15.3.93 OfficialJournaloftheEuropeanCommunities NoC73/31
Opinionon:
—theproposalforaCouncilDirectiveconcerningcommonrulesfortheinternalmarketin
electricity,and
—theproposalforaCouncilDirectiveconcerningcommonrulesfortheinternalmarketin
naturalgas(1)
(93/C73/10)
On6March1992theCouncildecidedtoconsulttheEconomicandSocialCommittee,under
Articles57(2)and100aoftheTreatyestablishingtheEuropeanEconomicCommunity,on
theabovementioned proposals.
TheSectionforEnergy,NuclearQuestionsandResearch,whichwasresponsibleforpreparing
theCommittee'sworkonthesubject,adopteditsOpinionon12January1993.The
RapporteurwasMrGafoFernandez.
Atits302ndPlenarySession(meetingof27January1993),theEconomicandSocial
CommitteeadoptedthefollowingOpinionby87votesto17with32abstentions.
1.Background
1.1.Theinternalenergymarket:TheCommission's
approach
1.1.1.InMay1988theCommissionapprovedits
WorkingDocumentontheInternalEnergyMarket
[doc.COM(88)238final]inwhichitdescribedthe
internalenergymarketasanessentialpartofthelarge
internalmarketplannedfor1992;amongothercon­
siderations,itnotedthat,unlessthepricesandavail­
abilityofthevariousenergysourceswerecomparable
inalltheregionsoftheCommunitytheinternalmarket
couldnotberegardedascomplete,sinceenergy—and
theproduction,transmissionanddistributionthereof—
areafactorofproductionandhencealsoafactorcost
inalleconomicactivity.
1.1.2.Inthesamedocumentitdiscussedthelackof
intra-Community tradeingasandelectricitywhichis
waybelowthetheoreticaleconomiclimitssetbyphysi­
calandeconomicconstraints;thisseemedtopointto
theexistenceofaseriesoflimitingfactors.
1.1.3.Thisdocumentmentionedthreemajorgroups
ofobstaclesimpedingcompletionoftheinternalmarket
ingasandelectricity.Insummarytheseare:
1.1.3.1.Exclusiverights(import,production,distri­
bution)coveringthewholeorparticularpartsofthe
gasandelectricitysectors.
1.1.3.2.Limitedinterconnection capacitybetween
MemberStates,placingphysicallimitsonpotential
trade.
1.1.3.3.Lackofknowledgeofthearrangementsfor
settingtariffsineachcountryandofthepricesactually
paidbyconsumers.1.2.Theinternalenergymarket:ESCOpinions
1.2.1.TheEconomicandSocialCommitteehas
alreadyhadanopportunitytobroachthesesubjectson
severaloccasions.MorespecificallyinitsOpinionsof
31January1990(2)theCommitteegaveitsviewson
theDirectivesconcerningthetransparencyofelectricity
andgaspricesandthetransitofnaturalgasandelec­
tricitythroughthemajorsystems.
TheseOpinionsmaybesummarizedasfollows:
1.2.2.TheCommitteewelcomedtheseDirectives
aimedatachievinganinternalmarketinelectricityand
gas.
1.2.3.TheCommitteecalledfortheCommission
tocarryoutadetailedstudyofalltheimplications,
advantagesandcostswhichwouldresultfromthe
introduction,albeitlimited,oftheconceptof'common
carriage';thisstudyshouldbebased,inparticular,on
thetechnicalrequirementsoftheseenergysources.
1.2.4.TheCommitteestressedtheneedforaparticu­
larlydetailedstudyoftheimplicationsforlong-term
securityofsupplyand,inthespecificcaseofnatural
gas,thepotentialweakeningoftheCommunity'snego­
tiatingpositionwithregardtopurchasesfromnon-EC
produceroligopolies.
1.2.5.TheCommitteesupportedtheinclusionofa
certaintransparencywithregardtocostscomparable
tothatproposedforgasandelectricitypricesand
tariffs.
1.2.6.TheCommitteerecommended thattheCom­
missiontakeextremecareinpreparingthesesuccessive
stagesfortheattainmentofaninternalmarketinelec­
tricityandgas.
(!)OJNoC65,14.3.1992,p.4-14. (2)OJNoC75,26.3.1990,p.18,20and30.

NoC73/32 OfficialJournaloftheEuropeanCommunities 15.3.93
1.3.Somebasicconsiderations withabearingonthe
newDirectivessystemmustcontainsubstantialreservecapacityfor
useonlyatpeakperiods.
1.3.7.ThedifficultyinestablishinguniformCom­
munitycriteriafordividingtheunitcostofelectricity
andgasproductionanddistributionbetweenthetariffs
appliedtothevariouscategoriesofusers,withdue
regardforthevolumepurchased,thestabilityandconti­
nuityofdemandortheparticularconditionsunder
whichtheproductissuppliedorservicerendered.1.3.1.Besidesthemainconclusionsoftheabove­
mentionedOpinions,thereareotherbasicpointswhich
needtobebroughtoutwhenitcomestoassessingthe
implicationsoftheproposedcreationofaninternal
energymarket.TheCommitteebelievesthatthesuccess
ofthismajorCommunityprojectwilllargelydepend
onacorrectgraspofthesefactorsandhowtheytiein
witheachother.
1.3.8.Technicalspecificationswhichdifferfromone
countrytoanotherorareinsufficientlyharmonizedat
Communitylevel.1.3.2.Consequently ,theCommitteethinksitnecess­
arytolistthemnowinthisintroductorypartofthe
Opinionsothattheycanserveasareferenceframework
beforethemainbodyoftheOpinionitself,where
thepracticalimplementation ofthesemeasureswillbe
analyzedinthegeneralandspecificcomments.The
factorsinquestionare:1.3.9.Theimplicationsfortheobjectivesofefficient
energyuseandfortheCommunity'senvironmental
objectives,restatedinboththeSingleEuropeanAct
andtheMaastrichtTreaty.
1.3.3.Thestrategicnatureofenergy,i.e.theabsolute
necessityforregularandorderlysuppliesasthebasis
ofeconomicandsocialactivity.Thedescriptionof
energyas'strategic'appliestoboththesupplyofpri­
maryenergyandtothequalityandguaranteeofservices
tothefinalconsumer .1.3.10.Theheterogeneousinstitutionalorganization
ofthesector,withpublicandprivateenterprises,inte­
gratedorsectoralenterprises,nationalorregional
enterprises.Thisgivesrisetodifferenceswhichhaveto
betakenintoaccountbeforeanhomogeneousCom­
munitymodelcanbedrawnup. 1.3.4.Themajorimpactofthesemeasuresonsome
sectorswheredevelopmentshavebeenslowtotake
root,suchaselectricityandnaturalgas.Thesesectors
havebeenbuiltupoverseveraldecadesonthebasisof
territorialmonopoliesintheformofStateconcessions
andthedevelopment,inmanycases,ofverticallyinte­
gratedenergygeneration,transmissionanddistribution
operations.ThishasledtoincreasingStateintervention
whichhasfrequentlytakentheformofprice-setting
(tariffs),inadditiontomandatorypriorauthorization
fortheconstructionofnewpowerstationsortransport
anddistributiongrids.1.3.11.InthisconnectiontheCommitteewould
pointoutthatalargemajorityoftradeunionand
consumerorganizationshaveexpressedpartialortotal
oppositiontotheCommissionproposalsastheystand
atpresent;onlythelargeindustrialenergyusershave
welcomedthem.
1.3.12.TheCommitteewouldmentionthat,in
responsetoaninvitationfromtheBritishGovernment,
theEnergySectionheldapublichearingwithrepresen­
tativesofalltheenergysectorsinvolvedinthepresent
liberalizationprocessintheUnitedKingdom.Thishear­
inghighlightedthetopicalityoftheissueaswellasthe
existenceofdifferingandinconclusiveopinionsasto
theprosandconsofalarge-scaleliberalizationpro­
grammebasedonamodelsimilarinsomerespectsto
thatproposedbytheCommission .1.3.5.Thelongleadtimeandsignificantfinancing
neededfortheentryintoserviceofinvestmentsin
energyproduction,transmissionanddistribution.To
quotebutoneexample,productioncostsin1992inthe
electricityandgassectorsaretheresultofinvestment
decisionstakenin1990,1985andeven1980attimes
whenconstructionandfinancingconditionswerenot
—andarestillnot—sufficientlyaligned.Thishasintro­
ducedcostdifferentialswhicharebeyondthepowerof
individualfirmstochangeeveniftheywanttoand
whichverypossiblydistorttheorderlycompetition
soughtbytheECCommission . 1.3.13.AgainstthisbackgroundtheCommitteecon­
sidersthatthepurposeofaninternalmarketinelec­
tricityandgasisnottosharpencompetitionforitsown
sake,buttoensurethatenergyavailabilityandprices
arecomparablethroughouttheCommunityandforthe
samecategoriesofconsumers,andthatahighlevelof
securityandqualityofsupplyismaintainedinkeeping
withuserdemands.1.3.6.Theirregulardemandforelectricityandgas
(seasonalanddailypeaks),togetherwithlimitedstorage
capacity(naturalgas)orphysicalimpossibilityofstor­
age(electricity).Thismeansthatproductionhastobe
preciselymatchedtodemandatalltimesandthatthe

15.3.93 OfficialJournaloftheEuropeanCommunities NoC73/33
andtoaltertheDraftDirectivesonthebasisofthe
followingproposalsandrecommendations .
2.1.2.TheCommitteeisawarethatthesupplyof
bothelectricityandgas,besidestheactualtransmission
ofthephysicalproduct,istiedupwiththeconceptof
providingapublicservice.1.3.14.Inviewoftheongoingpublicdebateonthe
DraftDirectives[especiallytheoneonThirdParty
Access(TPA)],therisksforthesecurityofsupplyin
theCommunityandthefactthatatleastinthemedium
termitisinevitablethatprogresswillbemade,the
Committeerecommends totheCommission and
Councilthat:
—thefinalizationoftheDirectivesbedeferreduntilit
ispossibletomakeaproperassessmentofthe
experienceacquiredintheliberalizationpro­
grammesintheenergysector;
—suchadecisionwouldprovideamuchbetterbasis
forassessingthethinkingbehindtheDirectives.
TheCommitteeassumesthatitsmanysuggestionswill
alsobetakenintoaccountiftheDirectivesarerevised.2.1.3.TheCommitteebelievesthatthishinders,but
doesnotpreventthefreemovementoftheseproducts
andthattheyshouldnotthereforebeexcludedfrom
thefreemovementofgoodsprovidedforunderthe
Treaties,althoughitcallsfortheadoptionofadequate
safeguardsbasedontheirspecificcharacteristics .
2.1.4.Inparticular,theCommitteewishestoexpress
itsoppositiontotheplananddeadlinesfortheintroduc­
tionoftheTPAsystemasproposedintheseDirectives.
2.1.5.TheCommitteefindsthattoolittleattention
isgiventocertainotheraspects:securityofsupply(as
regardsbothprimarysourcesandtheguaranteeand
qualityofservicetotheconsumer),insufficientcapacity
ofthetrans-European electricitynetworkstoachieve
theobjectivessetintheDirectives,orthedifficultyof
makingprogressontheinternalmarketwithouttrying
toimprovethecoordinationandalignmentofMember
Stateenergypolicies.1.4.ThestrategyoftheECCommission
1.4.1.ToachievetheobjectivessetoutinitsWork­
ingDocumentontheInternalEnergyMarket,themain
pointsofwhichhavealreadybeenmentionedinthis
Opinion,theCommissionmapsoutthreestages:the
first,alreadyapprovedandintheprocessofimplemen­
tation,entailedapprovaloftheDirectivesonprice
transparency(*),thetransitofelectricityandthetransit
ofgas(2).
1.4.2.Thesecondstage,whichisthesubjectofthis
Opinion,concernstheeliminationofexclusiverights
intheareasofproduction,transmissionanddistri­
bution,thekeepingofseparateaccountsfortheactivi­
tiesofverticallyintegratedenterprisesandthelimited
introductionofTPAforgroupsoflargeconsumerson
thebasisofobjectivecriteria.
1.4.3.Inthelightoftheexperienceacquiredduring
thissecondstagetheCommissionintends,from1996,
toextendthirdpartyaccessconsiderablybyintroducing
neweligibilitycriteria.2.1.6.ThisdoesnotpreventtheCommitteefrom
findinginthepresentproposalspositiveelementswhich
areacceptabletoallparties,theapprovaland
implementation ofwhichcouldfacilitatethesearchfor
alternativesolutions.
2.Generalcomments2.1.7.Specifically,theCommitteeapprovesthe
introductionof'commercialcriteria'asafutureguide­
lineforthesesectors.Italsoapprovestheliberalization
introducedinthegenerationstageandthegradual
deregulationofthetransmissionanddistribution
stages.Itwould,nevertheless,callattentiontothe
necessarylinkswhichthesenewguidelinesneedto
maintainwiththe'publicinterestobligations'ofthese
sectors,andinparticularsecurityofsupply.2.1.Assessmentoftheproposals
2.1.1.TheCommitteesupportstheCommissionpro­
posalsincertainrespectsonly.Whileendorsingtheir
ultimateobjective,ithasseriousreservationsabout
someaspectsofthem.ItwouldthereforeasktheCom­
missiontogivefurtherconsiderationtotheseaspects,2.1.8.Finally,theCommitteethinksthatbecause
thesetwoenergysourcesarenaturalcompetitors
(besidesbeingaprimaryenergysource,naturalgas
isaninputintheproductionofelectricity),thetwo
Directivesshouldbeapprovedandimplemented in
parallel,asprovidedforintheCommission'sproposals,
withduerespectfortheindividualcharacteristics of
eachsector.HOJNoL185,17.7.1990,p.16.
(2)OJNoL313,13.11.1990,p.30;OJNoL147,12.6.1991,
p.37.

