Dear Mister,Once again thank you for your choice of DemosEurope. After our initial meeting with you we have done some research. On your request we have clarified the following: who should have the power to regulate the energy market and through which means.
On your request we have dug a bit deeper into independent agencies and self-regulation.For who should have the power we have found the following three options with varying feasibility which was either pointed out by you or we concluded based upon own research. The first option we have looked at is a ministry. This ministry then would fall under the executive branch of governance, to clarify: the ministry would only execute bills passed by parliament. One disadvantage may be that future responsibilities of the proposed ministry may cross into the territory of another ministry. As the current sole stakeholder in the energy market has gained a lot of power through corrupt means, it would be ill-advised to have a ministry hold this responsibility because then the stakeholder could sweet-talk the ministry into hiring a person who’s only interest is in excluding other parties from the energy market, thus resulting in a corrupt monopoly (which is the same situation as it is now). Another option will be letting local authorities handle it. However, it has been pointed out by the Head of Legal Services of the Polandian Government that the local administrative organs don’t have the expertise necessary to deal with the specific issues that might occur when given power over the energy market.
The last option we looked into was the possibility of an independent agency. This agency can only go as far as the ‘founding bill’ allows it to. The power has to be conferred through a means of attribution because there was a fixed market with only one party.
Now the government wants to change the one-party system to an open market, which is something totally new. As a free market is something totally new, the government of Polandia has to be vigilant for corruption and other ways to influence a new governmental body. Another challenge for this new agency is to advice the government into making legislation that prevents the formation of a monopoly(a situation in which one party has the entire energy market under its control). The agency can be held accountable at all times by the relevant minister. As any other organ, an independent agency has to abide by the rule of law. That is because the rule of law is the most important norm of democratic governments, the three main aspects are: government/administration has to abide by the law and judicial decisions, there is absence of arbitrary powers and there is equality before the law.
It is also easier for an independent agency to remain independent from the respective market because it watches over the market to ensure that all goes according to the rule of law, which prevails over every decision. A thorough example of the rights and obligations of employees of an independent agency can be found in the Dutch General Administrative Law Act. In the research we have assumed that the power will be conferred either through attribution or delegation. Attribution is applied when an authority has been granted new powers.
Delegation is applied when existing power is conferred to another (non-)governmental body, the delegator may withdraw the delegation at any time. There is a third way to confer power: mandate, which doesn’t apply because a mandate is usually issued during an emergency.Following the aforementioned reasoning, we advise the government of Polandia to create an independent agency because they are independent from the ministry under which they officially fall.
To regulate this newly formed market there are several ways to do so.There is the so-called command and conquer strategy. This has specific obligations which are imposed upon the market. If one or more of the obligations is found to have been violated, there will be an immediate and automatic fine, the height of which has to be specified within a law.
This strategy however doesn’t provide any incentive to improve and doesn’t have any rewards for ‘good’ behaviour.There is also the economic regulation idea. In this way of regulating the market instead of fines, there is a lowering of the individual company’s taxes.
This can’t be used in every market and there is in the ‘pure form’ no obligation imposed on the market to which they can be held accountable.Then there is the idea of self-regulation in which the market is allowed to do as it wants, with all economic, medical and environmental issues as a result. In this form of regulation there is no regulation from the government nor is there an invitation to innovate.We advise the government to follow a mixture of the mentioned ideas of regulation. That is because the laws must be upheld in the first place. And the government must also promote innovation amongst companies and companies will be more enticed to innovate when the innovation is subsidised in some way, either through lessened taxation or direct subsidies to the project.
Concluding from the aforementioned reasoning, we advise the government of Polandia to create an independent agency because of possible future decisions which may influence the proposed ministry for energy and environment and to lessen the possibility of direct (il-)legal influence. As a way to regulate the liberalised energy market, we advise to make rules and enforce them and still give incentives(for example subsidies) to improve the way energy is produced.If you have any questions after this letter, please do contact me.Yours sincerely,Lucas KarschLegal AdvisorDemosEurope