Author (Person) | Jones, Tim |
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Series Title | European Voice |
Series Details | Vol 6, No.18, 4.5.00, p16 |
Publication Date | 04/05/2000 |
Content Type | News |
Date: 04/05/2000 By IT IS a law of economic nature that incumbents will try anything usually short of outright law-breaking to protect their patch. Unfortunately for Europe's big national gas suppliers, the officials policing the opening up of a fifth of the market in August have seen it all before. Attempts to constrain 'third-party access' to national grids, keep pricing systems opaque or lock local distributors into generation-long supply deals were all tried in the run-up to last year's liberalisation of the electricity market. Then, Competition Commissioner Karel van Miert locked horns in a high-profile battle with his own supplier Electrabel over its attempts to tie distributors into 40-year contracts. It is an open question, say national and Commission officials watching his more emollient successor Mario Monti and energy chief Loyola de Palacio, whether these more politically cautious Commissioners will be prepared to do the same with the gas giants. For sceptics, the litmus test will be how they deal with the agreement between the gas sector and industrial customers in Germany, and especially the way access to the grid is provided for external suppliers. The European Federation of Energy Traders has written to the German government claiming that the current draft proposal "will serve to prolong the incumbents' position in their home markets rather than open these markets to competition". In particular, tariffs based on transactions rather than pre-published schedules have infuriated EFET. "It seems incomprehensible that the gas industry is proposing to agree to a charging mechanism that has already been abandoned by the electricity industry and specifically criticised by the European Commission," states its letter. Under De Palacio's predecessor, Christos Papoutsis, the Commission was reluctant to use all the policing powers at its disposal. "The gas deal was such a fragile compromise that there was sometimes a reticence to push our luck," says a former aide. But Commission officials point to their success in unravelling a potentially anti-competitive long-term gas supply agreement between Spanish energy firm Endesa and incumbent supplier Gas Natural. Ensuring competition in Spain was vital to regulators since the country is almost totally dependent on imports, with 98% of demand met from Algeria, Norway and Libya. Although BP Amoco is poised to sell directly into the Spanish market from its In Salah project in Algeria, Gas Natural, which controls 90% of the market, has been slow to sign deals giving third-party access to its distribution network. Nevertheless, Endesa and Gas Natural modified the terms of their supply agreement to allay the Commission's concerns. "The inquiry was dropped but the moral pressure and persistence paid off," says an official. From August, the EU's natural gas markets must be opened by 20%, rising to at least a third after ten years, but future liberalisation is likely eventually be along the lines of the British model. There, according to industry regulator OFGEM, competition is so well-established that "households treat it just like supermarket shopping". Full competition in gas supply was introduced in May 1998. The impact on the utilities industry has been profound and ferocious. British Gas' marketing arm almost sank under the combined pressure of competition and being forced to pay up for old and over-priced contracts. Utilities firms are using their customer lists to sell anything they can. Water company Severn Trent announced last week that it will soon begin providing gas. The next step is the ending of price controls on household retail gas prices next year. Commission officials believe that liberalisation of the gas industry will follow the pattern set by the telecoms sector, where legislation kicked off the process but was soon overtaken by market developments. Only now are member states committing themselves to opening up access to the crown jewels - the local loop. "The same will happen with gas," predicts one official. "It will be like pulling a brick with an elastic band; you pull and pull and nothing happens, and then it suddenly hits you on your head." Article forms part of a survey 'Industrial liberalisation'. |
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Subject Categories | Energy |
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