NoC73/34 OfficialJournaloftheEuropeanCommunities 15.3.93
2.2.Securityofsupplyandqualityandguaranteeof
servicethecapacityofhighvoltagetransmissionlinesandgas
mainswhichwouldpermitanincreaseintheregular
flowoftheseproducts,onplansforfutureexpansion,
andonthecapacityneeded,intheCommission'sview,
tofacilitatetheconstructionoftheinternalmarketin
thesesectorsandincreaseoverallsecurityofsupply.In
thisconnectiontherecentCommunication fromthe
CommissiontotheCouncilonelectricityandnatural
gastransmissioninfrastructures intheCommunity(*),
pursuanttoRegulation (EEC)No1056/72,contains
onlypartialandincompletefigures,largelyduetothe
failureoftheMemberStatestosupplysuchdata.2.2.1.TheCommitteerecognizesthatavitalelement
inthedevelopmentoftheinternalenergymarketisthe
needtoguaranteeoptimalsuppliesofelectricityand
gastoCommunitycitizens,andtoestablishthenecess­
arybasesfordevelopmentandprogressineachofthe
MemberStates,theleast-developed regionsinpar­
ticular.
2.3.2.ThesubmissionbytheCommissioninFebrua­
ry1992ofthreeDraftRegulationsonDeclarationsof
EuropeanInteresttofacilitatetheestablishmentof
trans-European networksintheelectricityandnatural
gasdomaininparticular(2)hasrecentlyprovidedthe
Committeewithanopportunitytocommentonthis
topic(3).Anassessmentoftheproposals,however,rais­
esreasonabledoubtsastotheirabilitytostimulatethe
constructionofnewnetworks.2.2.2.Securityofsupplyisnotseriouslyaddressed
intheproposedDirectives.Itisnotincludedinthelist
ofdefinitionsinArticle2andtheonlyreferenceoccurs
inArticle16(2)oftheelectricityandArticle14(2)of
thegasDirectivewhereitisstatedthatthe'Member
Statesmaylayupondistributioncompaniesanobli­
gationtosupplythecustomerslocatedinagivenarea'.
ThisisagravedefectintheseDirectives;itmustbe
clearlystatedthatsuchsecurityofsupplyisprimarily
theresponsibilityofthedistributorsofnaturalgasand
electricityandthatthisresponsibilitymustbeunder­
pinnedbyproperinstitutionalarrangements ineach
MemberState,inaccordancewiththeprincipleof
subsidiarity .
2.2.3.Accordingtotheprincipleofsubsidiaritythis
securityofsupplyshouldbeguaranteedbytheStates
themselves,combinedwiththenecessaryCommunity­
levelcoordination .2.3.3.Withoutincreasedinterconnection capacity
betweentheMemberStates(apartfromwhatisneeded
toensuresecurityofsupply),thepossibilitiesforactu­
allyapplyingtheDirectivesunderconsideration are
moretheoreticalthanrealandwouldbelimited,
dependingineachcaseontheorganizationalarrange­
ments,tothirdpartyaccesstothedomesticnetworks
ofeachMemberState;inpractice,however,suchTPA
couldnotapplytoconsumersandproducersintwoor
moreMemberStates.Thisshouldbesetagainstthe
shorttimeallowedforintroducingthissecondstage
andthedevelopmentoftheplannedsystemtowards
thethirdstage.2.2.4.Thissecurityofsupplyshouldbeunderstood
toapplytoboththeregularsupplyofprimaryenergy
andthequalityandguaranteeofsuppliestotheindivid­
ualfinalconsumer.
2.4.Organizational arrangementsintheelectricityand
gassectorsineachoftheMemberStates2.2.5.Hencethereisaneedtofindabalancebetween
thefreeplayofmarketforcesandsecurityofsupply,
avoidingtheadoptionofdecisionsbasedexclusivelyon
economicandfinancialconsiderations .
2.4.1.Nolessimportantistheanalysisoftheorgan­
izationalarrangementsintheelectricityandgassectors
ineachoftheMemberStates.TheCommitteehas
justifiabledoubtsastowhethertheDirectives'objec­
tivescanbeachievedwithoutimprovedcoordination
ofthesesystems.SinceArticle222oftheEECTreaty
authorizesdifferencesinorganizational arrangements ,
theCommitteewonderswhetherthemeasuresprovided
forintheDirectivesoughttobereconsidered .2.2.6.Inthisconnection,the'publicservice'obli­
gationsofthesesectorscannotbeoverlooked .Itis
thereforenecessarytotrytofindabalancebetween
keenercompetition ,decisionsbasedoncommercialcri­
teria,andthesepublicserviceobligations.Suchabal­
ancecanonlybeachievedthroughajudiciousand
orderlyprocess,withthegradualimplementation of
measuresandsufficientflexibilitytoadjustthese
measurestotheultimateobjectives.
2.4.2.TheCommitteewouldpointoutthatinmany
instancesthedevelopmentoftheelectricityandgas
2.3.Trans-European electricityandgasnetworks
2.3.1.TheCommitteewishestovoiceitsconcern
overthelackofsufficientlycomplete,reliabledataonHSEC(92)553final.
(2)OJNoC71,20.3.1992.
(3)OJNoC287,4.11.1992,p.12.

15.3.93 OfficialJournaloftheEuropeanCommunities NoC73/35
wouldreiteratethatthespecial'publicutilityservice'
aspectsofthesesectorsneedtobetakenintoaccount.
Itlikewisefullyapprovesthereferencetotheprinciple
of'non-discrimination ',extendednotonlytoStates
butalsotoundertakingsandprivateindividuals,with
acquiredeconomicrightsbeingprudentlysafeguarded .sectorsintheMemberStateshasbeenshapedbyenergy
policyconsiderations ;thismeansthateconomiccriteria
havebeensupplemented bysuchfactorsassecurityof
supply,exploitationofindigenousresourcesorsocial
considerations .Asaresultundertakingshavebeenfor­
cedtomakeinvestmentswhicharenotalwaysjustifi­
ableineconomicterms,andwithsubstantialdifferences
incriteriafromonecountrytoanother.Theplanned
rapidintroductionofthenewsystemcouldprevent
undertakingsfromrecoupinginfullthesehistorical
additionalcostswhicharenowrecognizedinoneform
oranotherinalltheMemberStates.2.5.2.TheCommitteeapprovestheliberalizationof
theconstructionofpowerstations,LNGfacilitiesand
electricity/gastransmissionordistributionlinesaspro­
videdforintheDirectives.Boththetechnicalrequire­
mentsandthedeadlinesandprocedureswouldseem
broadlyadequateforattainingtheobjectiveswithout
theneedtodrawupanexcessivelyrigidandcomplex
setofrules.2.4.3.MemberStateinterventiontooktheformof
specificchoicesastoelectricitygenerationandnatural
gassupply,generallythroughthediversification of
energysourcesandsupportfornationalproduction,in
theformofsubsidieswhichwereusuallycapitalinten­
siveandwithlongrepaymentperiods.Thenewplan
proposedintheDirectives,however,willleadtoless
capital-intensive solutionswithshorterconstruction
periods,butalsotogreaterpotentialsupplyvulner­
abilityinthelongterm.TheCommitteeisdeeplycon­
cernedoverthisaspectbecauseofitsstrategicimport­
ance.2.5.3.TheCommitteewould,however,drawatten­
tiontofourproblemswhichcouldariseinthe
implementation oftheDirectives.
2.4.4.TheCommittee—whileappreciatingtheneed
fortheseundertakingstoreplacetheprincipleof
'guaranteedrecoupingofcosts'bytheprincipleof
'prices,risksandbenefits'characteristicofothersectors
ofproduction—stressestheneedforagradualrather
thananabruptadjustment,takingintoaccountmarket
realitiesandthedemandsofsocietyasawhole,i.e.of
smallaswellaslargebusinessesandthemanymillions
ofsmalldomesticconsumers .2.5.3.1.ThefirstconcernstheprovisionsofArticle
4(2)oftheproposedDirectiveontheinternalelectricity
market.Thisstatesthat'MemberStatesmay,for
reasonsofenvironmental policyorofsecurityofsupply,
supplementthesecriteriabycriteriarestrictingthenatu­
reoftheprimaryenergysourcethatmaybeusedfor
thegenerationofelectricity'.Thisprovision,which
accordswiththeautonomyofnationalenergypolicies
andtheotherdeterminingfactorsmentionedinthis
Opinion,coulddistortelectricity-generation costsand
thusthwarttheCommission'splansforimmediatecom­
petition.
2.5.3.2.Thesecondconcernstheneedtoincludethe
energysupply-demand balanceatregionallevelinthe
authorizationcriteriaprovidedforinArticle4(2)ofthe
Directives .2.4.5.Forallthesereasons,theCommitteesupports
theideaofimplementing theinternalmarketmore
graduallyinthesesectors,providedthatparallelpro­
gressismadeonthecoordinationofMemberState
energypoliciesandaccountistakenofthelegitimate
interestofallconsumersinaregularsupplyonthe
besteconomictermspossible.Theintroductionofthe
'commercialprinciples'andthederegulationprovided
forintheseDirectivescouldfurthersuchcoordination
asaresultofthefree,individualdecisionstakenby
industryandconsumersintheMemberStates.
2.5.Accesstothemarket2.5.3.3.Thethirdconcernstherefusalordeferment
ofalicencetoconstructnewelectricityandgaslines
[Article5(3)oftheelectricityDirectiveandArticle4(3)
ofthegasDirective]'ifthetransmissionordistribution
requirementsconcernedcanbesatisfiedbytheexisting
transmissionanddistributioncapacitiesavailableinthe
interconnected systematareasonableandequitable
price'.Thisdiscretionarypowerofthenationaladmin­
istrationsshouldbespeltoutmoreclearlyasregards
boththeproofofsufficientcapacityandthecriteriafor
settingthetariffsforitsuse.Asregardstherightsto
expropriateprivatepropertyandtousepublicground,
adeclarationoftherequirementsofpublicinterestor
socialusefulnesswillsuffice.2.5.1«TheCommitteeapprovestheinclusionof
'commercialprinciples'asayardstickfortheattainment
oftheinternalelectricityandgasmarket,althoughit

NoC73/36 OfficialJournaloftheEuropeanCommunities 15.3.93
verticallyintegratedundertakingsand,especially,the
analysisandinspectioncapacitiesoftherelevantautho­
ritiesrequiredseveralyears.2.5.3.4.Thefinalpointconcernssupplybydirect
lines.Thecriteriaforthegrantofalicenceforthese
linesarethesameasforgeneral-uselines.However,
theverynatureoftheselines,especiallywherethey
supplyanundertaking'sownpremises,subsidiariesor
affiliatecompanies,meansthatmoreflexibleand
straightforward licensingcriteriashouldbelaiddown.2.6.2.2.Secondly,anin-depthstudycouldbecarried
outoftheimplicationsofunbundlinginthegassector
withrespecttothepotentiallossofnegotiatingpower
byCommunityenterprisesintheircommercialagree­
mentswithnon-ECsuppliers.Itcouldhaveconsider­
ableadverseeconomicandstrategicrepercussionsfor
enterprisesandconsumers.2.5.4.Inthehypotheticalcaseoftheintroductionof
TPA,theannuallimitsof100GWhofelectricityand
25millioncubicmetresofnaturalgassetforthesecond
stageofliberalizationwouldseemadequateinthecase
ofindividualsites.
2.7.Transmissionofelectricityandnaturalgas2.5.5.Thelimitsfordistributioncompaniesof3%
(electricity)and1%(gas)ofoverallconsumptionin
eachMemberStatecouldraiseproblems.Firstly,
becausethedifferenceinthesizeoftheMemberStates'
marketsmeansthatthesefiguresareinsomecases
insignificant .Secondly,because,byraisingthepossi­
bilityof'associationsofdistributioncompanies',the
doorisopenedforcompaniesresellingenergy;this
couldaffectthestabilityofthemarketwithoutsuf­
ficientlyclearadvantagesforthesystemasawhole,as
theycouldencourageexcessiveconcentration which
reducescompetition .2.7.1.TheCommitteewouldmakethefollowing
commentsonChapterIII('Transmissionsystemoper­
ation')ofthetwoDirectives:
2.5.6.Forallthereasonscitedabove,theCommittee
considersthattheintroductionofTPAisill-advised.2.7.2.Thefirstconcernsthedebatableadvantages
forthe'electricitynetworkoperator'orthe'gastrans­
missioncompanies'ofincreasingexistingcapacity;at
bestthebenefitofthiswillbetorecoupcosts(operating
andinvestment)anditsresultwillbetofurthercompli­
catetheoperationofthenetworksthroughtheprolifer­
ationofnewoperators.TheDirectivesgonofurther
thanadeclarationofintentanddonotlaydown
eithereconomicassessmentmeasures(theannualreport
wouldnotseemsufficient)orcorrectivemeasures,
exceptthehypotheticalfreedomtoconstructindepen­
dentnetworks .2.6.Unbundlingandtransparencyofaccounts
2.6.1.TheCommitteeendorsesinprinciplethecon­
ceptandscopeproposedintheDirectives. 2.7.3.Theresultisapotentialclashbetweenthe
obligationslaiddowninArticle9oftheelectricity
DirectiveandArticle8ofthegasDirective[tomaintain
a'secure,reliableandefficientelectricity(naturalgas)
system'initsarea]andthepaymentcriterialaiddown
inArticle14(electricityDirective)andArticle12(gas
Directive)whichprovidefortherecoveryoflong-term
costsandareturnoncapitalinvested.Giventhescale
ofoperationrequiredtoconstructnewlines,itwould
beadisincentivetohavetoundertakeconstruction
withoutanyguaranteeofimmediatedemandforthe
totalcapacity.2.6.2.However,theCommitteethinksthatbefore
analyzingtheproposedrulesfortransmissionanddis­
tributionnetworks,itisnecessarytoclarifytheconcept
andscopeofthe'unbundlingandtransparencyof
accounts'.Itwouldthereforestresstwoimportant
pointsforconsideration :
2.6.2.1.Firstly,theremightbeacaseforaccelerating
theentryintoforceoftheabove-mentioned 'unbundling
andtransparencyofcosts'asapreliminarysteptowards
thepossibleentryintoforceofothermeasures.The
informationthusprovidedcouldhelptoimprovevital
aspectsofthecompletionoftheinternalmarketin
electricityandgas,whichcouldbeofbenefitinthe
transitiontowardssubsequentstages.Itisalsonecess­
arytomentiontheexperienceoftheUnitedKingdom
wheretheactualimplementation ofthisunbundlingof2.7.4.Thirdly,nospecificmeasuresarelaiddown
forthedevelopmentofinterconnected networks
betweentheMemberStates,thepresentlimitationsof
whicharetheprincipalbottlenecktobeovercome.
TheseDirectivesshouldbetiedinwiththeproposals
fortrans-European electricityandnaturalgasnetworks
recentlysubmittedtotheCouncilbytheCommission .

