The debate on the Commission's initiatives on energy went immediately to the heart of the matter, including the foreseeable criticisms and harshness. Negotiation will be long and difficult: Commissioner Andris Piebalgs hopes that it will be concluded under the French presidency of the Council, that is, before the end of 2008. This is a reasonable timescale, given the importance of what is at stake and the Commission's brave, almost revolutionary, proposals, and taking account of the fact that the European Parliament will play a key role, since it is a co-legislator - there will be no European legislation without its say so. The EP has just called for a common foreign policy for energy (see our newsletter of the two days ago), in part anticipating its response to the new package.
For the content of the proposals and the reactions, I would refer you to what Emmanuel Hagry has been writing day after day over the last two weeks, and to this column in our edition No 9503 for a general overview. Today, I would like to address two specific key points.
The large integrated groups do not necessarily represent their countries' “national interest”. As forecast, the major integrated energy groups (in France, Total, Suez and especially Electricité de France and Gaz de France; in Germany, E.ON) have come out against separation of production and distribution activities, and, sometimes, in scathing terms: absurdity, nonsense, strategic error and so on. The chief executive of Gaz de France, Jean-François Cirelli, said: “Can we not leave anathemas to one side, and consider the options before imposing solutions? Unbundling is not in the interests either of the consumer or European policy or security of supply”. The integrated groups challenge the idea that unbundling the two activities will lead to increased investment in networks; on the contrary, it is in the interests of these groups to invest in new links, while the exclusive systems operators suffer from bottlenecks.
Commissioner Piebalgs responded by introducing an idea into the debate, which, to my knowledge, had been left in the shadows: that the interests of the integrated groups were not necessarily the same as those of the member states to which they belong. In an interview he said: “On the one hand, there are companies which are very happy with the present situation and which are, of course, against unbundling, and, on the other hand, a government which will naturally take the interests of these groups into account as well as the interests of consumer businesses and citizens, in terms of price and security of supply”. And in a text which he signed personally, he said: “It is not in the interests of integrated operators to make investment that makes it easier for competition to emerge in their current markets”. Distributors' autonomy is, in his opinion, necessary if small producers and renewable energy are to flourish. If the integrated operators sell gas and electricity and at the same time control the networks, “they will do all they can to prevent competitors from linking up; they could for example prevent interconnections with other markets”. There is a need, then, for an environment of competition, said Mr Piebalgs: “I know that it is difficult for many groups to give up their dominant position on their national markets. But the status quo would only be in the interests of these groups and not those of our citizens, who pay a high price for an inadequate level of service”.
The Commission's allies. In its battle, the Commission has an ally: the high energy consumption industries, which feel they pay too much. Some sectors, including CEFIC, which represents the European chemical industry, have been frank in their comments. The organisation which represents industry as a whole, BusinessEurope, is more cautious, and this is understandable, because it speaks on behalf of employers in general, including private sector energy producers and distributors. On unbundling, however, BusinessEurope was clear: “Effective unbundling is essential for the creation of non-discriminatory access to the networks”. It did not come out in favour of one or other of the options put forward by the Commission, ownership unbundling or separating the management; it wishes to study the matter in detail. Small and medium-sized enterprises, however, have come out firmly in favour of separating ownership of the two activities, as has BEUC, which represents consumers and which feels that the EU should push further on competition.
Shifting national stances. I believe that those who assume that, in negotiation within the Council, France and Germany will be firmly against unbundling are mistaken. Their governments know that negotiations will be long and tough, and, for the moment, they are maintaining their reservations. Yet, to present the France-Germany pairing as the “no front” is premature and inaccurate. Even if, in France, the integrated energy groups are largely state-controlled and the official position is against unbundling, it is reasonable to assume that the authorities will take account of the various points made by Mr Piebalgs. As for the German authorities, one must read carefully what was published in our newsletter No 9506: what Secretary of State for the Economy Joachim Wuermeling firmly rejected was ownership unbundling, but he was much more favourably disposed towards the other option, which would allow integrated groups to retain ownership of networks on condition that an independent system operator (ISO) manages them. Germany is also considering increasing the management powers of the national regulatory agencies with regard to the integrated groups. The positions of some member states are changing, at least partly, by comparison with the starting positions set out by Emmanuel Hagry in out newsletter No 9492. There will be powerful pressure brought to bear in all directions, heads of state and government will probably be personally involved in negotiations; it would be presumptuous to anticipate the outcome and to rule out compromises.
The importance of unbundling for external relations must not be forgotten. The second point I want to highlight is firstly a statement: as far as I know, neither supporters not opponents of unbundling have emphasised its importance in allowing the EU to give itself reasonable protection from the risk of third country giants taking control of European energy networks. This does not just relate to Gazprom; China and some of the Gulf states have similar financial capabilities. The Commission is not suggesting any protectionist measures, but equality of treatment, that is, the application of European legislation to third country companies, according to the same principles that apply to Community companies. In short, if unbundling becomes compulsory for European groups, it would also have to be so for Gazprom or any other operator in the EU. But if unbundling is not introduced, how can it be imposed on third countries?
The Russian authorities have realised the importance of this and immediately invited themselves in. Through its spokesman, Gazprom has said that, as a “reliable” supplier of gas and a “major investor in the infrastructure that carries this gas to Europe, it was “willing to contribute to the debate”, and said it was confident that “its voice will be heard” (see our newsletter No 9506). The Russian case brings the whole problem of involvement of public authorities in the activities of market players into the debate. Energy is being increasingly considered, we know, as an essential element in foreign policy. This is how Mr Putin is using it, and the European Parliament, this very week, has clearly and firmly backed a common EU foreign policy in this area (see our newsletter No 9510). Moreover, Italian Minister Pierluigi Bersani said that talks being carried on between ENI (on behalf of the consortium which includes inter alia Total, Exxon and Shell) and the authorities of Kazakhstan on the Kashagan oilfield was “a European issue”. Commissioner Piebalgs has spoken to Kazakh Energy Minister Sauat Mynbayev about this issue, and he emphasised that energy partnerships had to be based on mutual respect, transparency, predictability and no-discrimination (see our newsletter No 9507).
Essential balance. Balance is essential between, on the one hand, the proper working of the market and compliance with competition rules and, on the other, security of supply; and political authorities necessarily have a role to play. The European Commission believes that energy prices are too high in the EU today, and that account must be taken just as much of the interests of consumers and industrial companies as of the energy operators. Unbundling, it believes, is necessary to strengthen competition and diversify supply. Mr Piebalgs has said that, for electricity, total separation of producers and distributors is the right way, while for gas every member state would be able to choose between ownership unbundling and independent system operators. At the same time, he underlined that separation had no effect on the involvement of the state. He said: “A state will be able to retain control of the company which operates the energy infrastructure, because state-controlled companies can be just as efficient as private companies, in particular in systems management. But when a state controls both the producer and the system, two separate companies will be required”. Neelie Kroes also set out in detail why, from the competition point of view, separation is necessary and why the current situation is inadequate and unsatisfactory (see our newsletter No 9507).
In their debates, which will determine the outcome, MEPs must take account of all the aspects and avoid allowing themselves to be guided exclusively by matters of principle and doctrine.
(F.R.)