European energy Policy

During 2013, the European Union set out various actions with a view to the
completion of the EU internal energy market by 2014 and to the development of
interconnections in order to put an end to any isolation of member states from
the European gas and electricity networks by 2015.

In some cases, state intervention in the energy markets may be necessary so
as to guarantee supply and to achieve climate objectives. In order to avoid
additional costs for the consumer and distortion of the internal electricity
market, public intervention needs to be carefully established. To this end
the European Union published a guidance document for the member states
regarding renewable energy support mechanisms and capacity guarantee
Delivering the internal electricity market and making the most of public

In March, the European Commission took a first step towards the establishment
of ’A 2030 framework for climate and energy policies’, with the adoption of a
Green Paper that promotes public consultation on the content of the strategic
framework. What are the type, nature and level of targets to establish for
2030? How to ensure the cohesion between different policy instruments? How
can the EU best improve security of energy supply internally by ensuring the
full and effective functioning of the internal energy market (e.g. through the
development of necessary interconnections) and externally by diversifying
energy supply routes? How should the framework ensure an equitable
distribution of effort amongst the member states? These are some of the
questions raised in the consultation, envisaging that the strategic framework is
approved in 2014.

In the field of energy infrastructure, Regulation 347/2013 was published,
establishing guidelines on the timely development and interoperability of
the priority corridors and areas of the trans-European energy infrastructure
In October, the European Commission published a list of almost 250 energy
infrastructure projects, ‘projects of common interest’ (PIC), that will benefit from
accelerated licensing procedures and improved regulatory and may have access
to financial support from the Connecting Europe Facility. The list includes close
to 140 projects in the field of electricity transmission and storage, almost 100 in
the field of gas and LNG transmission and storage and the remainder relating to
oil and smartgrids.

With the adoption of the Energy Efficiency Directive (EED) in 2012, there is now
an EU wide legislative framework that shall be promoted and implemented by
the member states. The Council considers that initiatives in the area of energy
efficiency can contribute significantly towards the reversal of the current rises
in energy price and costs, and as such, the implementation of the Directive is of
vital importance.


Domestic Energy Policy

In Portugal, during 2013, the XIX Constitutional Government implemented an ‘energy model based on economic rationality and sustainability, by combining measures to promote energy efficiency and the use of energy from indigenous renewable sources as well as reducing extra costs which increase energy prices’.

Council of Ministers Resolution No 20/2013 approves the National Action Plan for
Energy Efficiency for the period 2013-2016 (Energy Efficiency Strategy – NEEAP
2016) and the National Action Plan for Renewable Energy for the period 2013-
2020 (Renewable Energy Strategy – NREAP 2020).

On a regulatory level, it is worth noting the establishment of a mechanism aimed
at ensuring a competitive balance in the wholesale electricity market in Portugal,
with a focus on the general economic interest costs (GEIC) component of the
General System Use tariff (Decree Law No. 74/2013). Implementing Order
(Portaria) 288/2013 establishes the process for conducting a study on the impact
of non-market actions or events taking place in the European Union and their
redistributive effect on the various factors influencing electrical energy tariffs,
and the mechanism for proper distribution of the general economic interest costs
borne by the energy providers under the ordinary production scheme and other
energy producers which operate outside the framework of guaranteed payment.

The amendment to DL 240/2004 (DL 32/2013) sets out the possibility of a
reduction in the compensatory payments made to electricity producers through
the advanced termination of the PPAs, thereby making possible a reduction,
as proposed by the producer, of the financial burden, resulting in benefits for
electrical energy consumers due to a reduction in the costs that make up their
energy bill.

During 2013, the Government carried out amendments to the remuneration
regime applied to renewable plants (installations licensed under Decree-Law
No 189/88 of 27 May 1988, and 312/2001 of 10 December 2001), envisaging the
possibility of adhesion to an alternative remuneration scheme.

Liberalized market in Portugal

During 2013, approximately 1 200 000 customers switched to the free market
system for electricity, totalling in December, more than 2 269 000.

Average annual consumption by those clients supplied under the free market
system on the final day of December 2013 was in excess of 32 GWh (compared
to almost 27 GWh in December 2012). In overall terms, consumption on the free
market reached, in December, more than 72% of total consumption in the country,
representing an increase of over 12%compared to the equivalent period in 2012.

Almost all consumption by heavy users is through the free market. In spite of
experiencing a significant increase during 2013, only around 40% of overall
domestic consumption is through the free market.

Natural gas
Since the end of 2012, consumers have been switching to the free market at a
faster rate. By the end of November 2013 the total number of clients currently on
the free market was in excess of 502 000.

In overall terms, the free market represents almost 94% of the total consumption
of natural gas. In the case of heavy users, 100% of consumption is supplied on
the free market, along with around 94% in the case of industrial users.