15.3.93 OfficialJournaloftheEuropeanCommunities NoC73/37
2.8.Distributionsystemoperation
2.8.1.Manyoftheforegoingargumentsapplyalso
toChapterIV('Distributionsystemoperation')ofboth
Directives.TheCommitteewould,however,liketo
raiseafewspecificpointsonthischapter.2.7.5.Appointmentordesignationasoperatorofan
electricitytransmission networkbringswithit
undoubtedregulatorypowersasregardsthedispatch
ofelectricitygeneratinginstallationswhichneedfurther
defining,egtheconceptof'reasonableprices'referred
toinArticle13(4)asregardssmallelectricitygenerating
installationsorthepossiblediscrimination between
undertakingsresultingfromtheapplicationofcriteria
fortheprotectionofindigenoussources[Article13(5)].
Allofthishighlightstheneedtosafeguardtheindepen­
denceofoperators,bearinginmindtheimportanceof
theirtask;thisisnotspecificallyacknowledged inthe
Commissionproposal.2.8.2.ThefirstconcernsthepossibilityoftheMem­
berStatesestablishingtariffsforthosecustomerswho
arenotentitledtoreceivesuppliesthroughthirdparty
accesstotheinterconnected networkorwhorelinquish
supply.Firstitwouldbenecessarytoestablishsome
basicuniformcriteriafordrawingupthesetariffssoas
toavoidthecreationofdistortionsincompatiblewith
theobjectivesoftheinternalmarketinelectricityand
gas.2.7.6.IntheCommittee'sview,applicationofthe
subsidiarityprinciplemeansthatitistheMemberStates
whichshoulddealwiththesemattersontheground.
However,thelackofuniformityinthecriteriausedby
theMemberStatescouldfatallyjeopardizethepro­
cedureswhichtheDirectivelaysdownfortheattain­
mentoftheinternalmarketinelectricity.
2.8.3.IntheCommittee'sview,itisessentialto
ensurethattheaccessofnewoperatorstothenetworks
ortoelectricitygenerationorthewithdrawaloftheir
applicationforservicedoesnotimposeadditionalcosts
onotherconsumers .2.7.7.Thesameargumentsapplytothedrawing-up
oftechnicalstandards.Althoughtheprocedurelaid
downinthetwoDirectivesisadequate,inpracticethere
willundoubtedlybeproblemsofadjustmentwhichwill
requiretechnicalarbitration,andthisisnotprovided
forintheDirectives .2.8.4.Tociteonlyafewexamples:verylowtariffs
forlargeconsumerswouldactasadisincentivefor
theseconsumerstoswitchtoalternativesuppliesvia
theTPAsystem.Similarlyitwouldbenecessaryto
alignthecriteriaforassessingthedifferentwaysin
whichthetotalcostofsupplyisdividedbetweencatego­
riesofconsumersforeachdistributor (nationaltariff
orspecifictarifffortheterritoryofeachdistributor).2.7.8.Thereisnoquestionastotheusefulnessof
theannualreportstobedrawnupbytheoperatorsof
electricitytransmissionnetworksandthegastrans­
missioncompanies;theinformationwhichtheyprovide
onthenetworkswillmakeiteasiertotakedecisions
regardinggeneration,distributionandconstructionof
directlinesasanalternativetotheinterconnected sys­
tem.Forthisreasontheyshouldbesupplemented by
datasuchastheactualutilizationandpercentageof
hourlyoccupationoftheinterconnected networkand
dataonthenumberofrequestsforinformationonthe
useofthenetworkandthenumberandtypeofcontracts
actuallyconcluded.Atallevents,theCommitteeis
anxiousthatthereports'conclusionsshouldbetrans­
latedintoconcretedecisionsensuringtheharmonious
long-termdevelopmentoftheproductionandtransport
systems.2.8.5.AfurtherexampleistheapplicationofArticle
16(3)underwhichalargeconsumerwillbeableto
withdrawfromasupplyareawiththreemonths'notice
andwillbeabletorejoinit,ifitsodesires,withsix
months'notice.Thecostsincurredwillhavetobemet
bythepartycausingtheinterruption .Iftheobligation
toresumesuppliesiskeptin,capacitywillhavetobe
maintainedataleveltotakeaccountoffutureneeds.
Thiswouldentailunjustifiablehighercostsforother
consumers .
2.7.9.Thisbringsustothefinalpointinthisanalysis
oftheuseoftransmissionnetworks,namelythecon­
tractstobeconcludedbetweennetworkoperatorsand
potentialusersofthenetwork.TheCommitteenotes
withconcernthepossibilityofarefusaltoprovidea
servicebecauseofalackofavailablecapacitynot
alreadyallocatedunderearliercontracts;thisisoneof
themostcontentiouspointsintheproposedsystem.
TheCommitteethereforeconsidersthatitwouldbe
possibletoestablishadditionalconditionsforboth
partieswhichimprovethequalityoftheserviceand
guaranteeofsupply.2.8.6.DespitethestudiesandassurancesoftheCom­
missiononthispoint,theCommitteeisconcernedover
thezerobenefitforsmallconsumers,whowouldhave
noaccesswhatsoevertothebenefitsaccruingfrom
thereductionincostswhichtheincreasedcompetition
couldbringforlargeconsumers.Althoughthetariffs
ofnon-TPAconsumerswouldbefixedbythenational
authorities,theverynatureofthesystemcouldexacer­
bateexistingimbalances;thiswouldbecontrarynot
onlytoeconomicandsocialcohesion,butalsotothe
veryrootsoftheEuropeanCommunity .

NoC73/38 OfficialJournaloftheEuropeanCommunities 15.3.93
2.8.7.Itisnoteasytojustifythepossiblerefusalto
provideaserviceasreferredtoinArticle21(2)(elec­
tricity)andArticle19(2)(gas)wherethedistribution
systemisconcerned.Thebasicideaoftheterritorial
distributionsystemisthatatalltimestheuseremploys
thecapacityavailableandthesystemoperatorhasthe
legalobligationtoprovidetheservice.Thereforerefusal
toprovidetheservicecanonlybebasedontechnical
groundsofdubiouslegality.2.9.5.Anotherproblemraisedbytheapplicationof
TPAisthatofthe'economicprecedence'criterionlaid
downintheDirectivesforallocatingaccess,giventhe
limitedcapacityoftheinterconnected networks.The
applicationofthiscriterioncouldresult,atleastinthe
shortterm,inonlyalimitednumberofconsumers,
ratherthaneveryone,enjoyingthepotentialbenefitsof
freetransit;intheshorttermthiscouldexacerbatethe
distortionsofcompetitionwhichtheDirectivesare
intendedtoremedy.
2.8.8.TheCommitteecallsforarevision,ongrounds
oftechnicalefficiency,ofArticle16(4).Onlyundertak­
ingsowningorresponsiblefordistributionsystems
(includingelectricalorgaslinesformingpartthereof)
shouldbeabletodesignateasystemmanager,tobe
ratified,whereappropriate,bytheState.2.9.6.TheCommitteewouldreiteratethatthepur­
poseoftheinternalmarketinelectricityandgasisnot
tosharpencompetitionforitsownsake,buttocreate
conditionswhichensurethattheavailabilityandcost
ofenergyiscomparablethroughouttheCommunity
andatthesametimetomaintainthehighlevelsof
securityandqualityofsupplydemandedbyusers.
2.8.9.Finally,theCommitteeconsidersitnecessary
toanalyzetheimpactofthesemeasuresonlocalelec­
tricityand,inparticular,naturalgascompanies.These
companiesareoftenpart-ownedbylocalauthorities
andareamajorsourceofincomeforthem,aswellas
providingasafeguardastothequalityandguarantee
ofservice.Theseaspectsneedtobelookedatindepth.
2.9.Thirdpartyaccesstothenetwork2.9.7.ConsequentlytheCommittee,whilenotcom­
pletelyrulingouttheadvisabilityofintroducingTPA
atsomefuturedate,recommendstheadoptionofother
measuresaspreliminaryandimmediatesteps,such
asgreatercompetitioninelectricitygeneration,the
applicationofcommercialcriteriaintheelectricityand
gastransmissionanddistributionstages,andthe
unbundlingofaccounts.Fromtheexperienceacquired
inapplyingthesemeasures,togetherwiththesearch
foralternativesolutions,thebestwayofcompleting
theinternalmarketinthesesectorscanbedecided.At
allevents,progressneedstobemadeatthesametime
onaligningMemberStates'energypoliciesandthe
financial,fiscalandenvironmental conditionsunder
whichthesesectorsoperateasapreconditionforthe
adoptionofmeasuresleadingtoTPA.2.9.1.IntheCommittee'sviewtheintroductionof
thisplan,evenifgradualasproposedbytheCom­
mission,undoubtedlyrunstheriskofdisruptingthe
electricityandgassystems.Tooffsetthis,thepotential
advantagesofthenewsystemforthecommunityasa
wholehavenotbeenquantifiedindetail,exceptfor
somevaguereferencestoamoreefficientsystem.
2.10.Consultationproceduresandsafeguardclauses
2.9.2.Forthisreason,inearlierchapterstheCom­
mitteehaspointedouttheseriousrisksanddifficulties
whichcouldariseinvariousareas(generation,trans­
mission,distribution )fromtheimplementation ofthis
plan.2.10.1.TheCommitteeapproves,withthenecessary
clarifications,thesafeguardclausescontainedinboth
Directivesasaguaranteethatthestabilityofthesystems
willnotbeseriouslyjeopardizedattimesofcrisis.
2.9.3.TheCommitteeconsidersthatgreater
efficiencycouldequallybeachievedbytheother
measurescontainedintheDirectivesandimproved
cooperationbetweengovernmentandindustryinthe
MemberStates.2.10.2.TheCommitteeconsidersasexcessivethe
powersdelegatedtotheCommissionintheDirectives;
itwouldbesufficienttostatethatthemeasurestobe
adoptedinexceptionalsituations,i.e.acrisislinkedto
thesecurityofthesystem,shallnotprejudicethe
internalmarketorthecommoninterestsoftheMember
States.2.9.4.ExperienceofTPAinotherpartsoftheworld,
includingtheUnitedKingdom,iseitherdifficultto
applytotheCommunityasawholebecauseofthe
specificfeaturesofsomeenergymarketsorbecause
oftheproximityofotherstosourcesofsupply.The
Committeewouldalsodrawattentiontothefactthat
theseexperimentsaretoorecenttoallowanoverall
assessmentoftheiradvantagesanddrawbacks.2.10.3.Alinkshouldalsobemadebetweencrisis
situationsinthesesectorsandthosewhichcouldarise
fromacrisisinthepetroleumsector;forthelatter,

15.3.93 OfficialJournaloftheEuropeanCommunities NoC73/39
theCommissionhasproposedaDirectiveaimedat
coordinatingtheactionsoftheMemberStates.2.11.5.TheCommitteealsonotesthattheappli­
cationoftheseDirectivesislikelytocoincidewith
implementation oftheEuropeanEconomicArea.Since
theexistenceofthisnewblocwillbringnewcompe­
titionfactorsintoplayintheEuropeanmarket,includ­
ingintheenergymarket,theCommitteewouldrec­
ommendtheCommunityauthoritiestoassesstheappli­
cationoftheseDirectivesinthisnewCommunity
framework .2.10.4.TheCommitteewouldalsodrawparticular
attentiontothefactthatcontractsconcludedbefore
thepublicationofthisDirectiveforthepurchaseofgas
fromoutsidetheCommunityona'takeorpay'basis,
hithertoregardedasastandardelementinnaturalgas
supplycontracts,couldpermanently—nottemporarily
astheDirectiveclaims—jeopardizetheimplementation
oftheinternalmarketinthissector.
3.Specificcomments
2.10.5.InconclusiontheCommitteewelcomesthe
proceduresforconsultationwithallcategoriesofcon­
sumersasprovidedforinbothDirectives.Itproposes
thattheseproceduresculminateinnationalreports
priortothepreparationofageneralannualreportfor
thewholeCommunitycontaininganassessmentofthe
implementation oftheseprovisionsandindicatingany
problemswhichhavearisen.3.1.InArticle4(1)oftheelectricityDirectivethe
Committeeproposesreplacing'allow'by'authorize'
anddeleting'forauthorization'attheend,sothatthe
fifthlinereads'onlytocriteriaandprocedurestobe
established....'.
2.11.Theenvironmentandtheenlargementofthe
Community3.2.TheCommitteeconsidersthatthefollowing
shouldbeaddedattheendofArticle4(2)ofthe
electricityDirective:'...generationofelectricity,taking
intoaccountthelimitationsondispatchlaiddownin
Article13(5)'.Itwouldalsoaddthefollowingasthe
firstcriterioninthelistgiven:'theproductionneedsof
theregionwheretheinstallationistobeconstructed'.
Thisisbecauseelectricitygeneratinginstallationscan
haveaconsiderableenvironmental impactandaccount
mustthereforefirstbetakenoftheenergyneedsofthe
areainquestion,whichwillalsomakeforamorestable
service.2.11.1.TheCommitteeisconcernedoverthelackof
anyreferencetotheimplicationsoftheseproposalsfor
theenvironmentandwouldurgetheCommissionto
carryoutathoroughstudyofthematterinsuchaway
thatdevelopmentoftheprinciplesofcompetitionand
liberalizationinnowaydetractsfromtherequirements
ofenvironmental protection.Amongthetopicstobe
considered,theCommitteesuggeststhepotentialenergy
savingsfromamoreefficientsystem,changesinthe
plannedprimarysourcesinelectricityproductionand
theoverallenvironmental impactofthefreedomto
constructpowerstations,LNGterminalsortrans­
missionanddistributionlines.3.3.IntheCommittee'sviewArticle4(6)oftheelec­
tricityDirectiveandArticle4(8)ofthegasDirective
shouldsetatimelimitforinformingtheapplicantand
forthelattertoappeal.
2.11.2.TheCommunityisalsofacingaprocessof
enlargementandisdiscussingtheprotocolsfor
implementingtheEuropeanEnergyCharter.3.4.WithregardtoArticle5(3)oftheelectricity
Directive[Article4(3)ofthegasDirective],theCom­
mitteeconsidersthat,inviewofpossibledamagetothe
environmentfromhighvoltagelines,suchdamagemust
betakenintoconsideration whentheneedforanew
lineisbeingestablished.Itthereforeproposesthatthe
followingsentencebeaddedtothisparagraph :'The
grantofalicencemayalsoberefusedordeferredor
itsroutechangedifthetransmissionordistributionline
orassociatedequipmentislikelytocauseirreparable
damagetotheenvironment.'2.11.3.IntheCommittee'sview,theimplications
oftheDraftDirectivesforthesemattersshouldbe
analyzed.
2.11.4.InparticulartheCommitteeisconcerned
overthepotentialharmfuleffectsoftheseDirectiveson
thepossibilityofnewsuppliesofnaturalgasfromthe
CISortheneedforshort-termelectricitysuppliesto
thecountriesofCentralandEasternEuropetooffset
theclosureoftheirowninstallationsonenvironmental
ornuclearsafetygrounds.3.5.TheCommitteeproposesaddingthefollowing
attheendofthetwoparagraphsofArticle6ofthe
electricityDirective(Article5ofthegasDirective):'....
providedthatthereisnoalternativelineandthatthe
needtoprotecttheenvironment isrespected'.The

