Brussels, 19/09/2007 (Agence Europe) - In order to breathe new life into the energy policy for Europe, the outlines of which the European Council has already approved in its adoption, last March, of a triannual action plan for the period 2007-2009 (EUROPE 9383), the European Commission on Wednesday 19 September adopted its proposed third legislative package for the internal market for gas and electricity. The objective of this package is to improve the functioning of the internal market and to open it up more to competition, in order to guarantee freedom of choice and real and effective advantages to all European citizens, notably in terms of energy prices, clean energy and safety of supply. At the heart of the proposals lies the delicate issue of the unbundling of production/supply activities from the transport (networks) activities of the energy operators, in order to try to facilitate the emergence of new operators on markets which are dominated by vertically integrated companies. This question is bound to give rise to a long, in-depth debate between the Council of the EU and the European Parliament, which have been called upon by the Commission to reach an agreement as soon as possible, in order to provide a response to plans to ensure a “Europe of results”.
Five text proposals in addition to existing legislation
In order to seek to balance out defects in the functioning of the internal energy market (market compartmentalisation, dominant position of the old monopolies, prices too high and insufficient investment) which it spoke out against in its sectoral investigation last January (“Energy and Climate” package, EUROPE 9341), the Commission has forwarded five draft texts: - two proposed directives which aim to modify and add to directives 2003/54/EC and 2003/55/EC on the common rules for the internal electricity and gas market, the objective being to achieve effective separation of activities (production/supply and transmission) by the energy operators; - three proposed regulations. The first has the objective of creating a European Agency for the Cooperation of National Energy Operators; the two others seek to amend regulations 1228/2003 and 1775/2005 concerning conditions for access to the electricity and gas transport networks.
Although it favours ownership unbundling, Commission has not closed door to “ISO” option, which aims to be more flexible, but with a greater administrative burden
Permitted by the 2003 directives, the simple unbundling of legal and accounting operations within an integrated energy group will not, according to the Commission, prevent conflicts of interests between the two types of activities, as Neelie Kroes pointed out, speaking alongside President José Manuel Barroso and her colleague with responsibility for energy issues, Andris Piebalgs, before the press on Wednesday. In view of the competition commissioner, within the framework of their production/distribution activities, integrated companies seek above all to maximise their sales and market shares and, therefore, have no reason to develop the networks which they hold beyond their own requirements. In order to improve the access of third parties to transport networks which are still held by the old monopolies, the Commission, which also sees no reason to distinguish between electricity and gas, has tabled two well known options.
- the most radical option, which is favoured by the Commission, provides for the ownership unbundling of energy production activities from transport activities. By means of this option, the Commission aims to oblige large, vertically integrated groups to abandon control of their transport infrastructure (energy “motorways”). However, as the only concession left in place by the Commission, they would keep ownership of local distribution networks. It is worth noting that several member states, taking their lead from the United Kingdom, have already separated the activities of their energy operations in one or other of the sectors (gas and electricity) or in both;
- the other option, known as “ISO”, theoretically more flexible for those member states which wish to keep their national champions, allows the large, vertically integrated groups to keep ownership of their infrastructure, but obliges them, in exchange for remuneration, to confer the management of them to an Independent System Operator. The ISO would be tasked with the upkeep and maintenance of the networks and would also be responsible for decisions on investments needed for the correct functioning of the network, whilst the mother company would have no rights of scrutiny over these prerogatives. In order for the system operator to be recognised as a transporter, the mother companies would have to agree to a procedure for the “certification “of independence, co-organised by the national regulator and the Commission. This concession on the part of the Commission would be so restrictive in terms of administrative burden that a number of observers see it as a thinly-veiled version of ownership unbundling.
