Assessment and recommendations

Mandate

As Portugal’s economic regulator for electricity, natural gas, fuels and electric mobility, ERSE provides stability and confidence in the sector through transparent and predictable decisions. ERSE’s activity is most developed in the fields of electricity and natural gas regulation, in line with European legislation that has been adopted for these sectors over the last 25 years. ERSE’s objectives, clearly set out in legislation, are to: i) protect consumers; ii) ensure compliance of regulated entities with public service and other obligations; iii) ensure market integrity; iv) promote service quality; v) ensure competition between market players; vi) and resolve disputes between regulated entities and between consumers and market actors.

ERSE has approached the expansion of its mandate to the fuels sector effectively, overcoming several challenges. The law has expanded the sectors overseen by ERSE three times since its establishment: to natural gas in 2002, the electric mobility network in 2012 and the fuels sector in 2018. The new responsibilities in the fuels sector mark a departure from ERSE’s traditional work of regulating natural monopolies in network industries. In the fuels sector, ERSE is responsible for regulating downstream markets. Regulation in the oil products and biofuels sectors relies largely on ex post regulation, with the Competition Authority playing a major role until 2018. However, in the context of the energy transition, there are benefits to bringing fuels and biofuels within ERSE’s remit and it enables the regulator to have a holistic view of the different segments of the energy sector. The new role brought with it challenges of role clarity and co-ordination with other public bodies that were already active in the fuels sector, but ERSE has found workable solutions to overcome any ambiguity in legislation. The sustainable and predictable funding for this area of the regulator’s work nevertheless remains an issue (see Inputs section for further discussion).

The regulator has placed increasing emphasis on its consumer protection mandate in recent years with the liberalisation of the retail markets for electricity and gas. The Portuguese sector now counts 29 retailers in the electricity sector and 12 in the retail gas market, in addition to the suppliers of last resort. The regulator has a team dedicated to handling consumer complaints and mediating disputes between operators and consumers, and has focused on providing clear, plain language information to better inform energy consumers of their rights. It provides funding and training to arbitration centres throughout the country that handle consumer complaints in the energy sector. It also provides training to the household consumer associations that sit on its consultative councils in order to build their capacity and ability to contribute to deliberations. Stakeholders recognise and appreciate ERSE’s role in this regard. A recent survey commissioned by the regulator found that consumer support is seen as the area of ERSE’s activities that has been growing the most. A planned internal restructuring of ERSE intends to bring together consumer protection-related functions to strengthen the regulator’s work in this area even further.

Functions and powers

In general, ERSE has sufficient powers to carry out its functions, although there can be a time lag between gaining new responsibilities and the expansion of its enforcement powers. ERSE’s functions and powers include regulatory, advisory, mediation, supervisory and sanctioning (Table 1). The regulator currently lacks sanctioning powers in the wholesale energy, electric mobility and, to a lesser extent, the fuels sectors. The Energy Sector Sanctions Framework has not yet been updated to include electric mobility or the implementation of the EU Regulation on Wholesale Energy Market Integrity and Transparency (“REMIT”), while the latter gives ERSE supervisory responsibilities to monitor wholesale markets and investigate potential insider trading and market manipulation. ERSE is awaiting the transposition of EU directives into national legislation.

ERSE’s functions expand beyond national borders to cover the single electricity market with Spain, where it has advisory powers. ERSE is part of the Council of Regulators of the Iberian Electricity Market (MIBEL), created by an international agreement between Spain and Portugal in 2004 to address issues in the development of the single electricity market. The MIBEL Council is composed of the Spanish regulatory authorities for securities (Comisión Nacional del Mercado de Valores, CNMV) and energy (Comisión Nacional de los Mercados y la Competencia, CNMC) and the corresponding entities in Portugal: CMVM (Comissão do Mercado de Valores Mobiliários) and ERSE. Market actors nevertheless raise concerns about insufficient regulatory alignment through MIBEL. Retail market regulations on either side of the border remain different, which can lead to different levels of business costs in the two countries. This can be challenging for cross-border market agents and can lead to different levels of consumer prices, impeding the functioning of a true single market. As the Council does not have executive power, its primary function is as a mechanism for information sharing. Draft regulation for the functioning of MIBEL, to be approved in Portugal or in Spain, are subject to the mandatory issuance of a non-binding co-ordinated statement of opinions by the Council.

