consumers.

In closing, ACER and CEER find it essential to amend the proposals to ensure these and other regulatory concerns are addressed, to ensure an efficient and future-adaptive framework that enables the decarbonisation of the energy system.

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