27 May Energy Council

Date: 05/06/1997

ENERGY ministers focused their discussions on liberalisation of the European market for natural gas, but were unable to reach any conclusions, largely because they were awaiting the outcome of last weekend's second round of the French legislative elections. The debate centred on three major outstanding issues in the negotiations: how to open national markets, how to deal with 'take or pay' contracts between gas producers and suppliers, and whether to give emergent markets exemptions from the normal liberalisation rules.

GOVERNMENTS demonstrated clear support for an approach to market opening which would classify power generators and large industries with a minimum consumption level as 'eligible customers'. Member states would then be given the chance to limit market opening once a specified level had been exceeded. This was merely a political commitment to do what ministers' officials had already agreed.

They were not able to go further and set the minimum threshold levels for eligible customers, nor agree the exemptions for types of industry or distribution companies.

DUTCH Economic Affairs Minister Hans Wijers, who chaired the meeting, claimed his colleagues had shown strong support for a liberalised market which allowed for the continuation of certain 'take or pay' contracts. These arrangements set the volume of gas which producers deliver to supply firms for up to three decades at fixed prices. The Dutch and 'liberal' member states are keen to eliminate long-term take or pay contracts in the future, amid fears that they would stifle the market. After the meeting, Wijers said that ministers had approved a regime for future contracts characterised by transparency, strictly defined criteria and policing by independent regulators.

AMBASSADORS will now hold further discussions to try to reach the basis of a political agreement under the Dutch presidency. The Hague will decide within the coming weeks whether or not to convene an extra energy ministers' meeting for 24 June.

MINISTERS came to a vague agreement on the use of renewable energy sources. They reaffirmed that the development of renewable sources of energy was an important part of the energy sector's contribution to sustainable economic growth, the security of energy supply, successful European competition in the global market-place, employment creation and the strengthening of economic and social cohesion. Ministers agreed that they should set indicative targets for the share of renewable sources as a proportion of total energy use in the medium to long term, saying that governments would aim to double the overall share of renewables in the Union by 2010.

A FIRST exchange of views on proposals for a decision on a multi-annual programme for the promotion of renewable energy sources, known as Altener II, revealed broad support for the plan. The original Altener scheme is due to expire at the end of this year and the new programme would run from 1998 to 2002 with a budget of 30 million ecu for the first two years. All delegations were in favour of an extension of the project, but some questioned its duration as well as the size of the budget.