Commission wants competitive energy market by early 2009

The European Commission is planning to set a deadline of January 2009 for creating a fully competitive EU energy market. A paper entitled ‘An Energy Policy for Europe’ discussed by commissioners’ energy advisers on Monday (18 December) says: "A coherent series of measures now needs to be taken with the objective, by January 2009, of creating a European gas and electricity grid and truly competitive Europe-wide energy market."

The document is the centrepiece of a package of more than ten papers setting out the Commission’s strategy for creating a competitive market, reducing greenhouse gas emission and dealing with climate change to be adopted in January. The main paper says that, despite the liberalisation of the sector, "meaningful competition does not exist in many member states". It says that the best way to create a market where consumers can choose their energy supplier and companies can operate anywhere in the EU is ownership-unbundling, by which energy firms are forced to sell off their transmission and distribution assets, because "it is the only solution that eliminates any disincentive to invest in the network and reduces significantly the need for intrusive regulation and competition policy".

But in response to warnings from Paris and Berlin that they would not accept unbundling, the Commission will refer to ownership unbundling only as one of a number of options including significantly strengthening the powers of national regulators and creating independent transmission system operators without ownership unbundling.

Although several commissioners, led by Competition Commissioner Neelie Kroes, favour forcing energy firms to sell off their transmission and distribution assets, Kroes is planning to use the powers she already has to break up energy companies if they are found guilty of abusing their market position to prevent competition in the energy sector. As the basis for deciding which firms to sanction, she will use the final results of an inquiry into competition in the energy sector, due in January, as well as information gathered from dawn raids at some of the biggest energy firms including E.ON, RWE and Vattenfall. One Commission official said: "It’s easier than trying to get governments to agree [to ownership unbundling]."

A draft version of a paper called ‘Prospects for the internal gas and electricity market’ calls for greater powers for improving the powers and independence of energy regulators, harmonising them "on the basis of the highest, not the lowest, common denominator". It says that they should be given control over third-party access to networks, access to gas storage, balancing mechanisms (ie, for managing the gap between anticipated and real demand), market surveillance of power exchanges, compliance with functional and account unbundling for distribution system operators, cross-border issues, consumer protection, including end-user price controls, information gathering and sanctions for non-compliance.

The Commission wants to boost the powers of the European energy regulators group, ERGEG, so that it can address cross-border competition issues like interconnection, technical standards and market access.

The Commission also strongly favours creating Independent System Operators which are responsible for the transmission and distribution infrastructure but are legally separate from generating firms. One model being held up for emulation is the case of Scotland where there are two power-generating companies but the transmission and distribution is run by the UK-wide National Grid.

The European Commission is planning to set a deadline of January 2009 for creating a fully competitive EU energy market. A paper entitled ‘An Energy Policy for Europe’ discussed by commissioners’ energy advisers on Monday (18 December) says: "A coherent series of measures now needs to be taken with the objective, by January 2009, of creating a European gas and electricity grid and truly competitive Europe-wide energy market."

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