Brussels, 19/06/2001 (Agence Europe) - In principle, on Wednesday, the European Commission is expected to adopt conclusions proposing ways to resolve problems caused by the asymmetrical liberalisation of electricity markets in the EU. Such problems are highlighted by the acquisition of interests in Italian Montedison by the French monopoly EDF, and by German EnBW acquisitions in the Spanish company Hidrocantábrico (see EUROPE of 13 June, p.12).
If it follows the line proposed in the documents presented by Commissioners Frits Bolkestein, Loyola de Palacio and Mario Monti, the Commission should define a three-point strategy: 1) accelerate the liberalisation of the electricity market between now and 2005, as it had proposed in March; 2) strictly apply competition rules on mergers and dominant position abuse to companies in the sector; 3) apply articles 85 and 86 of the Treaty on public companies and monopolies, with the presentation, as provided for in these articles, of a draft directive or decisions. The Stockholm Summit had called on the Commission to ensure that these articles are applied in the context of electricity liberalisation. In other words, the Commission could put France before the alternative of accepting increased liberalisation of the electricity market, or seeing EDF's investment possibilities strictly contained. A difficult choice for France since the provisions taken to defend EDF could aggravate ELF's investment policy, notes one observer.
The long-awaited Commission debate will be based on two documents:
A Communication by Internal Market Commissioner Frits Bolkestein on the implementation of 1997 guidelines on the freedom of movement of capital and cross-border investment. The Commissioner will take stock of the situation in this context regarding measures taken by the States to defend their newly privatised companies against being taken over by monopoly companies of another State. These measures may take a legislative form, as in the case of legislation on monopolies adopted by Spain or Portugal. It may be a matter of a "golden share" that safeguards the power of certain shareholders, or specific measures, as is the case of the decree adopted by Italy to counter the EDF offensive.
A memorandum from Competition Commissioner Mario Monti and Energy Commissioner Loyola de Palacio on the consequences of asymmetrical liberalisation of electricity markets between the States which have only liberalised 30% of their market by following the 1998 electricity directive to the letter, as is the case in France, and those that liberalised beyond this threshold, as is the case in most Member States. The Commissioners note that asymmetry has led to serious competition distortion and competitive inequalities between Member State companies. They clearly criticise State monopolies, writing that the "Member States that have limited themselves to minimum market opening thus maintain a captive consumer market, have a guaranteed level of income and a significant advantage in the effort they make to develop European-scale companies, mainly by acquisitions in other Member States". In their view, this situation increases the urgent nature of new market operators, since consolidation of electricity companies cannot take place in a context where the market of some companies is closed to competition. Noting that the problems of asymmetry must be "urgently resolved", Commissioners de Palacio and Monti propose four roads of action to: - accelerate liberalisation; - strictly apply competition rules; - rapidly adopt common tariff rules for cross-border electricity transit; - and develop infrastructures, as the Commission will propose in an "action plan" by the end of the year.
Concerning the problem of State aid, the Commissioners state that: "the Commission will ensure that aid paid by the Member States to electricity market operators does not guarantee them an undue competitive advantage over new entrants". "The Commission will also be attentive to State aid in the nuclear sector", which is not directly covered by the European Treaties, with the Euratom Treaty not providing anything on State aid. Commissioners Monti and de Palacio also specify that it will be necessary to adopt a "solution to stranded cost" (Ed.: which covers the costs claimed by traditional operators to recover investment made in the infrastructure before liberalisation). The Commission should give its conclusions in three cases of stranded costs out of nine that are presented to it (D, A, B, D, E, GR, I, NL, UK), they recall.
Concerning mergers, the Commissioners' note stresses that the mergers between energy companies may be favourable for competition, if they allow companies to enter new energy markets. Nonetheless, it states, "mergers between former monopolies that have become competitive thanks to liberalisation are far more problematical". They recall that, in application of Articles 81 and 82 of the Treaty, the Commission has already intervened in the cases of EDF/EnBW, Vega/Viag and is examining the case of the EnBW takeover of Hidrocantábrico.
On the ground abuses of dominant position and the access to electricity networks, the memorandum underlines that access to interconnections is a Commission priority, and recalls that in this case it has to used Articles 81 and 82 to ensure the opening of the interconnections between Denmark and Norway, Germany and Denmark and France and the United Kingdom and that it is presently examining the case of connections between France and Spain, between Italy and France and within the Netherlands.