27 October Energy Council

Date: 30/10/1997

ENERGY ministers failed to secure agreement on the terms for opening up the EU's gas supply and distribution markets, with conflicting versions from participants afterwards on what progress was actually made towards a future deal.

FRENCH Secretary of State for industry Christian Pierret dug in his heels at the special session by denouncing the 28&percent; market-opening target set by the Luxembourg presidency as unacceptable. France has proposed a maximum 15&percent; opening of the market and now expects Luxembourg to come up with fresh proposals. Energy Commissioner Christos Papoutsis said he would not accept any market opening of less than 23&percent;, the level agreed at the end of last year for the first stage liberalisation of the electricity market.

DESPITE the obstacles still standing in the way of a deal, Luxembourg's Robert Goebbels held out the hope that ministers could reach agreement at their next meeting on 8 December. But he warned that he would not hesitate to force the matter through on a vote if necessary. Pierret countered by warning that France was prepared to fight its corner for as long as it took to get a satisfactory deal.

SOME progress was made on the contentious issue of 'take-or-pay' contracts - long-term agreements where gas suppliers agree to take large amounts of gas at a fixed price - according to Goebbels. He said that new contracts would be vetted by national authorities on a case-by-case basis, with the Commission having the power to overrule any decision. However, Pierret said the Commission would have to challenge national decisions through the laborious process of launching a complaint with the European Court of Justice.

ON ANOTHER side issue, that of whether power plants producing both heat and power (so-called cogeneration plants) could shop around for the cheapest gas supplies at the start of liberalisation, a compromise decision was reached. Large cogeneration plants would be able to shop around for the cheapest supplies at the earliest opportunity while small plants only serving one site and not the general grid would not.

THE question of whether offshore pipelines should be brought within the scope of a directive, allowing gas supply companies access to rivals' networks, was not resolved.

UK diplomats suggested that a compromise could be found whereby offshore pipelines would be covered by the measure, but the special circumstances of such pipelines would also be taken into account. This issue of access to offshore pipelines is being watched particular closely by gas producers such as the UK, Italy, and the Netherlands. Norway is also observing developments since it would have to take on board all the EU legislation on gas as part of its European Economic Area (EEA) agreement.

ISSUES which still have to be cleared up include the separation of accounts for production, distribution and other activities of companies which are spread across all the sectors and the basic question of when access to gas distribution networks could continue to be restricted.