Strategic framework (vision, mission and objectives)

The regulator’s strategic framework is embodied in a four-year plan that would be strengthened by more focus on desired outcomes. ERSE operates within the framework of a four-year strategic plan (2019-2022) that sets objectives that span the regulator’s different activities. The plan is defined in a participative manner including different technical teams and senior management at ERSE. The plan sets five strategic objectives and 27 associated priorities (Table 2). The objectives are phrased according to the different activities that ERSE carries out rather than the outcomes that ERSE seeks to achieve. Many of the objectives and priorities are an aggregate of several priorities and responsible parties, which will make it challenging to monitor and report on them. The plan does not include performance targets and indicators, missing an opportunity to use it to define ERSE as an outcome-focused regulatory authority and to use the plan for strategic steering of the regulator’s activities and communicating on its performance. Recognising the value of such an approach, ERSE is working on defining indicators by strategic objective/priority (see section on Output and Outcome for further recommendations).

A more ambitiously and simply worded strategic framework would support ERSE’s identity as a forward-looking regulatory authority. The role of the regulator and its technical work are appreciated and understood by the regulated industry and other immediate stakeholders that sit on its consultative councils, but there is a lost opportunity with regard to projecting its vision and using its strategic framework to bring the message of its value to a wider audience (Figure 1). Moreover, ERSE’s forward-looking work (such as its use of regulatory sandboxes), in addition to its ability to provide predictability and consumer protection, could be more clearly captured in the strategic framework. For example, while the regulator’s strategic plan includes an analytical section on trends and challenges and the concepts of innovation and dynamic regulation appear among its strategic objectives, the vision and mission of the regulator do not articulate how ERSE fits into the “bigger picture” and contributes to driving progress in the energy sector.

Figure 1. ERSE’s vision and mission statements

Source: Strategic plan 2019-2022, ERSE, https://www.erse.pt/media/x23cbptt/plano-estrat%C3%A9gico-e-financeiro-plurianual-2019-2022.pdf.

Co-ordination

There are no permanent, sector-wide mechanisms for co-ordination between different actors in the Portuguese energy sector. However, the government establishes ad hoc groups that appear to work well. The ministry in in charge of the energy sector (Ministry of the Environment and Climate Action, Ministério do Ambiente e da Ação Climática (MAAC)) establishes working or expert groups on specific topics depending on need. ERSE participates upon invitation in such working groups.

ERSE counts on three independent consultative councils that in many ways play a significant role in supporting co-ordination between stakeholders from public authorities (including MAAC), consumer associations and industry. Although the councils’ primary purpose is to provide a consultation forum on the regulator’s decisions, they serve a secondary, indirect purpose of enabling multilateral discussions between the major players in the sector, as opposed to a one-way or bilateral consultation process between the regulator and its stakeholders. This is a source of great value to Portugal’s energy sector as it enables players to understand each other’s perspectives and develop relationships of trust over time. In this way, the councils provide stability to stakeholders and achieve consensus in their statements in an impressive 90% of cases.

ERSE is clear on its role and responsibilities vis-à-vis other actors in the sector and has taken proactive measures to address challenges of co-ordination when needed, but the division of responsibilities between entities is not always clear for regulated industry or the public. ERSE co-ordinates with a large number of organisations at national and international levels. The regulator is explicitly empowered and required through its statutes to co-operate with other bodies where this will assist in meeting common objectives. To overcome cases of ambiguity in responsibilities, ERSE has also established a number of co-operation agreements. Nevertheless, resolving overlaps often requires clarification on a case-by-case basis. ERSE has on occasion proposed new legislation when it has identified gaps or overlaps in responsibilities and maintains a record of institutions with whom it shares joint competences. While legislation defines the obligations for co-ordination between ERSE and other public agencies for providing non-binding opinions (e.g. with the Competition Authority, AdC) there are no mechanisms in place to ensure broader aspects of co-ordination such as information sharing. Moreover, the recent reorganisation of regulatory functions between ERSE, the Directorate General for Energy and Geology (DGEG) and ENSE appears to have sown confusion and the new division of responsibilities appears to be unclear.