NoC73/40 OfficialJournaloftheEuropeanCommunities 15.3.93
3.12.InArticle12(5)oftheelectricityDirective
[Article11(5)ofthegasDirective],concerningtheneed
forabodytosettledifferences,theexpression'shall
usetheirbestendeavours',shouldbereplacedinboth
Directivesbythedefinitionofanarbitrationprocedure.reasonforthisisthatifitisestablishedthattheState
isobligedtoauthorizedirectlinesbetweenproducers
andtheirpremises,orbetweencustomersandsuppliers,
withoutthisobligationbeingsubjecttoanypriorcon­
ditions,theupshotcouldbeaproliferationofdirect
linestothedetrimentoftheuseofexistinglines;this
wouldbebadfortheefficiencyofthesystemandthe
environment .
3.13.TheCommitteeproposesamendingtheword­
ingofArticle13(5)oftheelectricityDirectiveasfollows:
'...toanextentthatthetotalquantityusedofthisfuel
mayamountinanycalendaryearto20%oftheoverall
primaryenergy...'.Thepresentwordingcouldbeinter­
pretedtomeanthatitisalwayspossibletogivepriority
to20%oftheenergyproducedfromindigenousfuel,
irrespectiveofthepercentageofthisenergywhichisin
factalreadyinthesystemonitsownmeritsandwhich
itwouldthereforebeadditionalto.3.6.PriortotheinterpretationofArticle6(1)ofthe
electricityDirective[Article5(1)ofthegasDirective],
theCommitteeconsidersthataprecisedefinitionis
neededofwhatismeantbyasupplierforthepurposes
oftheseparticularrules[adefinitionisgiveninArticle
2(15)oftheelectricityDirective].Athirdparagraph
shouldalsobeadded:'Inthecasesreferredtoinpara­
graphs1and2ofthisArticleaccountshallbetakenof
theenergy-supplysituationinthoseregionsaffectedby
theselines.'
3.7.IntheCommittee'sviewArticle8(1)oftheelec­
tricityDirectiveshouldestablishclearly,intheabsence
ofanagreementbetweentheStateandtheundertakings
orbetweentheundertakingsthemselves,whoisrespon­
siblefortakingthedecisiontodesignatetheoperatoror
whatmachineryshouldbeusedtoarbitrateasolutionin
theeventthatthereisnoagreementonthematter.3.14.ForreasonsoftechnicalefficiencytheCom­
mitteewouldliketoseearevisionofthescopeof
Article16(4)oftheelectricityDirective(Article14(4)
ofthegasDirective),totheeffectthatonlyundertakings
whichownorareresponsibleforthesystems(including
electricallinesformingpartthereof)candesignatea
systemoperator,itbeingtheresponsibilityoftheState
toratifythedecision.
3.8.InArticle9(3)oftheelectricityDirective[Article
8(2)ofthegasDirective]theexpression'useitsbest
endeavours'shouldbereplacedby'develop...and
achieve3.15.ForthesakeofclarityArticle24(2)ofthe
electricityDirective(Article22(2)ofthegasDirective)
shouldbeamendedasfollows:'...andshallpublisha
balancesheetandaprofitandlossaccountforeach
division,togetherwiththeresultantannualaccounts
whichtheundertakingsmustapprovefortheiractivities
asawhole'.3.9.InArticle10(2)oftheelectricityDirectivethe
Committeeproposesdeletingfrom'Tothatend...'to
theendoftheArticle.Similarly,itproposesdeleting
thesecondsentenceofArticle9(2)ofthegasDirective.
3.10.InArticle11oftheelectricityDirective'onthe
generationcapacitywhichislikelytobeconnectedto
thesystem'shouldbereplacedby'onthegeneration
capacitywhichwouldhavetobeconnectedtothe
system'.3.16.TheCommitteeproposesthatArticle24(4)(a)
oftheelectricityDirective[Article22(6)(a)ofthegas
Directive]bewordedasfollows:'electricity(natural
gas)supplycostsontheonehandanddistributioncosts
andotherchargesontheother'.
3.11.TheTechnicalRulesfordirectlines,asdefined,
arenotpartofthesystemandthereforeshouldnotbe
theresponsibilityofthesystemoperator.TheCom­
mitteethereforeconsidersthatinArticle12(1)ofthe
electricityDirective[Article11(1)ofthegasDirective]
thewords'anddirecttransmission anddistribution
lines'shouldbedeleted.Itwouldalsobeadvisableto
statethattheoperatormustconsultallinterestedparties
onthepreparationandapprovaloftheTechnicalRules.3.17.TheCommitteeunderstandsthereferenceto
theannualmanagementreport[inArticle24(5)ofthe
electricityDirectiveandArticle22(7)ofthegasDirec­
tive]torefernottothiscommercialdocumentbutto
theactualannualreportofthecompanyconcerned.It
suggeststhatthereferencebeamendedaccordingly.

15.3.93 NoC73/41 OfficialJournaloftheEuropeanCommunities
4.Conclusions 3.18.InthefirstandsecondparagraphsofArticle25
oftheelectricityDirective(Article23ofthegasDirec­
tive)theCommitteeproposesdeletingtheword'sud­
den'.Iftheaimistoprotectthe'physicalsafetyor
securityofpersons,apparatusorinstallationsorsystem
integrity',itisirrelevantwhetherthecrisisissuddenor
hasbuiltupgradually.Thebasicpointiswhether
legallyprotectedpropertyisthreatened.Thiswould
alsomakeadistinctionbetweena'crisis'andaserious
technicalaccident—thedifficultieswouldstillneed
remedyingwhethertheywereofshortorlongduration.4.1.TheCommitteesupportstheCommissionpro­
posalsincertainrespectsonly.Whileendorsingtheir
ultimateobjective,ithasseriousreservationsabout
someaspectsofthem.ItwouldthereforeasktheCom­
missiontogivefurtherconsiderationtotheseaspects,
andtoaltertheDraftDirectivesonthebasisofthe
followingproposalsandrecommendations .
3.19.TheCommitteeproposesthatthelastpara­
graphofArticle25oftheelectricityDirectivebe
rewordedasfollows:'...theCommission ;these
measuresmaybeamendedorabolished,insofaras...'.4.2.TheCommitteehasjustifiabledoubtsasto
whethertheCommissionproposalsintheirpresent
formaretheonlywayofachievingtheobjectivesset.
Inparticular,theydonotcontainapreciseanddetailed
breakdownoftheadvantagestosocietyasawhole
fromtheintroductionofthenewsystem,compared
withtherisksentailedintheswitchfromanestablished,
stablesystem.
3.20.Intheinterestsoftechnicalprecisionand
efficiency,theCommitteeconsidersthatArticle26of
theelectricityDirective(Article25ofthegasDirective)
shouldberewordedasfollows:'MemberStates,in
agreementwiththeCommission,shallestablishadis­
puteresolutionprocedure...'.4.3.TheCommitteewouldmakeitplainthatthe
adoptionofanewframeworkforthederegulationof
theelectricityandgassectorsascontainedinthepro­
posedDirectivesmustbebased,inbalancedfashion,on
theprinciplesofgradualism,applicationofcommercial
criteria,securityandqualityofsupply.Itdoes,however,
realizethatthefreemovementofenergyproducts—
includingelectricityandgas—cannotbeexcludedfrom
theCommunityambit. 3.20.1.TheDirectivesconstantlycitetheCom­
missionasthebodytowhichMemberStatesmust
notifytheirdecisions,rulesetc.Itthereforeseems
appropriatethattheCommissionshouldbeinvolvedin
theestablishmentofanarbitrationprocedureformat­
terscoveredbytheDirectives.4.4.TheCommitteeisawarethattherecanbeno
questionofeconomicandsocialcohesioninrelationto
theinternalenergymarketifitisnotpossibletoensure
thebestpossiblesupplyofelectricityandgasatcompar­
ablepricesforallthecitizensofalltheMemberStates,
especiallytheirleastdevelopedregions.
3.21.TheCommitteeconsidersthatArticle28ofthe
electricityDirective(Article27ofthegasDirective)
shouldbeamendedtoread'...tocomplywiththis
Directivenolaterthanoneyearafterithasbeen
approved.'4.5.Theprovisionofelectricityandgasservicesand
theguaranteeofsupplyarethereforeunquestionably
inthegeneralinterestandthismustbeborneinmind
whensupplyconditionsaredrawnup.
3.21.1.Theproposeddateof31December1992is
clearlyimpractical,anditseemslogicaltogiveMember
Statesatleastayeartoadapttheirlawsandregulations
inthiscomplexarea.4.6.TheCommitteeendorsestheliberalization of
theconstructionofpowerstations,LNGfacilitiesand
electricityandgastransmissionordistributionlinesas
laiddownintheDirectives.Suchliberalization mustbe
compatiblewithsecurityofsupplyandenvironmental
protection.
3.22.Theoperationoftheinternalmarketinelec­
tricityandgasshouldbeprogressiveandcontinuous,
soalongeradjustmentperiodshouldbegiven.Also,
sufficienttimemustbegiventoseehowthesystem
operatesandwhereanyproblemsemerge,aswellas
theirscaleandpossiblesolutions.Tothisend,the
Committeeproposesthatthedateof1January1996
bedeletedinArticle29oftheelectricityDirective
(Article28ofthegasDirective).4.7.TheCommitteerejectstheplansanddeadlines
fortheintroductionoftheTPAsystemasprovided
forintheseDirectives.Inparticularitwishestocall
attentiontotheneedtoavoidtheriskofradical,inad­
equatelytestedinnovationsinsectorswhichhavedem­
onstratedtheirefficiencyandprogressiveoutlookover
severaldecades.

NoC73/42 OfficialJournaloftheEuropeanCommunities 15.3.93
4.8.TheCommitteewouldreiteratethatitwillbe
difficulttoachievetheCommunity-wide organizational
changesintheelectricityandgassectorsproposedin
theseDirectivesiftheyarenotprecededbyproper
alignmentofnationalenergypolicies.
4.9.TheCommitteewouldpointouttheimportance
ofguaranteeingtheindependenceoftheoperatorsand
managersoftheelectricityandnaturalgastransmission
anddistributionnetworks.
4.10.TheCommitteewelcomestheintroductionof
theprincipleofaccountingtransparencyandtherefore
approvestheproposedrulesonunbundling,although
itwouldliketheCommissiontoclarifythesituation
whichtheapplicationofthisprinciplecouldcreatein
gasundertakings .4.11.InparticulartheCommitteewouldliketocall
attentiontothemajorrolewhichconsumerconsul­
tationshouldplayinthedevelopmentandapplication
oftheserules.
4.12.TheCommitteewouldalsoreiterateits
environmental concernswithregardtoallprovisions
concerningtheenergysector,especiallythoseaimedat
reorganizingitssub-sectors .
4.13.TheCommitteewouldpointoutthatthecre­
ationofanewEuropeanEconomicArea,underwhich
themembersoftheEuropeanFreeTradeAssociation
willsubscribetotheobjectivesandtasksoftheinternal
market,willofferawiderrangeofalternativesand
modelsfortheelectricityandgassector;theirpotential
impactontheapplicationoftheproposedDirectives
willhavetobeconsidered .
DoneatBrussels,27January1993.
TheChairman
oftheEconomicandSocialCommittee
SusanneTIEMANN
APPENDIX 1
totheOpinionoftheEconomicandSocialCommittee
Thefollowingmembers,presentorrepresented,votedfortheCommitteeOpinion:
Mr/Mrs:ABEJON,AMATO,ANDRADE,ARENA,ATTLEYW.A.,BAGLIANO ,BEALE,BERNABEI,
BLESER,BONVICINI,BORDES-PAGES ,BOTTAZZI ,BREDIMA-SAVOPOULOU ,VascoCAL,CASSINA,
CEYRAC,CHEVALIER ,COLOMBO,vanDAM,vonderDECKEN,DELOROZOY ,vanDIJK,DOUVIS,
DRAIJER,DUNKEL,ENGELEN-KEFER ,EULEN,FLUM,FORGASICABRERA,FRANDI,FRERICHS,
GAFOFERNANDEZ ,GARDNER,GERMOZZI ,GEUENICH,GIACOMELLI ,GIESECKE,GOMEZ
MARTINEZ ,GROBEN,KAZAZIS,deKNEGT,LACAMARTIN,LAPPAS,LAUR,LIVERANI,LOW,
MARGALEFMASIA,MARVIER,MAYAYOBELLO,MERCEJUSTE,MEYER-HORN ,MOLINAVALLE­
JO,MORIZE,MUÑIZGUARDADO ,NOORDWAL ,OVIDEETIENNE,PANEROFLOREZ,PASQUALI,
PELLARINI,PELLETIERCh.,PELLETIERR.,PERRIN-PELLETIER ,PETERSEN,PETROPOULOS ,
POMPEN,PRICOLO,QUEVEDOROJO,RAMAEKERS ,REBUFFEL,RODRIGUEZ GARCIA-CARO ,
ROMOLI,ROSEINGRAVE ,SAITIS,SANTILLAN CABEZA,SANTOS,SCHADE-POULSEN ,SCHMIDT,
SCHMITZ,SCHNIEDERS ,vonSCHWERIN ,SEQUEIRA,STECHERNAVARRA ,TESOROOLIVER,
VELASCOMANCEBO,WHITWORTH ,WÍCK,ZUFIAURNARVAIZA .
Thefollowingmembers,presentorrepresented,votedagainsttheCommitteeOpinions:
Mr/Mrs:ASPINALL,BELTRAMI ,BLACK,BRIESCH,DAWSON,DECAILLON ,DRILLEAUD ,LITTLE,
MERCIER,MORELAND ,MOURGUES ,NIELSENB.,NIELSENP.,PE,ROBINSON ,SALA,TIXIER.
Thefollowingmembers,presentorrepresented,abstained:
Mr/Mrs/Miss:ATAIDEFERREIRA,JocelynBARROW,BELL,CARROLL,CEBALLOHERRERO,CHRIS­
TIE,CONNELLAN ,DONCK,FREEMAN,GUILLAUME ,JANSSEN,JENKINS,KAFKA,LUSTEN­
HOUWER,LYONS,MADDOCKS ,McGARRY,MOBBS,MORRIS,PARDON,PEARSON,PIETTE,
PROUMENS ,SAUWENS,SMITH,STOKKERS ,STRAUSS,TUKKER,VANDERMEEREN ,VERBOVEN ,
WAGENMANS ,WALDACK .

15.3.93 OfficialJournaloftheEuropeanCommunities NoC73/43
APPENDIX 11
totheOpinionoftheEconomicandSocialCommittee
Thefollowingamendment,basedontheSectionOpinionandsubmittedinaccordancewiththeRulesof
Procedure,wasdefeatedinthedebate:
Deleteallafter1.2.6oftheDraftOpinionandreplacewiththefollowing:
'1.3.SummaryoftheCommittee'sOpinion
1.3.1.TheCommittee'sapproachtotheCommission'stwoDraftDirectivesis,followingtheCommission's
example,firsttoexaminetheproposalsforelectricityinsomedetail,andthentoturntotheproposalsfor
gasinsofarastherearemajordifferences.TheCommitteethendrawsconclusionscoveringbothmarkets
and,finally,makesanumberofconcreterecommendations .ThefollowingsummaryoftheOpinionfrom
nowonmaybehelpful.
1.3.2.
I.Electricity(1-45)
Technical,technologicalandsocialcharacteristicsofelectricity(1-6)
TheCommission's objectiveofTPA(7-8)
TheCommittee'sobjectionstotheDraftDirective:
(A)IftheaimofTPAwereagreed(9-20)
NonindependenceofTransmissionSystemOperators(11-13)
Securityofsupplyisnotsafeguarded (14-17)
Inadequatemeasuresforimplementation andenforcement (18-20)
(B)WhythecaseforTPAhasnotbeenestablished(21-45)
Noclearevidencethatlowerpriceswouldresult(22-24),or
thatseriousnewcompetitionwouldarise(25-29)
Securityofsupplyisnotsafeguarded (30-31)
Socialconsequenceshavenotbeenthoughtthrough(32-36)
Inadequateprovisionforenvironmental andenergystrategies(37-43)
II.Gas(46-50)
Differenceswithelectricity(47)
TheCommission'sapproach(48-49)
Objectionstotransparentcontracts(50)
III.Conclusions (forelectricityandgas)(51-54)
TheCommission'sproposalsdonotconvince(51-52)
TheCommission'sproposalshavetobejudgedasaconnectedwhole(53)
TheCommissionhastherightaimbutkeyaspectsofitsproposalsaremistaken(54)
IV.Recommendations (forelectricityandgas)[54;(l)-{7)]
TheaimofTPAshouldbeabandonedforthepresentandtheDraftDirectivesshouldbeamended.The
followingrecommendations aremade.
1)Thefirstneed:convergenceoflegal,regulatoryandadministrative arrangements ;

