Energy giants’ control of markets risks US-style crisis, warns MEP

Date: 30/05/02

By Laurence Frost

DOMINATION of the EU energy market by a handful of giant power firms could risk a crisis similar to that seen in California last year when thousands of households were left without power, according to a leading MEP.

The warning from Claude Turmes, who drafted the Parliament's position on energy liberalisation, came as Spain abandoned hopes of a breakthrough deal on opening up markets to wider competition when ministers meet next Thursday (6 June).

It also comes against the background of a study from Germany's Oko Institute for Applied Ecology, which confirms that a handful of large power firms still dominate all EU markets except the UK and Scandinavia.

The trend is most marked in Germany, where mergers and acquisitions have seen the three biggest players, E.ON, RWE and EnBW, increase their combined market share from 40 to 60 in the five years to 2000 - well above the traditional 50 threshold used to determine market dominance.

In Portugal and Spain, concentration is falling slowly but remains high, with the three largest firms claiming over 65 of the market.

But the biggest concentrations exist in France, the Netherlands and Luxembourg, where French firm EdF controls almost 70 of the market - more than double the 33 limit for a single company recommended by anti-trust watchdogs.

'There is a tendency towards the creation of oligopolies,' warned Luxembourg MEP Turmes, a member of the Green/European Free Alliance group.

Unless action is taken, he said, the big players 'will be so dominant on the market that they will be able to act like cartels'.

California's 2001 energy crisis had shown that electricity was particularly vulnerable to price manipulations by generators and traders such as Enron, he added.

However, EU governments remain divided over whether flagship national monopolies need to be split up to ensure market-opening, with France and Germany holding out against pro-reform countries, which insist on full legal 'unbundling', or separation of generation and transmission businesses.

Unresolved differences on unbundling and other issues, such as the independence of national regulators, have forced Spain to drop plans for a political agreement on a final text next week - although officials have reported progress in recent weeks on technical aspects of liberalisation, including cross-border power transmission and charging.

Domination of the EU energy market by a handful of giant power firms could risk a crisis similar to that seen in California in 2001, when thousands of households were left without power, according to MEP Claude Turmes.