Ministers push to bridge rift in energy deal

Date: 07/12/1995

By Fiona McHugh

PRESSURE is mounting on member state governments, split over how far liberalisation of the electricity market should go, to reconcile their differences ahead of next week's meeting of EU energy ministers.

All eyes are trained on France and Germany to see whether French President Jacques Chirac and German Chancellor Helmut Kohl can break the six-year deadlock at their 'mini-summit' in Baden-Baden today (7 December).

But with Germany insisting France must extend liberalisation to distributors in addition to producers of electricity, and France unwilling to concede much ground on this issue for fear of aggravating strikes at home, agreement still looks far from certain.

Hopes for a compromise deal phasing in liberalisation in the distribution sector over several years are now receding as Paris adopts a more bullish stance in a bid to placate public sector demonstrators.

French energy workers joined transport and postal workers in an ongoing strike against welfare reform proposals which has brought Paris to a standstill and thrown the government into crisis.

Electricité de France (EdF), the state-owned monopoly which currently controls both the production and sale of electricity, has fiercely resisted plans to loosen its hold over the market, arguing liberalisation would lead to heavy job losses and patchy service.

With 120,000 people on its payroll and the second largest turnover in the Republic, EdF's influence over the government cannot be underestimated.

Its participation in the current wave of social unrest comes as a stern warning of the kind of havoc it would probably wreak if Paris were to bow to pressure from its EU partners at next week's Energy Council.

Members of the French parliament, taking that warning on board, adopted a resolution last week urging Chirac's government to block any attempts to liberalise the electricity sector.

“Domestically, things are very tense. It will be extremely difficult for us to move our position on distributors,” said one French diplomat.

Germany, for its part, has made it clear that unless distributors are included, there will be no deal at next week's meeting. “If they are not included, then there really is no point,” said a German diplomat.

A stream of industry captains have travelled to Brussels to press for liberalisation which they say would dramatically improve the competitiveness of their businesses.

“For the members of our association, energy accounts for, on average, about 20&percent; of production costs. Energy prices in Europe are between 30&percent; and 70&percent; higher than they are in the US because of high taxes and lack of competition in the sector,” said Yves Bobillier, President of Dow Chemical, who met Commission President Jacques Santer to discuss the issue.

Northern member states, led by Germany and the UK, are in favour of full liberalisation of the sector, while those from the south, led by France, want it limited, if not stopped.

Both sides will be under intense pressure to bridge the gap between them. Whether they will succeed or not remains an open question.

The European Commission has made the opening up of the 36-billion-ecu-a-year market by Christmas a priority. If that ambition is frustrated, it is likely to review its options.

Energy Commissioner Christos Papoutsis has already warned that if no progress is made, he will have to reconsider the whole approach taken during the past years and assess which other “strategies and instruments” might be applied to achieve a single market in electricity and natural gas.

Papoutsis did not say what those instruments might be, but many interpreted his remarks as a veiled threat to use powerful monopoly-busting powers, granted under Article 90 of the Treaty of Rome, if there is no agreement.