The area of consumer protection requires particularly careful co-ordination given the large number of entities involved in handling complaints. Several organisations are potentially involved, including ERSE, ENSE, the Directorate-General for Consumer-Affairs, DECO (a private consumer rights association), the Economic and Food Safety Authority (ASAE) as well as nine independent arbitration centres. Most of the arbitration centres serve a particular region and they are not specialised in the energy sector; they cover all economic sectors and can only process complaints from households and not, for example, small businesses. Seven of the centres are partly financed2 by and receive training from ERSE. There is also disparity in type of mandate between different institutions involved in consumer protection: for example, the decisions of the arbitration centres are binding, unlike ERSE, which does not have the power to impose a resolution to a dispute. The large number of organisations involved could reduce consistency and predictability in decisions towards market agents, if each organisation follows different processes or interprets and applies rules differently. The system could also create risk to consumer harm as consumers may be confused or intimidated by the complex or unclear processes to bring a claim.

Input into policy making and relations with the executive and legislative branches

Given its strong technical capacity and expertise, ERSE opinions carry weight and are valued by the executive. ERSE has a formal advisory role and contributes to policy development through the provision of advice, non-binding opinions, studies and participation in working groups. The time that ERSE has to comply with requests can vary from a few days for the more informal requests to a month for formal requests. Its opinions to formal requests are made public via its website and in its annual report to ensure transparency. ERSE estimates that contributing to the formulation and refinement of policies, laws and regulations consumes about 10% to 15% of its total resources, mostly staff time. The regulator reports that this is manageable, although the burden can be considerable if several requests are received at the same time.

Transparent reporting and approval processes are in place but dialogue between ERSE, the executive and the parliament could be improved. The government defines the broad energy policy within which ERSE must act as an independent regulatory body. The government and parliament also approve the regulator’s annual budget and the respective multiannual plan, its balance sheet, and the annual report and accounts. Without prejudice to its functional independence, ERSE must keep the government informed of its regulatory activity, reporting on recommendations, legislative proposals and draft external regulations which it intends to adopt, as well as on instruments in the framework of the government’s general policy for regulated sectors.3 ERSE informs the member of the government responsible for energy in writing about the launch of public consultations, the submission of the tariff proposal, as well as of the approval of the tariff regulation and tariff decisions. However, beyond this there appear to be few institutionalised processes, such as a statement of expectations, to ensure close and effective dialogue between the regulator and the ministry in charge of energy (Ministry of the Environment and Climate Action, MAAC). Furthermore, on occasion the regulator has been taken by surprise by additional tasks or responsibilities included in the annual state budget, on which there has been no prior dialogue with or warning from the executive or the legislative.

Independence

ERSE performs well on several dimensions of independence and has policies in place to foster a culture of independence internally. Nevertheless, it has been facing restrictions on its autonomy over financial and human resources. ERSE shows arrangements closest to good practice on independence4 among energy regulators in OECD countries as per the OECD Indicators on the Governance of Sector Regulators (Figure 2). The regulator also demonstrates independence in its technical decision-making, drawing on empirical evidence and transparent stakeholder input. The Board and Heads of Division and similar managers (ERSE senior management) provide independent leadership bolstered by post-separation employment policies such as a two-year cooling off period during which they cannot work in the regulated industry. During this period, Board members are compensated. Staff, however, do not have any post-employment restrictions. ERSE statutes, internal codes and plans also include provisions that deal with ethics, corruption prevention, incompatibilities and conflicts of interests. With regard to regulator resources, despite legislation that establishes the regulator’s de jure independence, provisions introduced through the annual state budgets have restricted ERSE’s autonomy in managing its financial and human resources in recent years (see Input section for more detailed assessment and recommendations).

