Europe’s energy markets. Monopoly? It all depends whose

The EU has one rule for big countries, another for small, claims Portugal

NATIONAL monopoly? Mais non, that's our national champion, quite a different thing. Such is the argument used for years by successive French governments to defend Electricite de France (EDF), their state-owned electricity outfit, against foreign intruders and Europe's antitrust meddlers. Today it is the Portuguese who wheel it out, to let their private-sector, yet all but monopoly electricity firm, Energias de Portugal (EDP), take control of state-owned Gs de Portugal. We need a group large enough to compete in next year's Iberian common market in energy, they say. But France is a big country, Portugal a small one, and the EU's competition watchdog - backed on December 9th by the EU Commission - has firmly growled “No”.

The Portuguese feel hard done by. In 2001, E.ON, Germany's biggest electricity company, and sizeable in gas too, wanted to get hold of Ruhrgas, master of nearly all the rest of that country's gas. Germany's anti-cartel office, its monopolies commission and its consumer-affairs ministry were all hostile. But the economics ministry wanted a national champion in energy (to be exact, a second one, since it already had RWE) and it had the last word. And the EU's competition watchdog? It found reasons in its rule-book to look firmly the other way. Germany too is a big country.

Yet, fair or unfair, the EU is right about EDP. In theory, next year Spain and Portugal will indeed start to become a single energy market. Not so in fact. Portugal allows competition already, and EDP - once state-owned, now 80% private - may truly believe in it: the firm has just raised $1.6 billion to buy control of HidroCantbrico, number four in Spanish electricity. But physical and other constraints mean that a real Iberian energy market may be years away. And such a market, as lvaro Barreto, Portugal's economy minister, said this week, is the “only” road to real competition in gas and electricity in his country.

Facing an EU ban - and a likely change of government at home - he has put the plan on hold. So will the EU now get a grip on larger monopolists? Don't count on it. It pussyfooted for years as the French, defying its directives, kept their energy market all but closed, while state-backed EDF ran around Europe buying up smaller companies, or stakes in them, in Britain, Germany and Italy. The EU has since prised the French market slightly open, but not for residential customers, and EDF still holds 90%. And the huge share issue that EDF now plans - up to 30% of its equity, raising up to €11 billion ($14.75 billion) - will do less than nothing to open up markets. EDF, still 70% in state hands, will just have more cash to defend its own turf while extending its hold on other people's.

Article suggests that the EU has one rule for big countries, another one for small ones in the European energy market.

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