Doris Leblond
OGJ Correspondent
PARIS, Feb. 21 -- Early findings of "serious problems" in a European Union inquiry of gas and electricity market liberalization have evoked warnings from Competition Commissioner Neelie Kroes and Energy Commissioner Andris Piebalgs.
At a conference last week they said they "will act decisively to remedy the serious malfunctions identified."
Kroes described what she called "a rather gloomy picture" and cited five problem areas:
-- Wholesale gas and power markets remain as concentrated as they were before liberalization began.
-- New suppliers find it difficult to enter the market and reach the final consumer because of unsatisfactory unbundling of infrastructure and supply.
-- There is no significant cross-border competition. New gas suppliers are unable to secure transit capacity on key pipelines because of a lack of interconnections.
-- Transparency is insufficient, so new market participants face a competitive disadvantage.
-- Wholesale prices are not determined on the basis of effective competition.
'Restrictive' practices
Stressing that market concentration is a core problem, Kroes said the commission would investigate further what she described as "restrictive business practices" and "abuses of dominant positions." She was particularly concerned about certain long-term contracts signed with industries such as steel and chemicals before liberalization.
Kroes included in "restrictive practices" the vertical integration of a number of historic operators from upstream to downstream functions. She said the practices restrict market entry, especially in final distribution.
She also pointed to still-restricted access to capacity on gas pipelines, storage, and gas and electricity interconnections.
Kroes made an issue of "the oil-gas price linkage" in many long-term contracts, which she said contributes to rising gas prices. It was not clear how major European suppliers such as Russia's OAO Gazprom and Algeria's Sonatrach might be induced to break the link.
Some of her views—particularly those on industrial concentration and vertical integration—were greeted doubtfully by Jean Syrota, president of France's Energy Regulatory Commission at a press conference Feb. 21. He said he believed concentration and integration favored investment.
He also pointed to a widening gap in France between government-regulated tariffs and market prices. Full market opening to individual consumers is not due before July 2007.
Transposing directives
At the EU conference last week, Piebalgs targeted without naming countries that either had not transposed the gas and electricity directives into law or had transposed them but applied them only partially.
He warned that by the end of March he would "launch a package of infringement procedures against members failing to comply with the letter and spirit of existing legislation," asserting that an approach based on 25 individual energy policies would not "deliver the common objective of the EU—secure, sustainable, and competitive energy."