Figure 2. ERSE demonstrates strong independence

1. Scores are on a scale from zero (most effective governance arrangement) to six (least effective governance arrangement).

2. The independence component maps the degree to which a regulator operates independently and with no undue influence from both the political power and the regulated sectors. Questions are organised into three subsections: relationship with the executive, staff and budget. It seeks to measure aspects of de facto independence through a variety of dimensions beyond only de jure independence.

Source: OECD (2018), Database on the Governance of Sector Regulators.

Governing body and decision making

ERSE’s three-person Board of Directors is selected through a transparent process that provides safeguards for independence. The board comprises a president and two members. Legislation establishes that board members must have adequate qualifications, recognised independence and technical and professional competence in the regulated activities. Of the three current board members, two were former ERSE staff and one was formerly the ERSE Tariff Council president. Board members are appointed by the Council of Ministers, following their nomination by the member of government responsible for energy and opinions from an independent appointments committee (CRESAP, the Public Administration Recruitment and Selection Committee) and the parliament. Although the opinion of the parliamentary commission is not binding, it appears to be a robust check on power: the appointment of a candidate to the board was once rejected following a negative opinion from the parliament.

A longer time required between Board appointments could support continuity and decouple the process from political cycles. Members are appointed for a term of six years, non-renewable, and appointments must be staggered, with a minimum period of six months between appointments. This provision opens the possibility for an entirely new board to be in place within a little over a year, which could undermine continuity in the regulator’s strategic direction and predictability in decision-making.

The board’s wide-ranging responsibilities and small size may reduce its capacity to focus on strategic matters. The Board’s vast responsibilities combine both strategic and executive functions, which is not unusual in the Portuguese context and in smaller regulatory authorities in other jurisdictions. Board members act as members of the senior management team rather than being at arm’s length from the operations of the regulator. The absence of the Director-General for Regulation post since 2017 or another executive management position results in the board engaging directly with heads of Division without the support of an intermediate level. The board has agreed a division of labour whereby each member oversees the work of particular divisions, and all divisions and offices report directly to the board. Board members are highly involved in the work of their assigned divisions. The board holds a weekly co-ordination meeting with all heads of division and each member meets weekly with their assigned divisions. This may undermine the Board’s ability to dedicate time to strategic, foresight activities.

Decision-making appears to be a highly efficient process supported by a digital tool that ensures internal transparency. External transparency mechanisms are more limited. Board meetings take place once a week and are preceded by an informal meeting during which members discuss issues and prepare for the formal meeting. The board uses a digital platform (“Portal do CA”) to manage the decision-making process, through which ERSE teams submit relevant items for approval, information or review. All exchanges within the decision-making process are recorded in the portal, although in practice board members will usually have discussed issues in person with the relevant head of division in the course of their regular meetings with teams. Decisions are taken by majority or by unanimous decision of the three board members. The president has the deciding vote. When the board takes a decision, the relevant head of division/manager is notified automatically through the portal. ERSE publishes the non-confidential versions of its decisions, sends them to its mailing list and may publish them on its website. ERSE does not publish the minutes of the board meetings.

Decisions are informed by internal and external inputs; external inputs provide valuable information and perspective that ERSE uses in its decision making. The board relies greatly on the technical input from ERSE teams and in particular the heads of division. Three independent, external bodies (the Advisory Council, the Tariff Council and the Fuels Council) provide non-binding opinions on all proposed regulatory decisions and also on corporate documents, such as the annual budget, in the case of the Advisory Council (see section on Engagement). The board places great importance on the opinions of the councils, which provides an important challenge function in the decision-making process.

Internal organisation and management

ERSE’s internal teams are organised by function rather than by sector, a feature that appears to give the regulator a certain degree of agility as it has taken on responsibilities for new sectors over the years. Such a structure may also help in terms of ensuring consistency of regulatory processes across sectors. The current exception is a small team that was created to work on ERSE’s new duties in the fuel sector, an ‘internal commission’ of four people (the National Petroleum System Installation Commission, CISPN).

