GdF seeks to head off unbundling plans

Gaz de France has launched a campaign against the European Commission’s bid to loosen energy companies’ control over transmission networks.

A paper from GdF sent to all commissioners, seen by European Voice, says that the Commission’s plans to force energy companies to sell off or give up control of transmission assets would weaken European companies’ ability to negotiate gas supplies from third countries such as Russia and lower investment in new infrastructure.

The Commission will publish proposals for improving competition on the EU’s energy markets next week (19 September). The proposals will say that energy firms with generating assets should sell off their transmission networks to allow fair access to new suppliers or give up control over transmission operators through a series of strict legal measures.

The GdF paper says that the Commission should take a different approach to the gas sector from electricity although the Commission argues that the two sectors should be treated the same. GdF, which will become Europe’s largest buyer and seller of gas through its planned merger with Suez, says that unlike electricity utilities, it does not have much generating capacity with 70% of its assets. It points out that it relies on imported gas and that Europe’s dependency on imports will rise to 80% in 2030. "European gas operators need to be strong enough to maintain their bargaining position in negotiations with producers outside Europe," it argues.

While the paper admits that there are problems in the EU’s internal gas market, it says these could be solved by more harmonisation and co-ordination rather than measures on ownership unbundling.

It rejects the Commission’s argument that ownership unbundling would lead to higher investment and lower prices. It says that in the UK unbundling has led to a "decreasing trend in investment over the last 20 years", with the average investment in transmission, distribution, storage and liquefied natural gas dropping to €800 million compared to €1,200m when generation and transmission were only split into separate legal entities.

Ownership unbundling would weaken European gas companies by depriving them of the "strong balance sheet" they need to take long-term commitments, the paper says. In turn, this would undermine operators’ ability to offer long-term price stability to energy-intensive industries such as steelmakers, increasing price volatility and uncertainty.

The paper says that "extreme" independent system operators (ISOs), which under the Commission’s second option would take over operational control of transmission networks, can have the same negative effects as ownership unbundling. "In extreme ISO models, financial consolidation of transmission networks’ assets won’t be possible any more," it says, adding that transmission operators would not be able to defend their position in tariff discussions with national regulators.

GdF claims that existing legal unbundling provisions, introduced by the latest energy liberalisation package, have achieved "positive results" with no complaints about access to the transmission network and user ratings close to those achieved by fully unbundled companies.

While it says that it agrees with common rules on the independence of transmission operators, it suggests as an alternative increased regional co-operation among transmission system operators and setting up a regional system operator to be responsible for standardisation of technical rules and co-ordination of pipeline projects.

The French government is expected to back GdF’s position. In a letter sent in July to Andris Piebalgs, the commissioner in charge of energy, French Ecology Minister Jean-Louis Borloo used arguments similar to GdF’s. "Full ownership unbundling would probably not be able to deliver the necessary positive effects on competitivity, security and sustainability of energy supply," the letter, which was co-signed by energy ministers from Germany and seven other EU countries, says. The letter adds that countries with ownership unbundling do not have the "most appropriate levels of investment".

Luxembourg Green MEP Claude Turmes urged the Commission to take a single approach to gas and electricity and to defend its proposed rules on independent system operators.

Gaz de France has launched a campaign against the European Commission’s bid to loosen energy companies’ control over transmission networks.