Energy: Compromise reached on liberalisation of electricity and gas markets, November 2002

European consumers should be able to choose their electricity and gas suppliers from 2007 after energy ministers from the EU's Member States reached agreement on the liberalisation of the Union's electricity and gas markets at the Energy Council in Brussels on 25 November 2002.

The deal on the electricity and gas markets which has been in the pipeline for the last decade will allow European companies to choose their supplier from 1 January 2004 whilst household consumers will have to wait until 1 January 2007. The European Commission had been pushing for 2005 but Germany and France both strongly objected to this because of reservations about the impact of full liberalisation on state-owned companies.

The breakthrough at the Council is a real success for the Danish Presidency, which drafted the text of the compromise. At the European Council in Barcelona, the end of 2002 was set as a deadline for achieving an agreement on the liberalisation of the two markets and the issue has figured regularly on the Council's agenda but stiff opposition from Germany and France have held up progress.

In addition to the postponement of the opening of markets to residential consumers, the compromise includes a number of further measures necessary to secure French support. This includes the provision for a report to be prepared by the European Commission by 1 January 2006 that will assess the initial effects of liberalisation on system operators and allow for governments to request an exemption from the liberalisation process if the European Commission finds that access to the energy network of a member state has disproportionate effects on undertakings. It has been suggested that France views this as a way of delaying the 2007 deadline for extending the market liberalisation to consumers.

Under the compromise the activities of energy transmission and distribution will be legally separated in a proposal know as 'unbundling'. Again, this proposed measure received stiff opposition from France and Germany, who fear it will mean huge restructuring for firms such as Electricité de France and Eon, but they backed down after the majority of energy ministers from other EU countries argued in favour of 'legal unbundling' which will prevent companies controlling access to key infrastructure such as pipelines and transmission wires as well as using it to supply customers.

The agreement should bring to an end the row between Member States over the liberalisation of the energy markets and the frustration felt by many towards France who have resisted liberalisation of their domestic market enabling Electicité de France to take over a number of energy companies in the United Kingdom, Spin and Italy. The Financial Times have suggested that the French support of the latest compromise has been made possible because the issue is no longer as sensitive now that national elections have taken place.

The political agreement will be adopted as a Common Position after finalisation of the texts before the European Parliament discuss it at its second reading expected in the first few months of 2003.

Links:
Council of the European Union:
	25.11.02:	Press Release: Transport, Telecommunications and Energy Council, Brussels, 25 November 2002 [PRES/02/354]
European Commission:
	26.11.02:	Press Release: 'European energy market revolutionised', declares Loyola de Palacio [IP/02/1733]
	The Internal market for Electricity
	The Internal Market for Gas
BBC News Online:
	25.11.02:	Europe reaches deal on power choice
European Sources Online: Financial Times:
	25.11.02:	Deal brings EU energy liberalisation closer
European Sources Online: In Focus
	Barcelona European Council agrees compromise deal on the liberalisation of electricity and gas markets, March 2002
	Gas and electricity: mixed report on liberalisation, October 2002

Helen Bower
Compiled: Tuesday, 26 November 2002

EU enregy ministers reached agreement on the liberalisation of the Union's electricity and gas markets at the Energy Council in Brussels on 25 November 2002, paving the way for European companies to choose their supplier from 1 January 2004 followed by European residential consumers in 2007.