More powers for the regulators and a community agency for their cooperation
The second key proposal of the legislative package concerns the regulation of the internal market. In order to guarantee their independence from the governments (including on the budgetary level) but also from the sector, the Commission is proposing to grant new powers to the national regulators, involving: carrying out new tasks: issuing certificates testifying to the independence of action of the transport network managers and their application of the unbundling rules; monitoring the transport network managers and the distribution network managers; approving investment plans; overseeing network security; checking transparency; checking the level of the openness of the market and competition, in collaboration with the competition authorities; application of consumer protection measures; - and deciding on dissuasive sanctions to be levied against energy operators.
Furthermore, in order to simplify and stimulate cross-border energy trade, the Commission proposes to set in place an Agency for the Cooperation of Energy Regulators, authorised to take decisions of an obligatory nature. The Agency would be tasked with keeping tabs on the impact of the behaviour of the operators on the internal energy market. Governed by a board of regulators, it would oversee the transport network managers and may ask them to make changes to their plans in order to guarantee adequate investment in their networks. Even though it will not be authorised to replace the regulators in their national missions, this Agency would still have the power to revise decisions taken by a national regulator with a direct impact on the internal market.
Formalised groups for improved cooperation between gas and electricity transport network managers
Lastly, the third key proposal of the Commission relates to the formalisation of existing European groups for transport network operators (ETSO for electricity and GTE for gas), to enable them to reinforce their cooperation. The transport network managers would thus be able to draft common security standards and commercial and technical codes, plan and coordinate the investment necessary to facilitate cross-border trade at EU level, and set in place a common platform of transparency on the management of networks, which would help to guarantee equality of access to information and to improve price transparency.
With Council divided and EP unsure over gas, debate on unbundling bound to be long
The Energy Council of 8 June demonstrated that the Twenty-Seven are a long way from consensus on the delicate issue of ownership unbundling (EUROPE 9441). Like their national energy giants EDF, GDF, RWE and E.ON, Germany and France are the most strongly opposed to this option. Paris, which, amongst other things, cites increased risks of instability in the sector and legal insecurity for investors, stresses its own model of regulated unbundling. For its part, Berlin lays emphasis on the denial of ownership rights. Other opponents of this option are Slovakia, which has already set ownership unbundling in place for electricity and now believes that the advantage to be had from this in terms of competition is insufficient; Cyprus, which fears a surplus of administrative and operational expenditure; Greece, which considers that this issue should be dealt with at a later stage, once the data on the advantages of liberalisation within the EU27 are available; Bulgaria and Latvia, which have voiced concerns at the threat from the Russian gas giant Gazprom, should national operators become weakened by ownership unbundling. At the end of July, these seven member states, plus Austria and Luxembourg, sent a joint letter to the Commission, pleading for ownership unbundling to be just one of several options. With 106 votes, these nine member states form a blocking minority within the Council. Previously, eight member states - Belgium, Denmark, Finland, the Netherlands, Spain, Sweden, Romania and the United Kingdom - had issued a joint invitation, at the end of June, to the Commission to keep ownership unbundling as the favoured option. These eight member states represent 119 votes within the Council. Portugal, currently the president of the Council of the EU and already running total unbundling for gas and electricity, shares their opinion. It is also known that other member states, such as Estonia, Italy and Hungary, support separation for transport to an extent, but are opposed to its extension to distribution. It is worth noting that in the decision-making process of the Council, voting on a draft directive is done by qualified majority. This will be achieved with 255 votes out of a total of 345. It takes a minority of at least 91 votes to block a text.
For its part, the European Parliament took position in favour of ownership unbundling, in its adoption, by a very large majority, of the report by Alejo Vidal-Quadras in July (EUROPE 9465). Although it takes the view that the ownership unbundling of transport activities from other activities (production, mining, distribution, sales) of the energy operators is “the most efficient way of promoting investment in infrastructure, fair access to the network for market newcomers and market transparency, in a non-discriminatory way”, it does however question the relevance of ownership unbundling in the case of gas for at least two reasons, which are the risk of damage to the gas operators from large producers from third countries and the need for specific solutions for gas. (eh)