NoC73/44 OfficialJournaloftheEuropeanCommunities 15.3.93
2)Inter-Stateconnectionsneedtobeencouraged;
3)Competitionamonggeneratorsshouldbeintroduced;
4)Tothatendindependenttransmissionnetworksshouldbecreated:
—tobuyandsellelectricity,and
—begiventhe'obligationtosupply'
Thusfacilitatingcompetitioningenerationwhilesafeguardingsecurityofsupply,fairpricestothepublic,
andtheabilitytomakestrategicchoicesonenvironmentalorenergysupplygrounds.
5)Similarindependenttransmissionnetworksshouldbecreatedforgassubjecttoallowingforthedifferences
withelectricity
6)Thescopefortransparentandunbundledaccounts.
7)ThecaseforTPAshouldbere-examinedin1998
I.ELECTRICITY
Background
1.Electricityisnotatradedgoodlikeanyother.Itisofcourseacommodityanditistraded.Butitalso
providesanessentialservicetoanymodernsociety.Itisirreplaceableasaproviderofmotivepowerand
light,andisinwidedemandtoprovideheat.Asconsumersofelectricity,societyhasonlytwointerestsin
theproduct.Theseareitspriceandsecurityofsupply.(By'securityofsupply'theCommitteemeanshere
theconstantavailabilityofelectricalpower,otherthaninveryexceptionalcircumstances ,atanytimeitis
switchedonbysomeonewhowantstouseit.)Itisbyreferencetothesetwocriteria—priceandsecurityof
supply—thattheDraftDirectivehasprimarilytobeassessedandjudged.
2.Theproductionandtransmissionofelectricitytoanysocietyisconditionedbythefollowingthree
factorsinparticular—onetechnical,OIKtechnologicalandonesocial.
3.Thetechnicalfactoristhatelectricitycannotbestoredinbulk.Ithastobeproduced(i.e.generated)
andtransmittedeverywhereandatanytimeatthemomentitisneeded.
4.Thetechnologicalfactoristherequirementoflargescale,capitalintensivetechnologybothforgeneration
andtransmission .Leadtimesforinvestmentdecisionsaretypically3-7years,sometimeslonger,whetherfor
powerstationsortransmissionnetworks(oradditionstotransmissionnetworks).Tworecentdevelopments
—thedecisiontoallownaturalgastobeusedasapowerstationfuel,andthesuccessfuldevelopmentof
combinedcyclegasturbinetechnology (CCGT)—havereducedtheleadtimeto2-3yearsfortheconstruction
ofCCGTpowerstationsutilizinggasastheirfuel.(Thesestationsarealsocheapertobuildthanthelarge
conventionalpowerstationsofrecentdecades.)Ontheotherhandtheeverincreasingenvironmental
standardsonwhichsocietyisinsistingistypically(butnotinvariably)lengtheningthealreadylongperiods
requiredforplanningandplanningconsentsforeitherpowerstationortransmissionconstruction .
5.Thesocialfactorinvolvedisthatthegeneralpublicrequireselectricitytobeprovidedataconsistent
pricethroughouttheseasonsoftheyear.Intemperateclimatesthedemandforelectricityisatitshighestin
thedepthsofwinter.Thisrequirestheutilizationforlimitedperiodsofgeneratingcapacitywhichisnot
otherwiseusedintheremainderofayear.Suchcapacityisveryexpensivetoprovide.Butthepriceof
electricitytotheconsumercannotberaisedatsuchtimesbecausethesocialandpoliticalconsequencesare
unacceptable .Whereastheoilindustry,forexample,isabletoraiseitspricesattimesofpeakdemandor
shortage,leadinge.g.toincreasesinthepriceofpetrol,theelectricitysupplyindustrycannot.Peoplecan
accommodatehigherpetrolprices,buttheycannotaccommodatebeingwithoutaffordableheatandlightin
thedepthsofwinter.
6.Forthesamereasonitisnotpossible,insupplyingsocietywithelectricity,torelyinallcircumstances
onthenormaloperationofmarketforces.Giventhetechnicalandtechnologicalfactorswhichgovernthe
productionofelectricity,marketforcescannotbereliedontooperatewiththespeedandsensitivityrequired
toguaranteethatsociety'sabsoluterequirementforsecurityofsupplywillalwaysbemet.Thatiswhyupto
nowgovernmentshaverequiredgeneratingcompaniestobeboundbyan'obligationtosupply',inexchange
forwhichtheyhavegrantedorallowedthematerritorialmonopolyorsemi-monopoly status,subjectto
differentformsofregulation.

15.3.93 OfficialJournaloftheEuropeanCommunities NoC73/45
ConsiderationoftheCommission'sproposals(A)
7.TheprincipleobjectiveoftheDraftDirectiveistoopenuptheelectricitymarkettoproducersand
consumersalikesothateventuallyeveryproducerwillbeabletoselltoanyconsumerandanyconsumer
willbeabletobuyfromanyproducer.Asisexplainedin6.3(III)oftheCommission'sExplanatory
Memorandum ,thatisthesituationwhichThirdPartyAccess(TPA)isdesignedtointroduce.Initspresent
proposalstheCommissionseekstostartwithTPAonalimitedbasis,buttheultimateaimistomakeit
universal.
8.TheCommitteedoesnotnecessarilyopposetheCommission'sobjectiveinprinciple.However,forthe
reasonsitsetsoutbelowitdoestaketheviewthat,attheleast,itisprematuretoproceedwiththeobjective
ofTPAwithoutmuchgreaterconsiderationbeinggiventotheproblemsassociatedwithit.Thisisnecessary
intheCommittee'sopinion,fromtwoalternativepointsofview.Ontheonehand,giventhattheaim(via
TPA)istocreateacompetitivemarketlikeanyother,theDraftDirectiveisseriouslyflawed.Ontheother
handtherearepersuasivereasonstodoubt,onthebasisofexistingknowledgeandexperience,whetherthe
conceptofTPAshouldbeproceededwithatallatthepresent.
9.Thecaseforintroducing,ifpossible,agenuinelycompetitivemarketisfirstofallthegeneralcasefor
competitionasagainstmonopolyorsemi-monopoly .Itisthecaseforencouragingtheintroductionofnew
bloodintoahighlystructuredindustry;formakingthatindustrymoreawareof,andresponsiveto,
commercialcriteria.Itisthecaseforpromotingthegeneralintroductionoffreetradeasbetweenproducers
andconsumersofanyproduct,andintheprocessdecentralizingdecisionmakingtothefullestextentpossible.
10.TheexperienceofintroducingThirdPartyAccessintheUnitedKingdomhasdemonstratedthatthis
canbedonebothtechnicallyandoperationally .ObjectiontoTPAcannotbesustainedonthesegrounds.
ThechiefgroundsforregardingtheCommission'sproposalsasseriouslyinadequatefortheachievementof
itsproclaimedaimsarethree,asfollows.
11.a)ThenonindependenceofTransmission SystemOperators.Itisessentialthattransmission (which
isthebulktransferofelectricity,viaagridsystem,betweengenerationanddistributioncompanies)is
conductedasanentirelyindependentactivity.Onlyonthatbasiswillgeneratinganddistributioncompanies
beabletobesurethattheyarereceivingfairandobjectivetreatmentatalltimes.Onlyonthatbasiswould
thepublicatlargebeabletoaccepttheintegrityoftheproposedarrangement .
12.TheCommissionstopswellshortofadvocatingindependentTransmissionSystemOperators(TSO's).
TheDraftDirectiverequiresthattransmissionsystemsshallbeoperated'separately'fromgenerationor
distributionactivities[Article8(2)],and'shallnotdiscriminatebetweenusersorclassesofusers'etc.[Article
9(c)],andshalluse'objective,transparent'criteriainanondiscriminatory manner[Article13(2)].Theword
'independent'doesnotappearanywhereinthetext.
13.Theomissionisnotaccidental.Itisclearlyenvisaged(e.g.,in5.2oftheExplanatoryMemorandum )
thattheTSOcanremainpart,albeitaseparatepart,ofanundertakinginvolvedineitherorbothgeneration
anddistribution,providedithastransparentandself-containedaccounts.OnthisbasisthereforeaTSO
managementwillremainapartofthemanagementofanywiderorganizationtowhichitbelongs,ase.g.in
respectofcareers,training,managementflexibilityand,aboveall,ultimateaccountability .Therecanbeno
genuineindependenceinthosecircumstances .Thisistoolimitedandtooshakyabasisonwhichtolaunch
TPA.TheintegrityandhenceindependenceofTSO'shastobeattheheartofanyintroductionofTPA
whichmightbesuccessful.
14.b)Securityofsupply.Securityofsupply(asdefinedin1)isnotseriouslyaddressedintheDraft
Directive.ItisnotincludedinthelistofdefinitionsinArticle2.TheonlyreferenceoccursinArticle16(2),
whereitisstatedthat'MemberStatesmaylayupondistributioncompaniesanobligationtosupplythe
customerslocatedinagivenarea'.Thishastobecontrastedwiththepresentarrangementsregardingsecurity
ofsupplywherebyitisthegeneratingcompaniesthatareunderan'obligationtosupply'electricityon
demandinexchangeforaterritorialmonopolyorquasimonopoly(see6).(Suchanobligationautomatically
lapses,ofcourse,oncecompetitionbetweengeneratorsisintroduced,sinceonegeneratingcompanycannot
besaddledwithobligationsfromwhichothersarefree.)
15.ThisisafataldefectoftheDraftDirective.Distributioncompaniescannotoperatean'obligationto
supply',sincetheydonotandcannotcommandthegenerationnecessarytoachievethateconomically,save
intheexceptionalcaseinwhichadistributioncompanyoperatesinanelectricallyisolatedandself-contained
area,suchasanisland.

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16.Itispresumablyforthisreasonthat,whenpressedonthismatterbytheCommittee,representatives
oftheCommissionadvisedthatinrealitysecurityofsupplyistobelefttothediscretionofMemberStates,
thusformallyintroducingtheconceptthatonsuchafundamentalmatter-theCommunitywillallowdifferent
standardsofsecurityofsupplytoapplytodifferentgroupsoftheCommunity'scitizens,dependingonthe
policiesoftheirrespectiveMemberStates.
17.ItistruethatMembersStatesareindividuallyresponsibleforsecurityofsupplytoday.Theydischarge
thisbyrequiringgeneratingcompaniestoacceptthe'obligationtosupply',asdescribedin6.Thedifference
is(1)thatuptonowtherehasbeennooverallCommunitypolicyfortheinternalenergymarket,and(2)the
Commission'sproposalsremovethe'obligationtosupply'fromgenerators,thusalteringcompletelythebasis
onwhichsecurityofsupplyhashithertobeenachieved.InfutureMemberStateswillhavetodecide,ifTPA
isintroduced,whethertoadoptapolicytowardssecurityofsupplyand,iftheydo,todecideonanew
mechanismtoachieveit.IntheUK,oncetheelectricitysupplyindustrywasprivatizedandtheprinciplesof
TPAwereintroduced,thedecisionwasinessencetoleavesecurityofsupplytotheoperationofmarket
forces.
18.c)Implementation andEnforcement .ThethirdmajorweaknessintheCommission'sproposalsisthat
theycontainfewexplicitprovisionsonimplementation andenforcement .Asismadeclearin6.4ofthe
ExplanatoryMemorandum ,MemberStateswillremainfree(1)'todeterminetheextentandnatureof
distributioncompanies'rightsandtheirpublicserviceobligations';(2)to'laydowndetailedcriteriaof
varyingstringency,forthegrantingoflicencestobuildpowerstationsandtransmissionanddistribution
lines';and(3)'tochoosehowtheyimplementtheDirective,e.g.whethertosetuparegulatoryauthorityor
torelyoncompetitionlegislation'.ForthesereasonsMemberStateswillalsoremainfreetodetermine
differentstandardsofsecurityofsupplyfortheirrespectivecitizens,aspointedoutin16and17.
19.Itisinparticularessential,giventhatdistributioncompaniesaretobegivenmorecommercialfreedom
thanbefore—sothattheywillbefree,forexample,totakeriskswhichuptonowhavenotbeenconsidered
—thatthepublicatlarge(thefranchisemarket)isprotectedbyadequateandconsistentregulation.Thereis
noforeseeableprospectofdomesticconsumersbeingabletopickandchoosefromwhomtoobtaintheir
electricity,andtheymustbeprotected.YetthisalsoistobelefttoMemberStates.
20.Thisfailuretoenvisagemechanismsfortheimplementation andenforcementoftheproposalsinthe
DraftDirectiveislikely,ifnotcertain,toresultinwidelydifferingstandardsofimplementation throughout
theCommunity .Theresultwillalmostcertainlybetodistorttheenergymarketandquitepossiblytowiden
thedistortionswhichexistalready.Inaddition,forthereasonsexplained,differentstandardsofsocial
practicewillbeallowed(indeed,maywellbeintroduced),contradictingthepolicytopromotesocialcohesion.
Consistencyofimplementation wouldbevitaltothesuccessoftheDraftDirectiveevenifthefundamental
deficienciesreferredtoata)andb)aboveweretobesatisfactorilyaddressed.
ConsiderationoftheCommission'sproposals(B)
21.Thealternativereasons,referredtoin(8),forbelievingthattheCommission'sproposalsareatthe
leastprematurearejustasserious.InessencetheCommissionhasfailedtodemonstrateapersuasivecase
forthefar-reachingchangesitisproposing.ThefollowingarethemainobservationstheCommitteefeelsit
mustputforward.
22.(1)Price.Itisacharacteristicoflargescaleelectricityproductionfromconventionalfuels(coal,oil
andgas)thatgeneratingcompaniesareobligedtoenterintolongterm'takeorpay'fuelcontractsfortheir
fuel.(Itistruethatcoal,oilandgascanbeboughtontheinternationalspotmarketbutthiscanonlybeat
themarginofthetotalquantitiesneeded.)Longtermfuelcontractsareingeneralobligatorybecauseonly
onsuchabasiswilltheproducersofprimaryfuelsinvestinnecessaryproductionfacilities.(Inaddition,
generatingcompaniesthemselveslikesuchcontracts,sinceitgivesthemareciprocalsecurity.)Insuch
circumstances large-scalegeneratingcompanies,abletoplantheiroutputforyearsaheadintheconfidence
ofsecuremarkets,canexercisemuchgreaterbargainingpowerwithfuelsuppliersoverpricethansmall
individualgeneratorscouldnormallyexpecttodo.
23.Afterfuelthesecondbiggestcostitemforgeneratingelectricityfromcoal,oilandgasisusuallycapital.
(Inthecaseofnuclearpower,orpowergeneratedfromrenewablesources,thecostofcapitalisoverwhelmingly
thedominantfactor.Fuelcostsarerelativelysmallfornuclearpowerandzeroforpowerfromrenewable
sources.)Inallcasesthecostofcapitaliseitheranimportantoracrucialfactorindeterminingtheultimate
priceofelectricitytotheconsumer.Thesameprincipleapplieshereaswiththecostoffuel:numeroussmall
generatingcompanieswillnormallyhavetopaymorefortheircapitalthanfewerlargercompanies.

