EU countries disagree over unbundling issue

Nine EU countries, led by France, have sent a joint letter to the EC disputing the need for integrated energy operators to give up ownership of their transmission networks.

Aug. 9, 2007

2 min read

Doris Leblond
OGJ Correspondent

PARIS, Aug. 9 -- Nine European Union countries, led by France, have sent a joint letter to the European Commission disputing the need for integrated energy operators to give up ownership of their transmission networks, unbundling gas and electricity transportation from energy production and supply. The letter was made public by France's Minister for Ecology and Sustainable Development Jean-Louis Borloo, who also oversees energy matters.

Saying the unbundling process has not been proven effective, the nine countries—France, Germany, Austria, Bulgaria, Slovakia, Cyprus, Greece, Luxembourg, and Latvia—insist it "should remain optional and not compulsory." Unbundling, they say, "brings no automatic guarantee of low prices for consumers and of sufficient investments."

Indeed, in the Netherlands, Denmark, and the UK, where unbundling has been carried out, prices have soared and are the highest in Europe, note observers close to Borloo.

The nine countries agree that stronger and harmonized regulations in Europe constitute an "efficient" answer to current market dysfunctions.

However eight other EU countries—Denmark, Belgium, Spain, Finland, the Netherlands, Romania, the UK, and Sweden—sent their own letter to the Commission June 22 backing unbundling. To these eight should be added Portugal, which holds the current 6-month presidency of the EU and is an ardent defender of unbundling.

The Commission is to present in September a series of measures to bolster the liberalization of the electric power and gas markets. The gas market since July 1 officially has been fully opened, but an open market has not yet materialized.

Antitrust issues
Meanwhile the EU Commission is giving fresh momentum to its antitrust offensive. It has opened two investigations; one concerning France's electricity utility EdF and Belgium's Electrabel, which are suspected of signing long-term contracts with industrial clients to safeguard their domestic markets, and the other with Germany's gas operator E.On AG and France's Gaz de France, which are suspected of a secret agreement under which each party would avoid entering the domestic market of the other.

The Megal gas pipeline, a joint venture of the two companies, seems to be at the crux of this suspected agreement. Megal carries Russian gas between the German-Czech Republic and German-Austrian borders on the one hand and the German-French border on the other, the only one that carries Russian gas into France.

GDF has a 44% stake in the 1,077 km Megal pipeline, E.On has 51%, and Austria's OMV AG 5%. It was built in 1976. GDF has about 60% of the Megal capacity.