Anger over French and Spanish approach to power liberalisation

Date: 18/03/1999

By Peter Chapman

Sparks are flying across the EU as France and Spain come under attack for the way they are legislating to comply with new Union rules governing the liberalisation of electricity markets.

The tension comes as member states begin to implement the liberalisation package which entered into force on 19 February.

Dutch Economic Affairs Minister Annemarie Jorritsma has asked the European Commission to investigate France's electricity law which, she claims, only allows big customers to change their supplier once every three years.

She claims the legislation, which was adopted by the French national assembly last week, runs counter to the new EU regime which allows the biggest consumers of power to shop around for the supplier which offers the best price.

Meanwhile, Spain is coming under Acting Competition Commissioner Karel van Miert's scrutiny over its plans to compensate domestic electricity companies affected by liberalisation.

Spanish Industry Minister Josep Pique travelled to Brussels last week to defend Madrid's h6-billion bid to support its firms, which Van Miert's officials fear could fall foul of Union state aid rules.

The Spanish move is designed to help suppliers make up for the 'stranded costs': investments sunk into capacity which will never be recouped once markets are liberalised and prices begin to plummet.

Pique told Van Miert that the Spanish market was one of the first to be opened to competition, pointing out that 43&percent; of corporate consumers would be free to switch suppliers from October.

The move towards open markets has also heightened sensitivities over EU anti-trust cases in the electricity sector.

The Commission recently cleared the sale of the UK's London Electricity to France's power giant Electricité de France (EdF). But the UK is lobbying for Commission support to ensure that British suppliers have fair access to the French market via the cross-Channel power interconnector which has allowed EDF to supply up to 6&percent; of the British electricity market. This requirement would have featured in a UK ruling on the London Electricity/EdF deal if the Commission had not insisted on taking the lead role in investigating the sale.

The new EU rules which entered into force last month call for the scope of competition to be gradually widened between now and 2003, when at least 35&percent; of the market is meant to be liberalised.

Greece and Ireland have been given the right to delay market opening by up to two years. But Belgium, which had been granted a 12-month reprieve, last week announced plans to open its markets earlier.

In doing so, the Belgian government yielded to pressure from its domestic supplier Electrabel, which feared that it would be barred from entering neighbouring countries' markets until Belgium matched their liberalisation efforts.