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24.Itisanotanunreasonableconclusionthatingeneralanypolicywhichaimstomaximizethenumber
ofcompetinggeneratingcompaniesintheelectricitymarketislikelytolead,wereittobesuccessful,toan
increaseinthecostofbothfuelandcapitalemployedintheactivityofelectricitygeneration,andtherefore
tohigherpricedelectricitytothepublic(forsavingsinoperatingcosts,whichcouldbeexpected,aremost
unlikelytobeenoughofanoff-settingfactor).Itmaywellbethoughtthereforethatapolicyofmaximizing
thenumberofcompetinggeneratingcompaniescouldturnouttobeself-defeating .
25.(2)Competition .ThisanalysisleadstothequestionofwhethertheintroductionofTPAalongthe
linesenvisagedbytheCommissionislikelyofitselftoinduceanybutasmallhandfulofnewplayersinto
theCommunityelectricitygenerationmarket.Canmuchcompetitionreallybeexpectedtomaterialize?
26.TheexperienceoftheUKoverthelasttwoyearsisworthconsideringinansweringtheabovequestion.
Anumberofnewgeneratingcompanieshavebeenformedandhaveproceededtoconstructnewpower
stations,whileothersareconsideringwhethertodoso.[Inanycasewhereconstructionisproceedingalong
term(10-15years)'take-or-pay'gascontracthasbeensignedforthepowerstationfuel,togetherwithalong
termcontractwithoneormoredistributioncompaniestobuytheelectricitywhichwillbeproduced.]
27.AtfirstsighttheUKexperienceisaclearsuccessforTPA.Oncloserconsiderationthatturnsoutto
beamistakenconclusion .ThechangestotheUKsystemcoincidedwiththeCommission'sdecisiontoallow
gastobeburnedasapowerstationfuelwhenpreviouslythishadbeendebarred.Initially(foranumberof
months),thepriceofNorthSeagaswascheapenoughtoensurethatnewgeneratorswouldbeabletobuild
newCCGTstations(see4)whichwouldproduceelectricitycheaperthananyotherfuel(otherthan
hydropower).Existinggeneratorsfollowedsuit.Afteronlyafewmonthsthepriceoftheavailablegaswas
verysubstantiallyincreased,sothatitisbynomeanscertainthatthelatecomers,whowillhavetopaya
muchhigherpricefortheirgas,willproceedwiththeirannouncedbutnotsofarimplementedplansfornew
capacity.
28.ItisareasonableconclusionfromtheUKexperiencethatwithoutgasbeingmadeavailable,and
initiallybeingcheaptobuyfromtheNorthSeafields,nonewgeneratorswouldhaveemerged.Thatsome
haveemergedisinthefirstplaceduetotheintroductionofTPA,whichmadeitpossible.Theabilityto
utilizeestablishedCCGTtechnologyhelpedthem.Butitwasthesuddenavailabilityofcheapgaswhichwas
thegalvanizingagent.Thus,inpracticeUKexperienceleavesopenthequestion,posedin25,ofwhether
introducingTPAwouldinpracticeleadtotheemergenceofseriouscompetitorstotheexistinggenerating
companiesintheCommunity .
29.BasedontheanalysisabovetheCommitteedoesnotfeelabletoconcludethatthepricesofelectricity
intheCommunitywouldfallsignificantly,ifatall,inrealtermsiftheDraftDirectivewereproceededwith.
Norisitclearthattheproposalswouldnecessarilyprovideastimulustotheemergenceofnewgenerating
capacitytocompetewiththatwhichexists.
30.(3)SecurityofSupply.Thisisthesecondofthetwokeycriteria[referredtoin(1)]bywhichthe
Commission'sproposalshavefirsttobejudged.TheCommitteehasalreadymadeobservationsaboutthis
in14-18.FromthoseobservationsitisapparentthattheDraftDirectivewouldremovetheexistingbasison
whichsecurityofsupplyisandhasbeensustained,leavingittoMemberStatestodevisedifferentsolutions,
ifany,inanaltogethernewcontext,astheymightthinkfit.(Itisworthnoting,inpassing,thatnoattention
hasbeenpaidtotheCommittee'spreviousrequestfora'detailedstudyoftheimplicationsforsecurityof
supply'—see1.2.4above.)
31.Therearetwofurtherconsiderations whichintheCommittee'sopinionarenotadequatelyaddressed
bytheDraftDirective.
32.(4)Socialconsequences .AstheystandtheCommission'sproposalsleaveunclearwhatthesocial
consequencesofitsproposalsmightbe.Itmaybethattheywouldbesmall,butprobablythatwouldbea
luckyoutcome.Itismorelikely,theCommitteebelieves,thattheywillbeunevenasbetweenMemberStates,
andasbetweendifferentsectionsofMemberStates'populations .
33.LargevolumeelectricityusersinindustrysupporttheCommission'sproposalsbecausetheybelieve
theywillgetcheaperelectricityasaresult.Thishasnotbeentheexperienceoflargevolumeindustrial
consumersintheUK,butpossiblythatisduetospecialfactorsthere.

NoC73/48 OfficialJournaloftheEuropeanCommunities 15.3.93
34.Suppose,however,itturnsoutthattheexpectationsofindustry'slargevolumeconsumersarefulfilled?
Willtheordinarydomesticconsumersimilarlybenefit?Thatmustbeunlikelyiflargeconsumersreceive
lowerpricedelectricityfromwhatisotherwiseastablecoststructure.Otherthingsbeingequal,thishasto
beattheexpenseofthedomesticconsumer.Itmaybetheresultantpricedifferentialswillbesmall.Itmay
bethatlargedistributioncompanieswillbeabletomaketheirownbidsaslargevolumeusers,inwhich
casethelargevolumeusersinindustrywillnotobtainthesavingstheyanticipateinanycase.(Itwouldbe
differentifTPAweretobringaboutageneralreductionintariffs,buttheCommitteehasalreadyexpressed
itsscepticismastothelikelihoodofthatoutcome.)
35.Ineithercaseitisunclearhowthedomesticconsumercanexpecttobenefitfromtheproposalsinthe
DraftDirective.Theabsenceofproposalsforconsistentstandardsofregulationtoprotecttheinterestsof
domesticconsumers,alreadycommenteduponin18-20,isagainseenasamajorweakness.
36.Furthermore,populationslivingandworkinginisolatedand/orunder-developed areaswithinMember
Statesarelikely,ifcommercialvaluesalonearetobetheguide,tofindtheyhavetopayhigherpricesfor
theirelectricitythanthoselivinginhighdensityand/orindustriallydevelopedareas,inwhichthecostsof
electricityproduction,transmissionanddistributionwillinevitablybelower.Itwouldrequireeffective
regulationtopreventsuchdevelopments ,butthatistobelefttoMemberStatestodecideupon.
37.(5)Energyandenvironmental policy.Electricity—indeedenergygenerally—issuchavitalcomponent
ofthelifeofamodernsocietythatgovernmentshavenormallyadoptedapolicytowardsthestrategicuseof
differentfuels.Environmental considerations haveinrecentyearsalsoinfluencedthechoiceoffuels.Article
130S(2)oftheMaastrichtTreatyexplicitlyprovidesfortheCouncilofMinisterstoadopt'measures
significantlyaffectingaMemberState'schoicebetweendifferentenergysourcesandthegeneralstructureof
itsenergysupply'shoulditwishtodoso.
38.Thereconstructionoftheelectricitysupplyindustry,toputitonafullmarketorientedbasiswould
seemtorestrict,ormightevenprevent,eitherMembersStates,ortheCommunity,fromhavingapolicy
towards'thegeneralstructure'oftheirenergysupply,whetheronbroadstrategic,orenvironmental ,or
indeedonanyothergrounds.Competitionpolicydoesnotnaturallymixeitherwithenergypolicyor
environmental policy.
39.TheycanbeadjustedtoeachotherbutthisrequiresState(orCommunity )intervention,director
indirect,toreplacemarketforcesincertainrespects,ortoshapetheminothers.TheUKhasrunintothis
veryproblemonlyrecentlyinrelationtotheacceleratedrundownofitscoalindustryasaresultofthe
decisiontoallowgastobeusedasapowerstationfuel.Thesocialandpoliticalrepercussionsareproving
verydifficultfortheGovernmenttodealwith.AmajordebatehasnowbeganintheUKastowhetherthe
countryshouldshutitselfofffromanindigenoussupplyof300years'futurecoalconsumptioninexchange
forarelativelyshorttermrelianceonnaturalgas.NoristhispurelyaUKissue.TheUK'scoalisafteralla
strategicreservefortheCommunityatlarge.
40.TheCommunityitselfalreadyhasamajorproblemonitshands.TheCommissionanticipatesthat
theproductionofelectricityintheCommunitywillcomeincreasinglyfromnaturalgas.40%ofthe
Communitynaturalgasatpresentcomesfromexternalsources.60%isanticipatedtocomefromthese
externalsourcesby2010(ExplanatoryMemorandum ,SectionC;paragraphs1-3).
41.Yettheseexternalsourceswillbecomeincreasinglydistantandbelocatedinareasoftheworldwhich
cannotbereliedupontoremainstable.WoulditbewisefortheCommunitytoadoptapolicytowardsits
primaryenergysourceswhichwillreflectonlytheplayofrelativelyshorttermmarketforces?
42.TheextenttowhichtheproposalsintheDraftDirectivewouldallowforthesestrategicissuestobe
dealtwithisunclear.Article4(2)oftheDraftElectricityDirectivewillallowMemberStatesto'supplement'
othercriterialistedin4(2)'forreasonsofenvironmental policyorofsecurityofsupply'.
43.Severalquestionsarise.Whatismeantby'securityofsupply'inthiscontext?IstheCommittee's
definitionin(1)therelevantone?Ordoesitcoverthemuchwiderquestionofprimaryenergysources,
discussedin40above?Ifthelatteristhecurrentmeaning,cansuchapolicybehandledviaasupplementary
clauseintheDraftDirective?CanArticle130S(2)oftheMaastrichtTreatybeaccommodated viathissame
supplementary clause,eventhoughanypolicydecideduponunderthatArticlewouldbelegallypreemptive?

15.3.93 OfficialJournaloftheEuropeanCommunities NoC73/49
44.Article13(5)istheDraftElectricityDirectiveissimilarlydifficulttounderstand.Inanswertoquestions
fromtheCommitteetheCommissionwasunabletogiveaclearstatementeitherastoitspurposeorhowit
wouldoperate.AndyetitwouldseemtoplaceasevererestrictionontheabilityofanyMemberStateto
pursueastrategicenergypolicyrelatedtoanyindigenousresourcesitmayhaveavailable.
45.ItisinthelightoftheseconsiderationsthattheCommitteebelievesthattheCommissionneedsto
givemuchdeeperthoughttotherelationshipofenvironmentalandenergypolicyissuestoitsproposalsfor
introducingTPA.
II.GAS
46.TheCommissiondevotesthegreaterpartofitsExplanatoryMemorandum initstwoDraftDirectives
toelectricity,addingitsthoughtsaboutgas,insofarasitdiffersfromelectricity,attheend.Electricitysupply
isamorecomplexsubjectthangassupply,andwhilethereareimportantdifferencesbetweenthemthere
aremanysimilarities.TheCommitteehasthereforefollowedtheapproachoftheCommissionindrawing
upitsOpinion.
47.Gasasafuellacksthegeneralconvenience,flexibilityanduniversalityofelectricity.Unlikeelectricity
itcanbestoredinlimitedquantities,whichassistsinthehandlingofitssupplyproblems.Todategasis
onlyavailableinquantitytofiveoftheCommunity'sMemberStates.Tothosetowhomitisavailableit
providesheatandmotivepower,anditspriceandsecurityofsupplyarehardlylessimportantthantheprice
andsecurityofsupplyofelectricity.Gashasinadditionanotherusealtogether,asachemicalfeedstock,and
itspotentialinthatrespectisstilllargelyuntapped.
48.TheCommissionobservesthatthereisnocompetitionbetweengassuppliersforsalestoend-users
anywhereintheCommunity .ItpointsoutthattheCommunityisheavilydependentonsuppliersfromthird
countriesforitsgas,andthatby2010thisdependencewillhaveincreasedby50%.TheCommissiondoes
notbelievegassupplyneedsacentrallycontrolledgasgrid,andthinksthatlong-term'takeorpay'contracts
withgasproducerswilltendtobecomelessimportant.
49.TheCommission'sapproachistotreatgasforpurposesoftheinternalmarketinthesamewayas
electricity,butwithsomeexceptions.Thisisnotunsound,butbythesametokentheDraftDirectiveforgas
isopentomanyofthesameobjectionsasthatforelectricity,notablyinrespecttoprice,securityofsupply
andonthequestionofwhethermarketforcesshouldbeallowedtosetasideconsiderationsofenergyand
environmental policy.
50.OneaspectoftheCommission'sproposalstowhichthegascompanieshaveraisedthestrongest
objectionsistheproposaltointroducetransparencyofaccounting.Gascompaniesarguedthatthiswould
weakentheirnegotiatingpositionwiththepowerfulgasproducers,fromwhomtheyhavetobuyoffthegas
theysupplytotheCommunity .
III.CONCLUSIONS
51.TheCommittee'sopinionisthatdieCommissionhasnotmadeapersuasivecaseinfavourofitsDraft
Directives,eitherforelectricityorgas.IftheCommitteewereconvincedabouttheoverallmeritsofthe
Commission'sdesireforTPA,themechanismsproposedarefundamentally flawedforthereasonsexplained
in11-20.ButtheCommissionhasnotdemonstratedthattherewouldbeanysignificantpriceadvantage
whichwouldflowfromitsproposals.Moregravely—andunacceptably—theCommission'sproposalswould
destroythepresentbasisonwhichsecurityofsupplyhasbeensuccessfullymaintainedinMemberStatesfor
manydecades,withoutproposinganyalternativearrangements incompensation .
52.Further,theCommissiondoesnotsatisfytheCommitteethatithasthoughtthroughthepossible
socialconsequencesofthepoliciesitwishestoimplement.TheCommissionhasnotaddressedadequately
thequestionsofenergyorenvironmentpolicy.
53.TheCommitteehasconsideredwhetheritisaviableoptiontoapprovethe'liberalization'aspectsof
theDraftDirectiveswhileopposingtheintroductionofTPA.IthasconcludedthattheCommission's
proposalscannotbeseparatedinthissimpleway.AnumberofthecriticismscontainedinthisOpinionapply
totheproposalsfor'liberalization'asmuchastothosefromTPA,ase.g.onthekeyquestionofsecurityof
supply.TheCommission'sproposalsareaconnectedwhole,thefinalandintendedpurposeofwhichisto
introduceTPA.ItwouldbealtogetherunrealistictoexpectthatoncetheDraftDirectivewereapprovedand
adopteditstermswouldnotbefullyimplementedasintended.