A long restructuring process runs the risk of slowing down the implementation of activities and creates uncertainty for staff. ERSE is currently restructuring, a process that was scheduled to finish in 2020. The rationale of the restructuring is multi-faceted: to consolidate the consumer protection activities that are dispersed across different teams, to strengthen focus on particular areas (e.g. on innovation through an ‘Innovation and special projects’ office or on internal procedures with the ‘internal management’ office) and to create intermediate management positions within the divisions. The organisation by function rather than sector will continue under the new structure. Staff report that certain activities have slowed down in anticipation of the definitive implementation of the reorganisation. The lengthy process also appears to be creating some uncertainty among staff and runs the risk of instilling ‘reform fatigue’.

The recent expansion of the workforce may test the limits of internal processes that worked well previously. The regulator has grown significantly in recent years. Between 2016 and 2019, ERSE’s workforce increased by over 20% to 95 staff. Some internal processes that may require co-ordination between different teams (e.g. making requests for data to regulated entities) seem to rely on informal contacts and understanding between staff rather than codified processes or policies. This approach may have been adequate at a smaller scale and with a core of staff with long-standing working relationships. It may not be as effective in a larger organisation with a significant number of new staff. As the 2018 annual report shows, 27% of staff have been at the organisation less than three years. The second largest cohort at 26% is those that have been with ERSE since its founding. As part of the on-going restructuring, ERSE intends to create a team whose terms of reference will include improving the coherence of internal processes (the Unit for Internal Management). This team will play an important role in finding workable solutions to this challenge.

Regulatory quality tools

Ex ante assessments of regulations are not used systematically and there is no standard methodology for carrying out assessments, which could generate inconsistencies in approach. No formal ex ante assessment is mandatory for ERSE activities, except in some areas where they are required under European regulation.8 Although ERSE does not undertake systematic ex ante assessment of costs and benefits, every ERSE decision must be subject to formal hearings and must be accompanied by a justification document. The justification document may include scenario analysis, impact evaluation, explanation of the regulation’s intention, its legal framework, etc. There is no explicit proportionality requirement for ERSE to tailor the level of the assessment to the potential impacts of a new regulation.

Nevertheless, the level of detail used in the ex ante analysis depends on the type of decision and its general impacts. For decisions on tariffs and regulated companies’ revenues, the economic analysis is detailed and data on costs and benefits is usually included. Currently, each head of division is responsible for determining whether a cost-benefit analysis is needed and for coordinating the analysis. Generally, the benefits assessed in the CBAs amount to the costs avoided for the regulated sectors. The methodology does not tend to assess other types of costs and benefits, such as societal, environmental etc. or include equality and diversity assessments. A new unit (GGI) is currently being established in the context of ERSE’s restructuration that will review and develop internal processes and quality control procedures, including for CBAs.

ERSE undertakes ex post reviews within the tariff-setting process and at the end of a regulatory period (every 3 or 4 years, depending on the sector). However, these do not follow a standard methodology across all sectors regulated, and do not encompass sufficient regard as to the quality of the regulatory setting process or of the regulatory tools employed by the regulator.

Audit, inspections and enforcement

The audit process is relatively more transparent than inspections, but neither process uses a risk-based approach. ERSE carried out 13 audits and 8 inspections between 2015 and 2019. Portuguese legislation does not require audits and inspections to be risk-based. The Framework Law of Independent Administrative Entities establishes that regulators shall carry out inspections and audits on an ad hoc basis, in execution of previously approved plans and/or whenever there are circumstances that indicate disturbances in the respective sector of activity (for example, complaints). ERSE has two categories of audits: one-off specialised audits triggered by the identification of potential non-compliance, and regular audits, generally on an annual basis. In the case of entities that are subject to the Tariff Regulation, ERSE approves an auditing and oversight plan containing the issues subject to periodic auditing. The plan does not include a calendar of audits, but ERSE notifies regulated companies by letter well in advance that an audit is due to take place. Specialised audit firms selected by ERSE carry out the audits whereas ERSE carries out inspections itself. In the past, ERSE has had annual inspection plans but more recently has carried out inspections on a needs-based approach, based on data analysis and monitoring of the regulated companies. The regulator can also decide to take action because of consumer complaints. The ERSE website publishes reports on the outcomes of some but not all audits; it does not publish data or information on the outcomes of inspections (ERSE, 2020[2]).

