Energy liberalisation faces delays

EU governments could delay tough decisions on further liberalisation of the energy sector until June in a bid to stop the French government blocking progress ahead of presidential and national elections.

Energy ministers meeting today (15 February) will try to agree crucial parts of the energy strategy paper presented by the European Commission in January.

One of the most controversial issues is the approach to ensuring free competition on energy markets. The Commission proposed two options: ownership ‘unbundling’ (where energy companies with generating capacity who own transmission and distribution networks are forced to sell off those parts of their business) and an independent systems operator (ISO) where the network operator has to be free from any management or commercial interference if it is owned by power generating companies. The Commission said clearly that ownership unbundling was the "preferred option" to prevent generators shutting new entrants out of the supply market by abusing their control over the transmission networks.

But the debate has pitted France against the UK. Britain, which has fully unbundled its energy market, believes that at the very least other countries should adopt the "ISO plus" model, ie with tough extra regulation to ensure fair competition. But the French Energy Minister François Loos is opposed to ownership unbundling and is arguing for "regulated unbundling" where the electricity grid operator is regulated by an independent agency, while the network is still owned by French electricity giant EdF.

But other countries like the UK where power generators no longer own the transmission grids are warning that the French approach could maintain the status quo and allow French and German energy giants to keep their stranglehold on national markets.

One possible scenario emerging is that EU leaders would not take a decision on which options to keep at the 8-9 March EU summit. Instead, the Commission would have to provide more technical detail on how each of the options would work in practice in time for a decision at a meeting of energy ministers in June. This would be after both rounds of the French presidential election in May and June, in which the issue of energy market liberalisation could play a major role.

But British officials warned against failing to agree new measures at the March summit. "We think the European Council should give a clear mandate to the Commission to take forward the work to improve fair and open access to the energy market," said one official.

A Commission official said that there was no need for further work on measures to improve competitiveness in the energy sector as the Commission had already carried out such an analysis and presented its recommendations in the January paper. The official said that in any case the Commission had not been planning to present draft legislative proposals until after the meeting of energy ministers in June.

EU governments could delay tough decisions on further liberalisation of the energy sector until June in a bid to stop the French government blocking progress ahead of presidential and national elections.