NoC73/50 OfficialJournaloftheEuropeanCommunities 15.3.93
54.TheCommittee'sopinionis:
i)thattheCommissionisrightinitsaimtomaketheenergysectorpartoftheSingleMarketandtowork
therefore(accordingtotheEnergyCouncilConclusionsof30.11.1992)towardsmoreopen,transparent,
efficientandcompetitiveelectricityandgasmarkets;butthat
ii)theCommissionismistakentoseek,initsDraftDirectives,tointroducetheconceptofTPAatthisstage,
andtomakeproposalswhichbothunderminethecontinuingsecurityofsupplyandpaytoolittleregard
tothepossiblyadverseeffectsofitsproposalsontheinterestsofordinaryelectricityconsumers.
IV.RECOMMENDATIONS
55.ItisnecessarythereforethattheaimofTPAshouldbespecificallyabandonedaspartofthecurrent
thinkingaboutthefutureoftheinternalenergymarketforelectricityandgas;andthattheCommission's
proposalsshouldbeamendedtotakeaccountoftheCommittee'sviews,andofthemeasures—setout
below—itrecommendstheCommissiontointroducetofulfiltheagreedaimsdescribedin54.TheCommittee's
recommendations aredesignedtodevelopcompetitioningenerationwhileensuringcontinuingsecurityof
supplyandproperprotectionoftheinterestsofthepublicatlarge.
i)Promotionofconvergence.InevidencetotheCommitteetherepresentatives ofboththeelectricityand
thegascompaniesexpressedstronglytheviewthattheCommissionshouldfirstofallbepressingfor
convergenceofthelegal,regulatoryandadministrative arrangementswhichatpresentgoverntheir
activitiesinthedifferentMemberStates.Differenttaxationandlevyarrangementsalsoneedharmoniza­
tionasfarasthatispossible.TheCommitteeendorsestheseviewsandurgestheCommissiontoproceed
accordingly .
ii)Strengtheninginter-Stateconnections
(a)ProbablythesinglemosteffectivemeansofinjectingcompetitivepressuresintotheCommunity's
electricitymarketliesinthedevelopmentasrapidlyaspossibleofmuchstrongerinter-State
connections .Existinggeneratingcompanieswillthenbeabletomarkettheiroutput,whenitis
cheaperorneededoncapacityorsecurityofsupplygrounds,tothegridsystemsofotherStates.
(b)Inrespecttogasthemajorneedistoestablishanadequatepipelinestructureintheconsiderable
areasoftheCommunitywhichatpresentdonothaveone.Thesubsequentdevelopmentofinter­
Stateconnectionswillthenfacilitatecompetitiononthesamebasisinprincipleaswithelectricity.
(c)PresentplansfordevelopingbothnetworksaresetoutintheCommission'sreporttotheCouncil
'Electricityandnaturalgastransmissioninfrastructures intheCommunity',dated27.3.1992.Some
ofthemosturgentprojectslistedtherearesupportedforObjectiveIterritoriesfromtheCommunity's
StructuralFunds.Suchassistanceisnecessarytoassistwiththeaimsofsocialcohesionandeconomic
convergence,butitdoesnotcontributemateriallytothemoregeneralpurposeofpromoting
competitionintheinternalelectricityandgasmarkets.
(d)TheCommitteebelievestheCommissionshouldreviewwhetheradditionalfundscouldbemade
availableforthislatterpurpose,andwhetheranyothermeanscanbefoundtopromotethe
developmentoftheelectricityandgasnetworksmorerapidly.
iii)Promotingcompetitioningenerationwhilesafeguardingsecurityofsupplyandsocialcohesion.In
additiontotherecommendations above,whichhavethegreatestpotentialforharmonizingeachofthe
twointernalmarketsandpromotingcompetitionwithinthem,theCommissionshould,intheperiod
ahead,concentrateonpromotingcompetitioningeneration.Whileforthereasonsexplainedthe
CommitteehasbeenunconvincedabouttheeffectivenessoftheCommission'sproposalsforintroducing
greatercompetitionintotheelectricitymarket,thatisnotareasonfordoingnothing.TheCommittee
acknowledgesthatifcompetitioncanachievecostsavings,itistheareaofgenerationwhichoffersthe
mostscope,sincegenerationaccountsfor75-80%ofthefinalcostofelectricity.
iv)CreatingindependentTransmissionSystemsOperators.
(a)TothatendtheCommissionshouldprepareaDraftDirectivewhichwouldsetupTransmission
SystemOperators(TSOs)inthemannerproposedinArticle8(1)oftheexistingDraftDirectivefor
electricity.Incontrast,however,withthetermsofArticle8(2)suchTSOsmustberequiredtobe
entirelyselfstandingi.e.independentofeithergenerationordistributioninterests.SuchTSOscan
bepublicly-owned inoneformoranotherorprivately-owned ,operatingunderlicence.Theywould
needtobesubjecttosomeformofregulation.

15.3.93 OfficialJournaloftheEuropeanCommunities NoC73/51
(b)Subjectto(g)belowTSOsshouldbeoperatedonthelinessetoutinArticles9-15inclusiveofthe
existingDraftDirectivewithtwoexceptions.TheexceptionsareArticle9(2),becauseitwillbetheir
function,amongothers,tobuyandsel]electricity;andArticle13(5),thepurposeofwhichis
questionableandthemannerinwhichitisintendedtooperateremainsunclear.Referencesto'not
disturbingtheinternalmarket'inArticles9-15requiredeletionsincetheCommitteedoesnotthink
TPAshouldbeintroducedatpresent.
(c)TSOsconstitutedasabovewouldhavetransferredtothem'theobligationtosupply'whichatpresent
restswithgeneratingcompanies(see14).Thisisanessentialrequirementtoensurethatsecurityof
supplyisclearlyseentobecentraltothedevelopmentoftheinternalmarket.TSOsconstitutedas
proposedwouldbeideallyplacedtodischargethatresponsibility .
(d)ToenableTSOstocarryoutthe'obligationtosupply',theywouldbegiventhelegalresponsibility
toensurethatotherthaninunusuallyexceptionalcircumstancesadequategeneratingcapacityis
availabletothegridsforwhichtheyareresponsibletomeetthedemandsplacedonthem,including
futuredemandsofarasthatcanbereasonablyforeseenandplannedfor.Whereinthejudgement
ofaTSOadditionalgeneratingcapacityisorwillbenecessarywhichcannotbeobtainedby
arrangementswithotherTSOs,orfromgeneratingcapacityavailabletotheTSO'sowngrid,the
TSOwouldhavetheauthoritytoissuecontractsforadditionalsupplyorinthelastresortto
undertakepowerstationconstructiononitsownbehalf.Adequatearrangementsforconsultations
etc.with(andperhapsforfinalapprovalfrom)agovernmentand/orregionalauthorities,asmaybe
appropriate,wouldneedtobeassociatedwiththedischargeofthisresponsibility .
(e)Itisnotpartofthisproposalthatgeneratingcompanieswouldbefreetomakedirectdealswith
individualcustomers,orviceversa(theTPAelementintheCommission'sexistingproposals).TSO's
wouldpayfortheelectricitytheybuyonthebasissetoutinArticles9-15asstatedabove.Tariffsto
customersofalldescriptionswouldcontinuetobeset,followingconsultationswithdistribution
companies,governmentsorregionalorstatutoryauthoritiesasappropriate,inthesamemanneras
theyareatpresent.Thiswouldcontinuetoensurefairtreatmentalongwellestablishedlinesforthe
greatmajorityofelectricityconsumers.
(f)ATSOconstitutedonthebasisproposedwouldbewellplacedtopromotecompetitioningeneration
whenevercircumstancesmightbeconducivetoit.Bybeingabletoofferalongtermsecuremarket
toacompanywishingtoenterthegeneratingmarketforthefirsttimeaTSOcouldhelptooffset,
possiblysubstantially,thedisadvantagessuchacompanywouldbelikelytohaveinbuyingfueland
raisingcapital(22-24).ATSOwouldofcoursehavetohaveregardtothetechnicalandfinancial
capacityofanyapplicantundertaking,aswouldberequiredunderArticle4.2oftheexistingDraft
Directive .
(g)Thefunctionsreferredtoin50(1V)(b)wouldbecarriedoutbyTSO'sastheirnormalmodeof
operationbutitwouldhavetobeclearlylaiddownthateitherMemberStates,ortheCommunity
actingthroughMemberStates,wouldhavepowerstorequireenvironmental orenergypolicy
considerations tobeincorporated,orgivenprecedence,asmightbedeterminedfromtimetotime,
particularlyinrelationtotheadmissionofnewgeneratingcapacitytotheirgrids.Innocircumstances
otherthanextremeemergencies (e.g.amajornuclearaccident,orsuddeninterruptiontothe
internationaltradeinoilorgas)couldtheresponsibilities ofTSOsforsecurityofsupplybeset
aside.
(h)Thepurposeoftheproposalsin54IVa-gabovetocreateindependentTSOsistointroducea
mechanismforpromotingcompetitioninthegenerationofelectricitywhilecontinuingtoprotect
thepublicinterestinrespectofsecurityofsupplyandmaintainingfairandbalancedtariffs.
v)Gas.WithregardtogastheCommitteebelievesthattheconceptofindependentlyoperatedgasgrids
alongthelinesproposedinIVabove,withthesameobjectivesandrequirements (includingtherefore
responsibilityforsecurityofsupply)wouldservethegasmarketwellwhileprotectingtheinterestsof
thepublic.Obviouslythedifferencesbetweengasandelectricitywouldhavetobeaccommodated in
workingoutthearrangements,butalltheprinciplessetoutin55(IV)arebelievedbytheCommitteeto
beapplicabletogas.
vi)Accountingpractices.Theaboverecommendations (ii—vinclusive)alsorequirechangestoaccounting
arrangements .TSOswouldhavetooperate'transparent'accountstoexposeclearlytopublicviewthe
basisonwhichtheyoperateandfixtheirprices.Distributioncompanies,whetherindependentorpart
ofwiderorganizations ,wouldhavetodothesame.Generatingandgassupplycompanieswouldhave
tounbundletheiraccounts,atleasttotheextentthattheyarealsoengagedinotheractivitieswhichare

NoC73/52 OfficialJournaloftheEuropeanCommunities 15.3.93
partofthebusinessofgenerationorgassupply.Ontheotherhanditdoesnotseemnecessarytoinsist
ongeneratingandgassupplycompaniespublishingtransparentaccounts,sothatgassupplycompanies
wouldineffectbesparedmakingtheiraccountsavailabletothegasproducerswithwhomtheydo
business.Ifitwerejudgedthatgeneratorsandgassupplycompaniesneededtohavetransparentaccounts
toensurefaircompetitionbetweenthemitwouldbesufficienttoenableTSOstoseethemfromtimeto
timeonacommerciallyconfidentialbasis(i.e.withoutpublication).
vii)FutureconsiderationofTPA
(a)TheCommitteehassaidin54that'theobjectiveofTPAshouldbeabandonedaspartofthecurrent
thinkingaboutthefutureoftheinternalmarketforelectricityandgas'.Earlier,in8,theCommittee
saidthat'itdoesnotnecessarilyopposetheCommission'sobjective(ofTPA)inprinciple'.
(b)Thetwostatementsarenotcontradictory .TPAinvolvesopeningtheelectricityandgasmarketsto
directtransactionsbetweengenerators(orgassuppliers)andindividualcustomers.Thecasefor
doingthisisoverwhelmingly basedontheory,whichisthesubjectoffiercecontroversy.Onlyone
country(theUK)isfullycommittedtothepathofTPA.EvensotheUKdoesnotyethaveafully
fledgedmarketsysteminplace,andtherehasbeenbarelytwoyears'experienceoftheinterim
arrangementscurrentlyinoperation.AsthethenHouseofCommonsSelectCommitteeonEnergy
observedinareportonthenewarrangementsinFebruarythisyear(1992),itistoosoontodraw
firmconclusions,anditmaybeafewyearsbeforeanyconclusionscanbedrawn.
(c)GiventhewidespreadoppositiontowhichtheproposalsforTPAhavegivenrise,andtheneedto
makeprogress,itistheCommittee'srecommendation thatthecaseforTPAshouldbere-examined
in1998(justover5years'time),whentheUK'sexperiencecanbeproperlyevaluated,andtherewill
havebeenthreeorfouryears'experienceofthearrangementstheCommitteeisrecommending .
(d)TheCommittee'srecommendations takenasawholewillnotonlyactivelypromotecompetitionin
generationandgassupplyinasafeandfairwayfromthepointofviewofthepublicinterest;they
willalso,ifadopted,createacontextandastructurecapableofalmostimmediateadjustmentto
accommodatetheprinciplesofTPAif,subsequently,itshouldbedecidedtointroducethem.'
ExplanatoryMemorandum
IncaseofdoubtIwishtoexplainthattheRapporteur'sDraftOpinionreflectstheviewsofamajorityof
myStudyGroupcolleagues.ItisalsotruethatmyownapproachtotheCommission'sDraftDirectiveswas
fromthebeginningdifferenttothatofamajorityofmycolleagues.Overdiecourseofseveralmeetingsthey
havelistenedpatientlytomyviewsbutwithoutbeingpersuadedbythem:ofcourse,theoppositeisalso
true.
Thecoredifferencebetweenourtwoapproachesis,Ibelieve,thatmycolleagueshavewantedtoapprove
theconceptofliberalisationwhileatthesametimeenteringawholeseriesofreservationsandqualifications .
Myviewisthatthisapproachproducesconfusionandalackofcredibilityinthefinalresult.Inaddition
therearedifferencesbetweenusonspecificissues,ofwhichsecurityofsupplyisthemostimportant.
IhavebelievedthattheCommission'sproposalshadtobesubjectedtostringentexaminationwhichwent
beyondgeneralstatementsexpressingreservationsaboutthisandthat.GiventheimportanceofthesubjectI
havethoughtitnecessarythentooffersomesolutionstotheproblemsidentified.Sinceweworktoinfluence
thethinkingoftheCommission,aconstructiveapproachalongtheselinesseemednecessary.
IhavegonetothelengthofofferingvirtuallyacompleteCounterOpinionbecause,forreasonswhichI
thinkwillbeapparent,Ididnotthinkiteitherpracticableorhelpfultoproposeamultitudeofamendments
totheDraftOpinion.Iwasalsoinfluenced,Iconfess,byamemberoftheStudyGroup,whodidnotagree
withmyviews,butwhosuggestedtomeneverthelessthatitwouldbehelpfulifIcouldsetoutmyapproach
asawholefortheSectiontoconsider.
Isetoutmyreasoninginalittlemoredetailinthefollowingparagraphs.
A.SecurityofSupply
Securityofsupply,ofbothelectricityandgas,hastobeanessentialcomponentofanynewarrangements
whicharetobeintroducedforthesetwoindustries.TheCommitteeitselfhasalreadyattachedcentral
importancetothisissue,aswitnessitsrequesttotheCommissionreportedin1.2.4oftheDraftOpinion—
arequesttheCommissionignored.
TheCommission'sproposalsdemolishthepresentbasisonwhichsecurityofsupplyhasbeenensuredover
pastdecades,andreplaceitwithnothing.Iregardthisnotasamatteraboutwhichweexpressconcernand
entersomereservations,butasafataldefectintheCommission'sproposals.Idonotthinkwecanapprove
theCommission'sproposals,eveninprinciple,ifwecannotofferasolutiontothe'securityofsupply'
problem.Iwaspleasedthereforetolearnthatatitsmeetingon30NovembertheEnergyCouncildeclared
that'securityofsupplyhastoremainthebasicobjectiveofenergypolicy'.