Sanctioning procedures are transparent but the diverse legal frameworks that underpin ERSE’s sanctioning powers lead to different enforcement outcomes. In some sectors sanctions may not be an adequate deterrent. Stakeholders commend ERSE for its transparent sanctioning procedures. All procedures are public and searchable on request. ERSE can impose a wide range of sanctions, including warnings, fines and accessory sanctions.9 Under the Energy Sector Sanctions Framework10 the gradation of available sanctions is considered adequate to allow credible deterrence through the escalation of sanctions. The maximum fine is 10% of total turnover depending on the seriousness of the administrative offence for legal persons and 30% of total annual remuneration for natural persons, and can be doubled for repeat offenders. The Energy Sector Sanctions Framework applies to the electricity and natural gas sectors but does not cover fuels, electric mobility and the EU’s REMIT Regulation. Different legislation, in particular the special penalty regimes, confers sanctioning powers to ERSE in the other sectors. Fines are limited to a maximum of EUR 15 000 under the complaints book rules and EUR 44 891.81 under unfair trading practices. Several cases of repeat offenders indicate that the sanctions under these special penalty regimes are not a credible deterrent.

Recommendations:

• Ensure inspections and enforcement are risk-based and proportionate. Decisions on what to inspect and how should be grounded in data and evidence, and results should be evaluated regularly (Box 10).

• Advocate for change to sanctioning regimes to ensure sanctions are credible deterrent.

Box 10. Identification of priorities through risk tables at the UK’s Health and Safety Executive

A number of tools can be implemented as part of developing a risk-based approach in relation to the inspection plan. For instance, the build-up of the risk table is a useful instrument which aids to the identification of priorities.

For instance, the approach in the table below was developed by the Health and Safety Executive England in order to determine the risk gap. This table matches the consequence and likelihood of the actual risk with the consequence and likelihood of the benchmark risk. In this manner, the regulator knows where to focus its efforts as part of their inspection activities. This leads to more targeted enforcement activity designed to counter the actual higher risk to consumers, as well as allows the regulator to identify areas of activity where a market actor might need additional guidance or education from the regulator.

Furthermore, an analysis of the areas flagged consistently as high risk over a longer period, enables a regulator to identify and investigate whether there are systematic deficiencies with the substance of the regulation, or with the interpretation of regulation by the market actors.

Figure 3. Risk matrix at the HSE UK

Note: This figure is an edited version, for brevity and clarity.

Source: Health and Safety Executive, Enforcement Management Model, HSE, http://www.hse.gov.uk/enforce/emm.pdf (accessed 21 September 2020).

Engagement and transparency of engagement process

ERSE counts on several mechanisms for consultation that enable differentiated degrees of stakeholder engagement depending on the nature of the regulation. All decisions on codes and regulations must be preceded by a public consultation or a stakeholder consultation in the case of tariff decisions. ERSE also organises public hearings in the majority of regulatory reviews to promote more dynamic and interactive discussions. For particularly complex or sensitive issues, ERSE may conduct pre-consultations before the presentation of the regulation proposal in order to identify stakeholders’ main concerns. ERSE also has three independent advisory bodies – the Advisory Council, the Tariff Council and the Fuels Council – that provide opinions on all decisions.

The three consultative councils are constructive, transparent structures for engagement with major stakeholders that bring value to ERSE’s decision-making and to Portugal’s energy sector more broadly. ERSE consults on its various decisions with its key stakeholders through three independent advisory bodies that deliver non-binding opinions: the Advisory Council, the Tariff Council and, since 2019, the Fuels Council. All opinions of the councils are approved by majority vote, although if members do not agree with all or parts of the opinion of the council they can state this in the submission to ERSE. The opinions of the councils are made public and published on the ERSE website (ERSE, 2020[3]). If the opinions of the councils do not lead to a change in ERSE’s proposed decision, the regulator must justify why it is not making the suggested changes. The councils are an important space within the energy sector for stakeholders to gather and understand each other’s positions, in addition to the value that they bring to ERSE in terms of ensuring that its decision-making is more accountable and robust.

