EC gas decontrol

The European Commission-the policy-making body of the 15-member European Union- remains unrelenting in its drive for natural gas deregulation.

The European Commission-the policy-making body of the 15-member European Union- remains unrelenting in its drive for natural gas deregulation.

It recently warned France and Luxembourg that it intends to sue them for failing to open their gas markets by the deadline last Aug. 10.

In August 1998, EC passed legislation requiring member nations to let consumers of more than 25 million cu m/year of gas, such as chemical firms and electric utilities, choose their gas suppliers.

The EC said that would lower overall energy prices and make European companies more competitive in world markets. The measure was expected to free 20% of the European Union's $75 billion/year gas market from former national gas distribution monopolies.

Only the UK, which represents a fourth of the European Union gas market, has fully deregulated its distribution. About 70% of the EU market is concentrated in four other nations: Germany, Italy, France, and Spain.

Their large gas distribution companies have asked for more time to coordinate decontrol measures with their large customers and the suppliers that would ship gas through their systems.

Warnings sent

The EC said France and Luxembourg have failed to pass legislation opening their internal markets to competition.

The two nations had informed EU that their governments had adopted draft decontrol legislation last year.

But the EC said their national parliaments have not passed the laws and "a further delay in the implementation of the directive in these two member states is thus inevitable."

It gave both nations only 2 more months to pass legislation effecting " swift implementation of the directive's provisions."

The EC noted that two other member states, Portugal and Germany, also have failed to implement the directive in time.

It said Portuguese authorities have told the EC implementation was imminent. and a response was expected soon from the German government.

Taxes urged

Natural gas is a keystone of the EC energy program.

In late November, the commission recommended its member nations increase taxes on energy to reduce carbon dioxide emissions and reduce an expected surge in demand for imported oil and other fossil fuels.

The EC adopted a Green Paper urging nations to pass energy taxes and take other measures to force "a genuine change in consumer behavior" toward energy sources with lesser environmental consequence.

Natural gas provides 22% of EU energy demand now. Oil provides 41%, coal and peat 16%, nuclear 15%, and renewable energy sources 6%.

The EC said electricity demand is expected to rise 2%/year through 2010, and most of the increase will be met with gas-fired generation. It eventually will rise to half of European power production, up from the current one third.

The green paper said European nations need to reduce their dependence on foreign energy sources, which currently meet about 50% of demand. It said if nothing is done, the EU nations could be 70% dependent on imported energy within 30 years.

More in Economics & Markets