Plan to open half gas market within decade

Date: 03/04/1997

By Tim Jones

AFTER three months of shadow-boxing, talks aimed at opening half of the EU's natural gas market to competition will begin next week.

Government negotiators will gather on Monday (7 April) for their first round of bargaining over a compromise proposal from the Dutch EU presidency which goes further than most of them expected in freeing-up the market.

A seven-year-old draft directive from the European Commission would allow huge industrial customers using more than 25 million cubic metres (m3) of gas to shop around among suppliers.

But if the new Dutch text is agreed, all power generators in the Union and customers using more than 25 million m3 would have a choice from January 1999 - the anticipated start date for liberalisation. This threshold would be cut to 10 million m3 five years later and 1 million m3 after a decade. Governments would have to ensure that liberalisation affected 30&percent; of their national markets from the start, 40&percent; after five years and 50&percent; after ten. Not only does this go beyond the original Commission proposal, but it would also go further than the opening of the electricity market approved by member states last summer.

This has come as welcome news to the EU's 'liberal' camp, led by the UK and the Netherlands and including most of the Nordic states and, usually, Germany. But it has worried the French and Belgians, who rely on outside suppliers for their gas needs and are concerned that Gaz de France and Distrigas would be crushed by the onset of full competition.

The Dutch paper makes concessions to more protectionist governments by allowing them a choice of liberalisation model: a 'negotiated' system whereby producers, suppliers and customers negotiate the price of access to networks case-by-case; or a 'regulated' approach where transmission and distribution charges are published up front.

Although all member states would be required to give outside suppliers access to their pipelines, the text includes get-out clauses. Access could be refused because of poor gas quality or a “sudden crisis” in the host's national energy market.

An original Dutch proposal to force the burden of proof for refusing access on to the shoulders of the host country has been deleted. If disputes arose between negotiating parties, governments would have to designate a “competent authority, which must be independent of the parties”, to settle them within a 12-week deadline.

A major bugbear for the Commission has been the attempt by protectionist member states to allow their supplier firms to sign exclusive long-term contracts with producers. This would, the Commission fears, freeze the national market concerned for the length of the contracts, which can last up to 30 years.

The presidency's paper would outlaw such contracts, although some member states might be granted a “temporary” exemption from the normal rules of access by the Commission.