The Energy Regulation and Markets Review - Stikeman Elliott

Sweden
Transactions leading to a significant impediment to effective competition,
in particular through the creation or strengthening of a dominant position, are not
permitted.
III
TRANSMISSION/TRANSPORTATION and DISTRIBUTION
SERVICES
i Vertical integration and unbundling
One of the main objectives of the Electricity Act with respect to vertically integrated
companies is to create a clear separation between the transmission or distribution
of electricity (i.e., network operations) on the one hand, and activities concerning
production or generation of, or trade in, electricity, on the other hand. Legal entities
carrying out network operations (i.e., the holders of the network concession) are not
allowed to engage in generation or trade in electricity: structural unbundling is required
for all legal entities conducting network operations. Notwithstanding this restriction,
such legal entities may generate electricity if such generation is exclusively intended to
compensate for losses in the network, or if it is performed by mobile reserve plants
intended for occasional use during power outages. Furthermore, legal entities conducting
network operations whose network system, together with the total network system of
the group of companies of which they are a part, have at least 100,000 electricity users,
must also be functionally unbundled. As a result, the Electricity Act forbids legal entities
that conduct generation from having the same board members, managing directors or
authorised signatories as undertakings that trade in electricity, or vice versa. Legal entities
must also have necessary assets to be able to make decisions independent of any group of
companies to which they belong.
With Directive 2009/72/EC and Directive 2009/73/EC, new rules have been
introduced on unbundling for transmission system operators (‘TSOs’). The unbundling
regime provides for three models: the ownership unbundling model (TSO model),
the independent system operator (ISO) model, and the independent transmission
operator (ITO) model. The models are intended to, inter alia, remove the incentive for
vertically integrated undertakings to discriminate against competitors as regards access
to the network, and commercially relevant information and investments in the network.
Sweden has chosen the TSO model for both the electricity market and the gas market.
It may be noted that Swedish electricity legislation does not make a clear
separation of transmission and distribution, transmission systems and distribution
systems, or transmission system operators and distribution system operators. The
ownership unbundling requirements of the TSO model applies to one legal entity only
in Sweden: Svenska Kraftnät, the owner and operator of the national grid. In view of the
Directive’s definition of ‘transmission system operator’, the national grid appears to be
the only network system that meets the criteria of being a transmission system.
The Natural Gas Act includes a somewhat different regulation than the Electricity
Act. The Swedish natural gas network system extends from south of Malmo in southwest
Sweden and along the west coast to north of Gothenburg. Due to the limited
network system extension and low number of participants – currently only five
companies sell natural gas – the Swedish gas market is rather limited, which appears to
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