Energy firm wins EU rules exemption

Date: 17/06/1999

By Tim Jones

ACTING Energy Commissioner Christos Papoutsis has decided to give eastern Germany's biggest energy producer a four-year exemption from the full force of EU-wide electricity liberalisation, according to EU sources.

His ruling, which is due to be approved by all 20 European Commissioners next Wednesday (23 June), is intended to safeguard €7.7 billion of investment sunk into Vereinigte Energiewerke AG (VEAG) by western energy giants Bayernwerk, PreussenElektra, RWE Energie and EBH.

Under the terms of the EU liberalisation directive which entered into force in February, rival distributors or industrial customers consuming more than 100 gigawatts hours (GWh) of electricity per year cannot be refused access.

Papoutsis' decision to exempt VEAG means the new utility will be allowed to deny other companies access to the grid until 2003, although any refusal and the grounds for it will have to be notified to the Berlin-based national cartel office.

Papoutsis has opted to give VEAG temporary protection to preserve local industry since the company produces electricity via lignite rather than lower-cost gas. Twelve regional companies will be obliged to buy at least 70% of their supply from VEAG until full liberalisation kicks in four years from now.

The VEAG decision will be the Commission's first to allow exemptions since EU legislation requiring at least 23% of the electricity market to be opened to competition entered into force four months ago.

This allows huge industrial customers using more than 100 GWh to choose their supplier now, with the threshold decreasing to include 20-GWh users from next year and 9-GWh-users in 2003.

Papoutsis received requests from six other governments - Spain, the UK, France, Denmark, Austria and the Netherlands - for equivalent exemptions.

These include Madrid's highly controversial application to pay €6.2 billion - to be levied from customers - in compensation to power firms Iberdrola, Union Fenosa and Endesa in return for unprofitable investments to meet social needs.

The Acting Commissioner has ruled that these six applications should not be allowed under electricity market-opening laws. Instead, he will tell the governments involved that the requests should be refiled to the Commission's Directorate-General for competition (DGIV) for a decision under state aid rules.

Keyword: VEAG.