End of 1996 marked the enacting of the Directive 96/92/EC on common rules for the internal market in electricity. With its rules for the generation, transmission and distribution of electricity, the Directive strives for the creation of an internal market and market opening. In terms of objective setting, the minimum target for the opening of the market was set to equal to 30% of the consumption in 2000. The Directive was repealed and replaced by Directive 2003/54/EC (“the Second EU Electricity Directive”) in 2003.

The principles of an internal electricity market were extended to apply for the market in gas in 1998.The Directive laid down common rules for the transmission, distribution, supply and storage of natural gas. The Directive was revised and repealed by Directive 2003/55/EC (“the Second EU Gas Directive”) in 2003.

Following the adoption of the two Directives, it was realised that the implementation process necessitates a neutral and informal European platform for discussion and exchange of experiences. This resulted in the establishment of the Electricity Regulatory Forum. Organised by the Commission, the first meeting was held in Florence in 1998. In 1999 a similar forum for gas was set up. The Gas Forum meets in Madrid.

Parallel to the evolvement of European internal energy market, the true pan-European implications of the process began to unfold. As a result the European Union took a more active stance in promoting stability and sustainable development in South East Europe. It, subsequently, tabled a proposal outlining the principles and the institutional necessities on which the development of the regional electricity market for the South East European (SEE) area should be based. It ultimately would ensure the integration of the region into the European Union’s internal electricity market. Both, the initiative and the approach, were highly welcomed by the countries from South East Europe.

If the proposal was to be pursued, it would presume the adoption of the EU common legal framework and establishment of monitoring structures in the region. Following intense discussions, an agreement was reached at the first South East Europe Electricity Regulation Forum in June 2002. The signing act of the Athens Memorandum of Understanding, took place in November 2002. The Athens Memorandum also set up a number of institutions, which collectively are known as the ‘Athens Process’. 

Few months later it was decided that the market in gas should be integrated into the Athens Process. A revised Athens Memorandum of Understanding 2003 was formulated. In addition to the market in gas, the paper comprises the newly revised EU Electricity and Gas Directives from June 2003. It, also, stresses the political dimensions of the process and urges the establishment of permanent institution and binding rules. 

The two Athens Memoranda paved the way for the drafting process of a new treaty. The drafting coincided with the work to build up a regional energy market for the SEE region. The next Athens Forum meeting resulted in a decision to name the process “Energy Community”. There also was an agreement on the location of future institutions.

In May 2004 the European Union decided to open negotiations with the countries of the South Eastern European region in order to conclude a legal agreement covering network energy and the creation of a regional market. This should eventually result in the integration of the regional market into the European Union’s internal energy market. The negotiations took place between the European Community on one side, and Albania, Bosnia and Herzegovina, Bulgaria, Croatia, former Yugoslav Republic of Macedonia, Republic of Montenegro, Serbia, Romania, Turkey and UNMIK on behalf of Kosovo on the other. 
 
 

In October 2005 the European Community and Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Montenegro, the Former Yugoslav Republic of Macedonia, Romania, Serbia and UNMIK on behalf of Kosovo signed the Treaty establishing the Energy Community. The Treaty requires the Contracting Parties to implement important parts of the acquis communautaire, provides for the creation of a single energy market and the mechanism for the operation of network markets. It also establishes the institutions of the Energy Community, as well as the decision making process.

Following the ratification and notification process, the Treaty entered into force on 1 July 2006. The European Union, the Republic of Albania, the Republic of Bulgaria, the Republic of Croatia, former Yugoslav Republic of Macedonia, the Republic of Romania and UNMIK on behalf of Kosovo had brought the ratification process to a conclusion by July 2006. The three remaining Contracting Parties, Bosnia and Herzegovina, Montenegro and Serbia, ratified the Treaty in December 2006.

Austria, Cyprus, Czech Republic, Germany, Greece, Hungary, Italy, Slovakia, Slovenia, United Kingdom, were accorded the status of a Participant at first the Ministerial Council meeting in November 2006.