The councils include a wide variety of perspectives and membership bestows a privileged position to members. The councils are composed of members defined under the law including industry, consumer representatives, representatives from other regulatory entities or public bodies and, in the case of the Advisory Council, government representatives from both national and regional levels. Industry and consumer representatives must be represented in equal numbers. Members serve a renewable term of three years and many members have been on the councils for several terms. Membership was updated in legislation two years ago. Some segments of the energy sector are less represented (e.g. the renewable energy sector is not represented on the councils; ERSE has also struggled to engage with relevant players for its consultations on electric mobility11). Membership bestows a privileged position to members in terms of access to information on ERSE activities that may not be publicly available to all stakeholders at large. While there are some periodic and recurring procedures which occur at the same time every year, the Advisory Council has no advanced schedule of consultations available to its members or the public. Given the extremely important role of the councils, it is essential that they remain representative of the sector. There is a delicate balance to be struck between continuity (with the benefit of experienced, skilled presidents who can build consensus among all members) and ensuring that the councils remain dynamic and open to new perspectives.

Membership of the councils requires a significant commitment of time and resources given the growing workload. Councils provide opinions when requested by the ERSE president. Each council decides how often to meet in order to address these requests, but in general the work entails several meetings a month and sometimes several a week at the ERSE headquarters in Lisbon. Members are expected to travel to all meetings, including members based outside the Lisbon area such as representatives from the Madeira and Azores archipelagos (a three-hour flight in the case of the Azores). The organisations that members represent are not remunerated for their participation. However, in order to facilitate the participation of household consumer representatives, ERSE allocates a per diem to these members. Over time, the range of issues that councils discuss has expanded. ERSE sometimes asks councils to provide opinions on the same issue several times. Members of the councils may also submit opinions twice: once via the consensus opinion of their council and again from their organisation alone via the standard public consultation process.

Consultation through these formal channels is transparent. Information on interactions with stakeholders outside these processes is less accessible to the public. ERSE can hold meetings with stakeholders to hear from specific perspectives outside the broader public consultation process. ERSE does not publish a list of these meetings or their minutes. Separately, ERSE may have meetings with formal “support groups” composed of stakeholders, for which the documentation and minutes are kept for legal and administrative purposes. This information is not published, but can be accessed upon request (e.g. freedom of information provisions and right of recourse of administrative procedures).

ERSE combines rigorous consultation processes with quicker processes in urgent and extraordinary cases, allowing for nimble decision-making when required. As of June 2020, ERSE concluded a total of 87 public consultations sine its creation. On average, consultations have lasted 144 days (5 months); in two cases, the process took two years to complete. The regulator’s statutes allow ERSE to hold short 8-day consultations in “urgent and “extraordinary” cases, reflected in the regulator’s agility during the COVID-19 crisis. Following an urgent public consultation in April 2020, ERSE adopted a regulation that extends the current regulatory period for the electricity sector by one year, to the end of 2021. ERSE reasoned that the degree of unpredictability created by the pandemic prevents a consistent definition of new regulatory goals and methodologies to take effect in a new regulatory period.

Data collection, management and analysis

Reporting requirements for regulated entities are predictable and detailed. ERSE regulations require regulated entities to submit a large amount of data at differing frequencies depending on the type of information. Data reporting requirements are generally defined for the regulatory period (three years for the electricity sector and four years for the natural gas sector), which provides some stability and predictability for regulated entities. ERSE has the right nevertheless to request additional information whenever it deems it necessary. There is no formal or periodic review of reporting requirements, however, ERSE often reviews reporting obligations in terms of their usefulness in order to adapt to changes in the market or regulation. If the need does arise to adjust the reporting requirements, a formal process is launched and new rules are published.

