Italy strives to close gap in EU electricity talks

Date: 02/05/1996

By Fiona McHugh

ITALY, mustering all of its peace-keeping skills, is hoping to bridge the gap between Germany and France over the planned liberalisation of the EU electricity market before next week's crucial meeting of energy ministers.

But despite the progress made in recent weeks, few are placing bets on its chances of success.

“Maybe they have a 50-50 chance of making a deal - or maybe not,” said one French diplomat this week.

But undoubtedly, Italy's ability to pen countless versions of the same EU liberalisation plan, together with its steely determination to succeed where others have failed, is beginning to yield positive results.

“At last we are having a valuable discussion,” commented one evidently-pleased German negotiator.

For more than five years, member states have argued about how, and to what extent, the 136-billion-ecu a year market should be opened to competition. Now, at least, they agree on the first question.

Under Italy's latest plan, consumers who use a minimum of 40 gigawatt hours per year of electricity would be allowed to shop around for cheap deals immediately after the directive came into force.

The eligible customer ceiling would then be reduced over a nine-year period to eventually include those who use ten gigawatt hours per year or more.

The compromise allows governments to duck the delicate issue of whether distributors as well as producers of electricity should be included in the deal, a sticking point which has held up the talks for several months.

Bonn may now be willing to drop its demand to have the latter group officially included in the text on the grounds that a sufficiently low customer threshold would automatically spill over to distributors.

“If, for example, 40&percent; of a distributor's customers qualify, then the distributor will in effect gain access to 40&percent; of the market. The more eligible customers who are covered by the opening, the more distributors will be covered,” explained the German diplomat.

But that does not mean that the shouting is over. While those in favour of liberalisation are on the whole pleased with Italy's plan to open the market gradually, they are nevertheless concerned that the thresholds will be set too high.

France, for its part, rejects the notion of a gradual opening. Under the sway of the all-powerful electricity company, EDF, it insists that the EU should proceed cautiously, assessing the impact of the first liberalisation wave before going on to a second.

“We are against the automatic evolution of the market. We should introduce one step now, do a review in five years' time, and then perhaps propose a second step in a separate proposal,” said a French diplomat.

But he hinted that given sufficient concessions on other issues, Paris might be willing to concede ground on this question.

In any case, the definition of eligible customers proposed by Italy is still open to negotiation. The current proposed threshold was chosen on the basis of guesswork, as a number of member states have not yet worked out exactly what percentage of market opening such a definition would represent.

Germany is pushing for a final one gigawatt figure (representing a 40&percent; opening of its market) after five or six years. Under pressure from producers at home, it is unlikely to accept anything which falls too short of that demand.

Bonn, promising to press ahead with domestic liberalisation come what may, has already said publicly it would rather have no directive than a mediocre one, fearing a scenario under which Germany's huge domestic market would be opened to competition, while France, for instance, would still be able keep German companies out.

Italy has suggested a reciprocity clause to allay those fears, but the Commission has cast doubt on the legality of such an instrument.

Energy Commissioner Christos Papoutsis' threat to call in “higher powers” to settle the matter should ministers fail to do so seems to have jolted some of the more reluctant member states into action of late.

The threat was widely taken to mean the use of the dreaded Article 90 of the treaty, which allows the Commission to break up monopolies without the agreement of national governments.

But with the Intergovernmental Conference under way, and sensitivities about national sovereignty running high, the Commission is unlikely to resort to such measures for at least a year or two.

The liberalisation plan will, however, be passed on to Europe's leaders at their summit in June should energy ministers fail to deliver the goods when they meet next week.