Unbundling Of European Energy Markets? Not If The French And Germans Get Their Way

Unbundling Of European Energy Markets? Not If The French And Germans Get Their Way

The Brussels Summit in June saw the new French President Nicolas Sarkozy succeeded in persuading the EU to drop its commitment to ‘free and undistorted competition’ from its reform treaty. Although Competition Commissioner Neelie Kroes argues this will have little impact upon Brussels’ tough stance against cartels, illegal subsidies and protectionism; many legal experts support the stance that the new arrangement will weaken the Commissioner’s ability to crack down on such ongoing practices.

As if to rub salt in the wounds, recent comments following the approved merger between GDF and Suez by Jean-Pierre Jouyet, France’s Europe Minister are likely to further inflame relations. Referring to the merger, Jouyet remarked to journalists: ‘its a vision of what could be the energy policy for Europe’. This must be particularly upsetting to Kroes who has been careful to ensure that the merger was scrutinised from top to bottom to seek out any adverse effect on competition, also making certain the disposal of assets and concessions formed the founding conditions for any potential deal.

To retaliate, Jouyet further expanded on the growing division between Paris and Brussels by stating that Kroes’ unbundling plan was ‘… an ideological view, we have a strategic view. It is a better balance between European interests and competition rules’.

Since this delicate and public series of events, Kroes has made no attempt to hide her determination to fight nail and tooth against the protectionist policies of the French, German and Spanish member states. Although she remained silent during the summit negotiations, one observer believes that ‘Ms. Kroes and her advisors were alarmed at the apparent lack of concern from liberal countries such as Britain and Sweden and also from Jose Manuel Barroso, European Commission President’. Mr Barrosso seemed convinced beforehand that erasing competition as an objective had no legal bearing, since the policy was mentioned 13 times elsewhere in the treaty. However, the French government and other legal experts clearly think differently.

Whatever the legal contentions, the Commission will this month present detailed proposals for an overhaul of EU energy market regulations. EU Energy Commissioner, Andris Piebalgs is expected to suggest that the integrated groups within member states be forced to sell their electricity grids and pipeline networks – a definite first step towards unbundling. But just how far this will be allowed to progress depends greatly on the strength of the influential French and German lobbies.

So, why should a business within a single EU member state concern itself with what is going on with competition policy across the whole of the EU? Any attempt to stifle competition in Europe will have a profound effect on our UK market. As we are highly dependent on Europe for much of our energy supply and as current European practices falsely peg the wholesale gas price to the price of oil, it is in our best interest to see a break-up of the unhealthy dominant forces which control and distort the market mechanism.

Examples of this distortion are currently being investigated by the Commission. These concerns surround the withholding of production capacity on electricity markets with the view to raise prices.

Lastly, commentators have claimed there is abuse of electricity balancing markets and since this is likely to have greatest effect on newer entrants and thus, for smaller players who regularly depend on these sources, it is a limiting factor on the expansion activity of these businesses.