Energy monopolies weighed in balance

Date: 17/04/1997

By Tim Jones

TALKS aimed at opening up the EU's gas market will receive added impetus in the coming weeks from a long-awaited judgement of the European Court of Justice.

At stake is the system of monopolies operated by Italy, France, Spain and the Netherlands for the import and export of gas and electricity - a regime considered by the European Commission to be contrary to the Treaty of Rome.

In the early Nineties, the Commission began its campaign for an internal market for energy with directives ensuring transparency of gas and electricity pricing for the final consumer, and obligations to transmit energy through their networks.

While pushing through legislation, the Commission also took legal action, claiming that the maintenance of import and export monopolies by the Netherlands, Italy and Spain for electricity and, in the case of France for electricity and gas, broke EU rules.

The Commission claimed that the granting of exclusive export rights in France, Italy and Spain violated Article 30 of the Treaty of Rome, which bans quantitative restrictions on imports, as well as Article 34, which concerns export restrictions.

Commission lawyers also said that these national laws contravened Article 37, which obliges member states to reform their “monopolies of a commercial character” so that they end discriminatory marketing or procurement practices.

Since the cases were brought before the Court, governments have reached an agreement on opening 23&percent; of the electricity market from January 1999, and talks are well under way on performing the same feat for the gas market.

When he gave his opinion on the cases in November last year, Advocate-General Georges Cosmos came up with a mixed bag for the parties involved.

In the case of the Netherlands, Cosmos called on the Court to reject the Commission's complaint and order it to pay costs.

Even though the Netherlands has a law restricting the importation of electricity intended for public distribution to a body called SEP, the Dutch claimed this did not amount to a treaty-violating monopoly. This is because final consumers of electricity could still import their own, but it had to be for their exclusive use. Moreover, Cosmos said that SEP did not behave as a commercial monopoly under the terms of Article 37.

In the case of Italy, however, the advocate-general found that it had failed to fulfil its treaty obligations under Articles 34 and 37 by maintaining exclusive rights for electricity exports. He said the same applied to France for its gas and electricity export monopolies. Cosmos accepted arguments from member states that import restrictions could sometimes be justified for monopolies undertaking “public service” obligations, but said this could not be extended to export curbs.

Although the advocate-general's opinion is not binding on the full Court, in most cases it is confirmed by the Luxembourg-based judges.