8 December Energy Council

Date: 11/12/1997

MINISTERS reached an historic agreement on opening up their domestic gas markets to competition. The final package showed clear signs of a willingness to compromise on the speed and breadth of liberalisation in order to get reluctant countries, such as France, on board. Under the deal, ministers set a 20&percent; target for initial market opening, a percentage which France indicated ahead of the meeting would be acceptable as long as all its other worries were dealt with. Liberalisation will be broadened to 28&percent; of the market after five years and 33&percent; after ten years as smaller gas users become 'eligible' to shop around for cheaper supplies. Initially, power generators and industrial users consuming more than 25 million cubic metres of gas a year will be allowed to buy supplies where they are cheapest. This threshold will fall to 15 million cubic metres a year after five years and 5 million cubic metres after ten years. “We found a formula which covers all national particularities and sensitivities,” said Luxembourg Energy Minister Robert Goebbels.

FRENCH Energy Minister Christian Pierret described the deal as “a victory” since it answered Paris' demands that gas distribution be excluded from competition if it could be proved to fulfil a vital 'public service' function. Extra protection was also built in for so-called 'take-or- pay' contracts (long-term supply agreements signed between gas producers and distributors). These deals will be allowed to continue if ending them would cause severe disruption or if the gas could not be resold at a viable price. The European Commission will have the final say on which contracts are acceptable.

COUNTRIES which have undeveloped gas markets, such as Greece and Portugal, may ask for derogations from the liberalisation timetable. Regions can also ask for derogations if they have no gas infrastructure or if it has existed for less than ten years.

THE gas deal must be ratified by the European Parliament, which will be far from a formality. Some MEPs warned that they would torpedo the deal if they believed it was not ambitious enough.

POLITICAL agreement was reached on a two-year extension of the Altener programme to boost renewable energy. The budget for 1998 and 1999 has been fixed at 22 million ecu.

A one-year extension of the Synergy programme for international energy cooperation, which has been given a budget of 5 million ecu, was also approved.

ENERGY Commissioner Christos Papoutsis presented ministers with the Commission strategy to boost joint power and heat generation and a separate initiative to increase the contribution of renewables to energy generation to 12&percent; by 2010 from the current 6&percent;.