Simple tools are in place to avoid companies receiving multiple data requests from different divisions, but there is no central portal for actors to submit data to ERSE or co-ordination with other public bodies. Each ERSE division requests data from entities pertaining to their respective areas of work. To co-ordinate the different data requests, divisions have access to a shared email account from which the data requests are sent to avoid companies receiving messages from several different contact points within ERSE. Divisions also rely on informal communications between staff to stay informed about what data is being requested from which companies. This system appears to be working for the moment as companies report that it is rare to receive repeat requests for information. However, companies often need to report the same data to DGEG, who has responsibility for compiling Portugal’s energy statistics, and ENSE, which has supervisory responsibilities across the whole energy sector. There is no common database within ERSE or between ERSE and other bodies for the whole energy sector, although ERSE uses the “Balcão Unico” system, a joint platform shared by ERSE, ENSE, LNEG and DGEG, hosted by ENSE, for supervising and monitoring the petroleum products and biofuels sectors. ENSE has proposed to extend this joint platform to the electricity and natural gas sectors.

ERSE has recognised the need for sophisticated data management and analysis capabilities to realise the opportunities from ‘big data’. Given the volume of data required by the regulatory process and supervision activities, ERSE has been implementing a strategy for using and structuring data using business intelligence tools and IT systems. In autumn 2019, ERSE launched an internal working group to review and map the various data and communication tools used by the divisions, with a view to developing a strategy for their efficiency, interoperability and modernisation. ERSE is investing in IT systems that will enable the establishment of more complete databases that can support new uses and data processing. In addition, several projects are underway to make various data collection obligations “smarter” and more automated.

Monitoring and reporting on the performance of the sector and the regulator

ERSE monitors the performance of regulated entities, the direct outcomes of its regulatory decisions and wider outcomes, in particular the performance of the wholesale and retail markets and consumer welfare. ERSE makes public much of the information it receives from regulated entities at an aggregated level in reports and in the documents that it prepares for public or stakeholder consultation. However, much of the data that ERSE handles is commercially sensitive or confidential and therefore not published. ERSE reports on the performance of the sector include reporting on service quality, economic and financial performance (e.g. investment monitoring), competition, security of supply and consumer protection. ERSE carries out systematic ex post analysis of the impact of regulatory period for both electricity and gas markets to inform regulatory decision making for the next period. These reports include analysis of the performance of different sectors of the market as well as individual market actors. The reports are published on the ERSE website.

The regulator does not report against a comprehensive set of performance indicators but is currently working on addressing this gap. The strategic plan 2019-2022 was finalised in 2019 but the associated performance indicators have still to be defined; the work is ongoing. Each division is devising indicators for its activities that they will submit to the Board for approval in 2020. This bottom up approach may run the risk that the indicators do not capture overall corporate performance or performance on cross-cutting goals as defined by the strategic plan, but rather focus on the activities and deliverables of individual teams. The delay in defining indicators also deprives ERSE of a tool to track whether it is meeting the goals it set out in its strategy. At the time of the review, no information was available to assess whether the performance indicators would capture the quality of processes, the outcomes of activities and the overall sector performance.

ERSE fulfils its legislative reporting requirements but could do more to demonstrate its impact and value to key external stakeholders. Legislation requires ERSE to publish a report on its activities on a regular basis.12 The Board prepares an annual report and accounts that is approved by the government and the parliament and published on the ERSE website. ERSE is not invited to present the report to parliament for discussion. The annual report is a comprehensive and in parts technical report (~165 pages) of ERSE’s activities that includes the regulations and codes emitted by ERSE and all the formal opinions published by ERSE in the course of the year. The report may not be accessible to all parliamentarians and other stakeholders due to the highly technical presentation of some of the information. Outside of the annual reporting process, the ERSE president occasionally presents to the parliament upon its invitation, during which members may ask them about the regulator’s performance. In addition, ERSE reports annually to the European Commission and the Agency for the Cooperation of Energy Regulators (ACER) on its activities and the developments in the Portuguese electricity and natural gas markets.