Luxemburg, 06/06/2008 (Agence Europe) - Meeting in Luxemburg on Friday 6 June under the chairmanship of Slovenian Economy Minister Andrej Vizjak, Energy Ministers struggled to reach a general approach, for want of a political agreement, resulting from the prior European Parliament opinion (codecision procedure), on the 3rd package of legislative measures to complete the liberalisation of the electricity and gas markets, including the thorny issue of effective separation of energy companies' production/supply and network/transport activities (see EUROPE 9505). At the time of going to press, however, delegations were still discussing the details of the alternative to the European Commission plan to dismantle vertically integrated companies holding a dominant market position to improve the operation of the internal energy market. Member states must reach a consensus on 6 June if conclusion of the mater is not to be put off indefinitely. France, which assumes the Council Presidency on 1 July and has made agreement on the energy-climate change package its priority, does not intend to return to this issue in 2008. “Failure to find a compromise today will be a failure for all,” warned Energy Commissioner Andris Piebalgs in the course of the debate in the morning. “Any change could undo the whole thing,” warned Vizjak, whose staff had drawn up a compromise on the 3rd package as a whole.
Suspecting that some historic monopolies did not give their competitors sufficient access to networks or provide sufficient investment, the Commission initially proposed two options, recommending the first, to ensure greater competition on the market and bring prices down: - ownership unbundling, which would mean that a single company cannot own a transmission network (gas pipelines and high tension lines) and produce or supply the energy; and the appointment of an Independent System Operator (ISO option), which would allow vertically integrated companies to retain ownership of the network, on condition that it was managed by a wholly independent body.
While there is already full unbundling for electricity in 11 member states and for gas in 7 (among these are the United Kingdom, Spain, Denmark and the Netherlands), 8 member states, led by Germany and France, have rejected this model and have proposed a less radical solution, in the option initially referred to as “effective and efficient unbundling”. To break the deadlock, the Slovenian Presidency and the Commission, which did not believe that this “third way” ensured the independence of the Transmission system Operator, in mid-May brought forward a joint non-paper proposing a third option, the ITO option, which would see independent Transmission System Operators established. This option would allow companies to retain ownership of transport networks as long as they were managed by independent Transmission System Operators and further conditions were met which ensured fair and non-discriminatory access to the network, effective regulation, changes in investment, the development of an interconnection infrastructure and undistorted measures to encourage investment. The idea behind this alternative, based on national regulators with strong powers guaranteeing competition, is to make network operators more independent and to monitor them more closely without cutting them off totally from their parent company.
According to a provisional compromise, a copy of which EUROPE has seen, all the delegations agreed that “effective separation of supply and production activities from network operations should be achieved in accordance with the orientations defined by the 2007 spring European Council. However, while the majority of delegations and the Commission see full ownership unbundling as the first best option, an option allowing for an Independent Transmission Operator (ITO) has been developed with the provisions outlined below. These provisions aim at balancing concerns on the scope, time-frame and enforceability of this option with keeping it workable and preserving the financial interest of the vertically integrated undertaking (VIU): - The ITO option should be available to both sectors for member states where the transmission system belongs to a VIU on entry into force of the Directive; - Effective and proportionate provisions on the ITO are set out in Chapter IIIa (gas) and Iva (electricity) to ensure the effective independence of the operator, its management and supervisory body, adequate access to financial resources, that it does not share certain means and resources ands corporate identity with the parent company, and to avoid conflicts of interest”. (E.H./transl. rt)