Deadlock in dispute over energy deals

Date: 26/09/1996

BELGIUM'S near-monopoly electricity supply company Electrabel and the European Commission remain at loggerheads over the company's attempts to tie distributors to long-term contracts.

Recent discussions between competition officials and top Electrabel executives, aimed at clarifying details of the company's proposed exclusive contracts with Belgium's local government authorities (communes), failed to break the deadlock.

Sources say executives answered one list of Commission questions, only to be presented with a fresh set of queries. Officials said afterwards that Electrabel had refused to move on key issues.

The Electrabel case is a crucial one for Belgian Competition Commissioner Karel Van Miert, who believes that the company is attempting to sidestep the introduction of open competition in Europe's energy supply industry by signing such long-term contracts.

The Directorate-General for competition (DGIV) suspects Electrabel of breaking a series of fair competition rules and abusing its dominant position on the Belgian market.

Electrabel originally offered Belgium's communes, which are the owners of local electricity distribution companies, exclusive supply contracts for between 20 and 30 years. In return, they were promised a 5&percent; overall share stake in Electrabel.

While Electrabel says it is willing to bow to demands from the Flemish regional government to trim the original 30-year exclusive supply contracts to 15 years, the firm maintains that it could still tie communes in the French-speaking Walloon and Brussels regions to 30-year agreements.

“That is something that could be possible,” said an Electrabel spokesman this week.

The firm says it was originally promised a Commission decision on its contracts by the end of September. But it appears unlikely the deadline will now be met, with work on the communes' share stake still frozen.

The power company also maintains that the Commission is contributing to a “democratic deficit”, since 98&percent; of the communes had already voted for the exclusive contracts before it intervened.

The dispute comes in the wake of an agreement by EU energy ministers back in June on a step-by-step opening up of Europe's electricity supply industry.

Under the plan, suppliers will be given a six-year deadline to allow their big corporate customers to shop around for the best deals in the first stage of liberalisation, with competition to be widened later to cover a bigger share of the market.

Energy ministers have now turned their attention to finding a formula for opening up the gas supply sector.