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EU agrees to diluted gas directive

Dec. 15, 1997

European Union energy ministers have agreed to open one-third of Europe's gas market to competition, in a compromise that falls far short of original plans for a single European gas market. A deal struck on Dec. 8 calls for opening EU members' markets in three phases over 10 years, following a second reading of the draft directive by the European Parliament and formal adoption of the directive in first half 1998.

European Union energy ministers have agreed to open one-third of Europe's gas market to competition, in a compromise that falls far short of original plans for a single European gas market.

A deal struck on Dec. 8 calls for opening EU members' markets in three phases over 10 years, following a second reading of the draft directive by the European Parliament and formal adoption of the directive in first half 1998.

The agreement has been cautiously welcomed by large industrial gas users-the main force behind the move to liberalization in Europe-but is seen as a victory for Europe's gas monopolists over U.K. and Scandinavian reformers.

Governments and gas suppliers in the Netherlands, France, and Germany are particularly keen to block access to their domestic gas distribution grids under a single gas market.

An earlier draft directive based on similar plans for a single European electricity market failed to gain a consensus. Last year, the EU had hoped for success with a redrafted directive incorporating the monopolists' concerns (OGJ, Dec. 9, 1996, p. 28).

New accord

The new agreement requires member states to open 20% of their gas markets to competitive supply at first. After 5 years, they must raise this to 28%, and after 10 years, to 33%.

Only customers with an annual gas consumption of more than 25 million cu m will initially be eligible to choose their supplier. This threshold will be reduced to 15 million cu m/year after 5 years and 5 million cu m/year after 10 years.

The EU energy council decided that all electricity producers, regardless of annual gas consumption, are also eligible for choice of gas supplier: "However, in order to safeguard the balance of their electricity market, member states may introduce a threshold, not exceeding the level decided for other industrial customers defined as eligible, for the eligibility of combined-heat-and-pow- er producers."

The EU gas supply market is estimated to be worth 100 billion ECUs/year ($90 billion/year). The EU said that the achievement of a common position is a decisive step towards establishment of an internal market for energy.