Brussels, 31/08/2007 (Agence Europe) - The European Commission's eagerly awaited third package of legislation to improve the functioning of the Internal Market in gas and electricity and open the industry up to greater competition is still being discussed among different departments at the Commission ahead of its scheduled publication on 19 September 2007. Sources close to the Commission told this newsletter on Friday that it was unlikely to be delayed. When adopting an ambitious three-year plan (2007-2009) for the EU's energy policy at the European Council in March 2007 (see EUROPE 9383), the EU27 made this third package of legislation one of its priorities and set a tight timetable in order to speed ahead. The draft third package of legislation is up for discussion at the 3 December 2007 Energy Council before being examined by the December European Council.
There are three strands to the Commission's package. The first is effective unbundling of generation, supply and networking by energy operators. This hinges on the Commission's desire to encourage ownership unbundling (as recommended by 8 member states, Belgium, Denmark, Spain, Finland, the Netherlands, Romania, the United Kingdom and Sweden, and rejected by 9 others, Germany, Austria, Bulgaria, Cyprus, France, Greece, Latvia, Luxembourg and Slovakia). This is seen as the most radical option to guarantee competition in the single energy market by separating off the activities of big energy companies which currently both generate and distribute and sell energy. They will be forced to sell off their energy transport network to an independent investor. The second, more flexible, option recommended by the Commission is known as ISO+ (independent system operator plus) whereby energy operators would continue to own their networks but would have to give up piloting (management and investment decisions) to an independent operator which would pay an appropriate amount for these services. Ferran Tarradellas, spokesperson for EU Energy Commissioner Andris Piebalgs, said last week that he still considered ownership unbundling as the best solution in terms of stimulating investment and bringing prices down. Given the current balance of forces among the 27 EU member states, the Commission's preferred option would not achieve the qualified majority necessary for its adoption but in July 2007, the European Parliament called for ownership unbundling (see EUROPE 9465 and 9466)..
The second section of the proposal concerns the introduction of an independent EU mechanism to increase cooperation among national gas and electricity regulators. Known as ERGEG+ (ERGEG is the European group of national regulators), this option aims to beef up the powers of the national watchdogs and ensure greater convergence of their powers to overcome technical differences and standards which currently hold back the development of cross-border sales and interconnections. The planned mechanism also includes transparency rules for vendors and purchasers of gas and electricity, which will be required to publish sensitive market information to boost competition in the market.
The third strand covers the introduction of a mechanism to ensure greater cooperation among transmission system operators over technical standards and investment plans. The European Commission will suggest giving the existing groups of transmission system operators (ETSO for electricity and GTE for gas) an official role, along with formal obligations and targets to improve coordination among network operators. This option is known as ETSO+/GTE+.
Guidelines on restricting the buying up of European energy companies by non-EU capital
In parallel with the first strand of the package, the European Commission is planning to publish guidelines restricting the purchase of energy companies in the EU by non-EU capital and ensure that as part of the ownership unbundling process, energy transport networks do not end up in the hand of companies from outside the EU or private investment funds (hedge funds and private equity companies) or sovereign funds. Measures being considered in a provisional document leaked to the Financial Times on 30 August include the introduction of a reciprocity clause whereby foreign capital would be welcome if the country of origin agrees to the purchase of its companies by European investors. Russia has introduced heavy restrictions on acquisitions in key industries like energy, is the country the Commission is aiming at here. Other measures include the right of control over any potential purchaser and the option of deciding that energy is a strategic industry and therefore foreign investment would be totally banned (see the initial debate surrounding the use of mechanisms like 'golden shares' in EUROPE 9477). (eh)