‘Concrete commitments’ will speed single-market power to the people

Date: 28/02/02

Energy Commissioner Loyola de Palacio is optimistic a deal will be struck at the Barcelona summit on further market opening of the electricity and gas sectors. In a Q&A with Laurence Frost she takes stock of EU policy

Q: The green paper you published over a year ago raised the possibility of a new integrated EU energy policy. Are you still in favour of this?

A: Yes I am. This would make our energy policies more coherent and efficient. We have already integrated our environmental policy, and energy obviously has enormous repercussions for environment; our Kyoto commitments, for example, are closely tied to energy questions. Secondly, we need to complete the single market; we've integrated our market policy and I hope Barcelona will see the completion of full integration and liberalisation of electricity and gas markets.

Q: How would nuclear power and nuclear safety fit into such an integrated policy?

A: I believe that Europe should not abandon nuclear power. Especially when you see that, among other things, nuclear power avoids 300 million tonnes of CO2 [emissions] a year and delivers both more stable energy prices and a greater measure of autonomy for Europe, in a very uncertain geopolitical context.

Having said that, I consider that we do need more transparency, and to guarantee the highest levels of nuclear safety for plants across the EU. Experts in the member states have already done considerable work on coordinating safety standards in European plants - not identical standards, but equivalent ones.

I believe compliance with these equivalent standards should become a requirement at EU level. With EU enlargement in mind, this is something essential for the future, especially when you consider that certain accession countries have plants that don't meet these standards and cannot be upgraded to meet them.

Q: Does the controversy over the Czech Republic's Temelin plant advance the case for an increased EU nuclear safety role?

A: The Temelin plant itself is one where modifications have been made that do guarantee equivalent safety standards. But the controversy in Austria has had a positive effect, in my opinion, by putting the need for EU-level guarantees of adequate plant standards on the table - a need that was acknowledged by the Laeken summit conclusions.

Q: What's to prevent EU electricity generators being undercut on liberalised markets by 'dirty' power imports from third-country producers who don't have to meet EU environment and safety standards?

A: First of all, in exchange for market integration we ask for reciprocity, but we're not there yet. What's clear is that it would not be acceptable to have electricity sold on our network from plants that are below the minimum acceptable safety standards.

In our energy dialogue with Russia, for example, we're discussing electricity. It's in the long-term interests of both sides to integrate our electricity networks. But in exchange for such an agreement we should of course demand that power plants that don't guarantee adequate nuclear safety should not be on the integrated network. This is something we've made very clear to the Russians: there's no room for 'dirty' electricity.

Q: You recently called for EU measures to provide for the earlier release of emergency oil stocks during supply shortages. How dependent would the strategy be on the cooperation of non-EU partners?

A: The oil market is marked by limited spare capacity, and there's also a huge problem with a lack of transparency.

We need to facilitate dialogue between producers and consumers, not at all with the idea of hindering the action of the market but - on the contrary - to allow the market to function more rationally.

Q: Does this mean increasing oil stocks?

A: Until now the EU has held stocks only at a national level. It is certainly worth considering greater cooperation, and even the eventual communitarisation of the use of the stocks. This will be addressed in the near future when I present a proposal for the management of stocks within the EU, later in the year.

Q: Is there scope for a bigger EU role in negotiating volumes and prices with OPEC and non-OPEC oil producers?

Prices can't be negotiated - it's up to the market to determine prices. But there needs to be an improved dialogue based on the kind of information needed to ensure that demand is adequately met while also avoiding over-production and market instability.

All of us, producers and consumers, have an interest in greater transparency and greater dialogue, for a more balanced situation in the market. Nobody's talking about negotiating prices - not at all.

I think there's a clear role for the EU in this dialogue. Together we are the world's biggest oil importer, while no individual member state carries much weight.

How the EU is represented we shall have to see, but we have every interest in having a common voice. This is one of the things that will be addressed in the proposals I'm going to submit to the Council.

Q: You've hinted in the past that the Commission might liberalise electricity and gas markets by 'decree' [under article 86 of the EU treaty] if there's no deal at next month's Barcelona summit. Is this an option you're still considering?

A: Liberalisation of electricity and gas is a must. Full market opening was one of the requirements in the Lisbon council conclusions, but the results of the Stockholm summit a year later were disappointing.

I think now in Barcelona we can't fail. I'm optimistic - but also realistic.

However, if ever the member states fail [to agree on liberalisation], the Commission is ready to act. We should use the treaties.

Q: Defending its reluctance to agree to firm dates for market-opening, France says Germany has maintained significant barriers to new entrants despite having fully liberalised on paper. Is that a fair criticism?

A: There are things that must be improved for third-party network access in Germany, and the Bundeskartellamt [German competition regulator] is the first to acknowledge this.

Our proposal clearly sets out the need for an independent regulator and a framework of previously published tariffs for any player in the market.

Q: Do you think that Germany will agree to an independent regulator?

A: We're still discussing this with Germany but I think there will be an agreement, as Germany is very committed to the full liberalisation of the European energy market.

Q: Are you prepared to compromise on your proposals, for instance by allowing a further delay

in liberalisation for domestic consumers while you're pushing ahead with the industrial side?

A: My aim is still 2005 [the proposed deadline for full market opening].

But we need to have a success in Barcelona, which means concrete commitments, and especially to stick to the timetable for industrial market opening. What we need are concrete commitments in Barcelona from the heads of state and government.

Of course we must continue to ask for domestic market-opening as soon as possible, but whether this has to happen in 2005 can be discussed.

Q: Competition Commissioner Mario Monti seems to think that delaying the consumer side would negate many of the visible benefits of liberalisation, including lower prices for individual households...

A: If we have a clear commitment, with concrete dates for industrial liberalisation in 2003-4, I think we will have succeeded in Barcelona.

Whenever you negotiate something you must have a certain flexibility.

What we need most are concrete commitments, as I've said on several occasions. I'm the commissioner in charge of energy - nobody else but me.

Major interview with Energy Commissioner Loyola de Palacio. Article is part of a survey on energy.