15.3.93 OfficialJournaloftheEuropeanCommunities NoC73/53
MycriticismoftheDraftOpinionisthat,unliketheEnergyCouncil,itfailstograspthatsecurityofsupply
isthecentralproblemwiththeCommission'sproposals.Itisnotenoughtosaythat'toolittleattentionis
givento...securityofsupply'(2.1.6),orthat'thisaspectisnotgivensufficientweight'(2.2.3)orthat
(summingupintheconclusion)guaranteeofsupplyisunquestionably inthegeneralinterestand'thismust
beborneinmindwhensupplyconditionsaredrawnup'(4.4).
B.Confusion
Regrettably 1believethattheapproachadoptedbymyStudyGroupcolleagueshasledinadvertentlyto
confusiononmanytechnicalissues,ofwhichthetreatmentofsecurityofsupplyisaprimeexample.
Thusitisstatedin2.2.5thatabalanceisneeded'betweenthefreeplayofmarketforcesandsecurityof
supply',aconceptrepeatedin2.2.6concludes'suchabalancecanonlybeachievedthroughajudiciousand
orderlyprocess,withthegradualimplementation ofmeasuresandsufficientflexibilitytoadjustthese
measurestotheultimateobjectives'.Butensuringsecurityofsupplyisnotaquestionofbalance,ofgradualism
orflexibility.Itisanissuetodowiththestructureoftheindustry.
Itispossibletoargue,ofcourse,thatsecurityofsupplyshouldhenceforthbelefttotheplayofmarket
forces.ThisisthesolutionoftheBritishGovernmentatpresent,butclearlyitisnotthesolutiondesiredby
theEnergyCouncil.Anyotherapproachrequiressomeorganisationtoberesponsibleforsecurityofsupply.
Hithertothisresponsibilityhasbeendevolvedongeneratingcompanieswhichhaveinexchangebeengiven
amonopolyorquasimonopolystatus.Ifthatistakenaway,whoelsecanassumethisresponsibility ?
TheresponsibilitycanbetransferredtoGovernmentsbutthisrequiresthemtobeadirectparticipantina
country'selectricitysupplyindustryandisinconsistentwiththeintroductionofcompetition,andisundesirable
onothergrounds.InpracticeaGovernmentwouldhavetorelyontheadviceofaTransmissionSystem
Operator(orsomesimilarbody),sinceonlytheTransmissionOperatorhasthedetailedinformationabout
anelectricitysupplysystemonwhichajudgementcanbemade.ThatiswhyIhaveproposedthat,tomake
competitioningenerationareality,independentTransmissionSystemOperatorsbegiventhisresponsibility .
Theywouldbeuniquelywellplacedtohandleit,anditisbothoperationallyandtechnicallyentirelyfeasible.
ThesameconfusionaboutsecurityofsupplyistobefoundintheDraftOpinionwhenit'approvesthe
liberalisationintroducedinthegenerationstage'(2.1.8andagainin4.4),althoughitisthisliberalisation
whichcreatesthesecurityofsupplyproblemwhich'concern'isexpressedaboutelsewhere.
2.1.8,whichgoesontoapprove'thegeneralderegulationofthetransmissionanddistributionstages'
overlooksthatderegulationofthesetwostagesleadsalmostdirectlytotheintroductionofTPA,withthe
transmissionanddistributionnetworksbeingopenedupprogressivelytoindividualproducersandbuyersto
utilisefordirectdeals.YetTPAiselsewhererejectedintheDraftOpinion.Theeffectsofderegulationon
distributionarediscussedandcriticisedinparagraphs2.8.1-2.8.6asiftheDrafthadnotalreadyapproved
thisin2.1.8,andagainin4.5.
Itseemstometobesymptomaticthatneither'liberalisation'nor'TPA',thoughthetermsareusedfreelyin
theDraftOpinion,areanywheredescribed.
C.Credibility
Finally,inadditiontotheconsiderations Ihavereferredtoalready,Ibelievetherewouldbeanoveralllack
ofcredibilityindeliveringanOpiniontotheCommissionwhichsays,ineffect,'takecare,but'yes'goahead
withyourproposals(otherthanTPA)'whileatthesametimedeclaringthattheCommittee
'hasjustifiabledoubtsastowhethertheCommission'sproposalsinitspresentformistheonlywayof
achievingtheobjectives...'(2.1.4);
'wonderswhetherthemeasuresprovidedforintheDirectivesoughttobereconsidered'(2.4.1);
'wouldurgetheCommissiontocarryoutathoroughstudy'of'theimplicationsoftheseproposalsforthe
environment'(2.11.1);
andexpressesat2.8.6itsconcern'overthezerobenefitforsmallconsumers'whichtheCommission's
proposalsappeartooffer.

NoC73/54 OfficialJournaloftheEuropeanCommunities 15.3.93
Inmyopinion,givensuchdoubtsandreservation(andthereareothersin,forexample,2.1.3,2.1.6,2.4.1,
2.4.2,2.4.3,2.4.4,2.6.2.2andelsewhere),thelogicalandcorrectconclusionintheabsenceofanysolutions
beingoffered,istoaskfortheseissuestobesatisfactorilyresolvedbeforeagreementcanbegiven,evenin
generalterms,toadoptingtheprincipleswhichgiverisetothem.
voting
For:13,against:largemajority,abstentions:26.
APPENDIX 111
totheOpinionoftheEconomicandSocialCommittee
Hiefollowingamendment,basedontheSectionOpinionandsubmittedinaccordancewiththeRulesof
Procedure,wasdefeatedinthedebate:
Deletefrom1.2.6andreplacebythefollowing:
'2.Generalcomments
2.1.Greatercoherence,transparencyandcompetitionarethemainCommission'sobjectivesinthe
liberalizationproposalsforgasandelectricitynetworks.TheESCsupportsthisconceptsinceitconsiders
energyasthebackboneofaneconomy.IfCommunityindustryandconsumersareorganizedwithina
frameworkwhichexploitsefficienciesandmarketorientedconditionsratherthanmonopolisticbehaviour,
itwillbeeasiertomaximizethebenefitsoftheinternalmarket.
2.2.Liberalizingthegasandelectricitymarketsisindispensableifresourcesaretobeallocatedefficiently.
Withsuchanopeninternalmarketforenergy,basedontheprinciplesofcompetition,tradebarrierscanbe
eliminated,securityofsupplycanbeimproved,energycostsreduced—allofwhichwillleadtoanimprovement
inthecompetitiveness oftheEuropeanCommunitybeingaccomplished .
2.3.TheESCbelievesintroducingelementsofcompetitiontoproduction,distribution,andtransmission
ofgasandelectricitywillnotundermineeconomicgrowth.Onthecontrary,thirdpartyaccess(TPA)coupled
withunbundlingwillmaximizeenergyefficiencies.TheESCisconvincedthatamoreefficientenergyand
environmental approachmustbethefocusoffutureenergypolicies.OnlythencantheCommunityand
MemberStatesmakebalancedshortandlong-termdecisions.
2.4.TheEconomicandSocialCommitteesupportstheCommission'sproposalstakingintoconsideration
thestrategicnatureofgasandelectricityandconsiderscompetitionanecessaryevolutionaryprocessif
Europeanindustrywantstobecome,moreefficientandincreaseitsinternationalmarketshare.Acohesive
internalenergymarketwillalsodecreaseenergyprices.TheCommission'sproposalsallowforMember
Statestoensurethatefficiencygainsarepassedontothesmallconsumer.Furthermore,largeconsumers
abletotakeadvantageof'thefreedomtoshoparound'topurchasetheirenergywillpasstheirgainsonto
theconsumerthroughmorecompetitivelypricedgoods,greaterprofitsandmoreemploymentprospects.
3.Unbundling
3.1.Unbundlingmeansseparatingmanagementandaccountingprocessesofthefollowingitems:pro­
duction,distribution,andtransmissioninthecaseofelectricityandsupply,distributionandstorageinthe
caseofgas.Thiswillallowthenecessarytransparencytooptimizetheentiresystem'smanagementby
promotinggreatercostconsciousnessandidentifyinggovernmentsubsidies.
3.2.TheESCenthusiastically supportsunbundlingasitintroducestransparencywhichisessentialfornew
actorstoenterthemarketonasequalafootingaspossible.Theprofit-makingcentreconceptshouldbe
activelypursuedbyutilities.Ithasbeenincreasinglyadoptedbylargecompaniesinallsectors(evenpreviously

15.3.93 OfficialJournaloftheEuropeanCommunities NoC73/55
government-regulated ones)withoutinsurmountabledifficulties ,therefore,itsapplicationintheenergysector
shouldnotbeconsideredabnormalorirregularinanyway.
4.Liberalization
4.1.Liberalizationwillallowmoreproducersandsupplierstoenterthemarket.Competitionwillincrease,
pushingupefficienciesandexertingadownwardpressureonprices.Ratherthandestabilizingthemarketas
utilitiesoftenclaim,anincreaseinthenumberofactorswillstabilizepricesatthemarketrate.
5.Thirdpartyaccess
5.1.Consumerchoice
5.1.1.Consumerswillhavethefreedomtoshoparoundforthecheapestavailablegasandelectricityas
undertheCommission'sliberalizationdirectives,eligibleconsumerscanoptfordecreasingsecurityofsupply
inreturnforcheaperpricesiftheyarewillingtoassumeextrarisk.Implementingthisoptionrequiresthe
distributortoofferconsumersalternativesolutionsandthusensureamoreequalrelationshipbetweenthe
twoparties.Customers,however,mustbeinapositiontoswitchfuelsinordertoobtaintheirrequired
energyneeds.
5.1.2.Forexample,alargecompanycouldreceiveaconsiderablepricereductioninelectricitypricesifit
werewillingtohaveitssupplyinterruptedduringabriefperiodoftimeonshortnotice.Toacceptthis
possibility,theconsumerwouldhavetofillthesupplygapwithanothersource.Itcouldforinstancegenerate
itsownpowerthroughcombinedheatandpower(CHP).Thisalternativewouldbecomeevenmoreattractive
ifexcesscapacitycouldbesoldtothegridatareasonableprice.Atpresent,thisisnotthecaseinmany
MemberStates.
5.1.3.ConsumerswhopursuetheiroptionsundertheTPAregimewouldprobablywishtomakeback-up
arrangementswithoneormoredistributioncompaniesincasethemaindistributordefaultsonhisobligation.
5.1.4.Undertherightconditions,theESCbelieveslargeconsumersanddistributioncompaniescanreap
thebenefitsoftheCommission'sproposalsthroughgreaterchoiceandimprovedservice.Forthosecustomers
whodonotwishtotakeadvantageoftheiraccessrights,aswellasforthecaptiveconsumer,securityof
supplythroughthepricetariffstructurewouldbeguaranteed.Thenatureofanefficientandcompetitive
marketcoupledwithplannedincentivesfordistributionCompanieswillensurethatbenefitsarepassedonto
thecaptiveconsumers.Inaddition,aclimateshouldbeencouragedallowingtheCommissiontodecreaseits
threshold,therebygivingallconsumersaccesstothedirectbenefitsofTPA.
5.2.Distributors
5.2.1.Thecombinationofallowinglargeconsumersthepossibilitytonegotiategasandelectricityprices
directlywithproducersandincreasingcompetitionamongdistributorswillstimulatetheinternalenergy
marketimmensely.Inthisnewsystemdistributorswillcontinuetomaintaintheresponsibilitytosupply
withinaregulatedframework(i.e.possiblyviaanindependentoperator).Themeansformaintainingthe
standardsofthepresentsystemshouldbebasedontheprincipleofsubsidiarity .
6.Securityofsupply
6.1.Securityofsupplyisalwaysmentionedbyproducersasbeingatriskwiththeintroductionof
liberalization .DiscrepanciesintheESC'sviewshouldnotarisesincewherethereisdemandthereisamarket.
Furthermore,governmentsstillhaveconsiderablepoweroverinvestments,securityofsupplyandfuelchoices
underthedirectives.Responsiblepurchasersnegotiatingnon-nationalcontractshoweverwillneedtowork
withinaneffectiveandorganizedframework.
7.Environment
7.1.Ithasbeenrecognizedbyallpartiesthatunderthepresentconditions,increasedcompetitionwill
encouragegreaterinvestmentsinelectricitygeneratingfacilitieswhichusegas.Ifthereisamovetowardits
usethroughCHP,theresultingdecreaseduseoflessefficientpowerstationswouldhaveobviousbeneficial

NoC73/56 OfficialJournaloftheEuropeanCommunities 15.3.93
consequencesfortheenvironment .Inaddition,companiesinacompetitivemarketwillhavetousealltheir
resources,includingfuel,morecarefully,whichwillboostenergyefficiency.
8.Investments
8.1.Theargumentusedbyutilitiesisthatliberalizationwillnotcreatetheproperclimateforinvestingin
infrastructure .TheESCisconvincedthatthenecessaryfinancingtoexpandcapacityanddevelopthegrids
willbecoveredbynewdemandsandcompanyprofits.Providedthatobstaclestotradeareremoved,
companieswillinvestinnewplantsinordertomaintaintheirexistingmarketshareanddevelopnewmarkets.
Riskwillbesharedmoreequitablybetweentheinvestorandthecustomer,ratherthanbeingbornepurely
bythecustomerasatpresent.
8.2.TheESCbelievesthatintheunlikelyeventthatinadequateinvestmentswerebeingplannedfor
infrastructure,governmentscanunderthedirectivesstepintoascertainthattheybemade.Ratherthanhaving
adestabilizingeffect,theCommissiondirectivescreateapositiveclimatewhichencouragesdiversificationof
investmentsinsupply(andstoragecapacityinthecaseofgas)whichwouldreduceexposuretofuelprice
fluctuationsandincreasessupplyavailability.
9.Conclusions
9.1.TheESCstronglysupportsliberalizationofthegasandelectricitymarketsandthereforeupholds
ThirdPartyAccess.UnbundlingwillincreaseefficienciesandthetransparencyofaEuropeanenergymarket.
9.2.Thirdpartyaccesswillprovidetheclimateandopportunitytobringanentirerangeofnewproducers
andsuppliersontothemarketwhichwillincreasecompetition.Itwillencourageabetteruseofthegrids
andgreateroptionsforthoseconsumerswithachoicethusavoidingnetworkduplication.
9.3.Largeconsumers,orconsortiums,willhavethefreedomtonegotiatecontractswiththedistributors
orgeneratorsoftheirchoice,captiveconsumerswillinturnbenefitfromthegainscreatedbyliberalization .
9.4.Themarketwillbestimulatedandtheclimateprovidedfortradebarrierstobeeliminated,security
ofsupplyimprovedandenergycostreducedforallconsumers.
9.5.TheCommunitiesinitiativeforachapteronTransEuropeanNetworksintheMaastrichtTreaty
providingfortheupgradingofinter-connections willencouragecross-bordertransfersandmaximizegains
underTPA.'
Resultofvotebyname
For:9,against:114,abstentions :15.
Thefollowingmembers,presentorrepresented,votedfortheamendment :
Mr/Mrs:ASPINALL,JocelynBARROW,BELL,BLACK,GUILLAUME ,LITTLE,MORELAND ,REA,
ROBINSON .
Thefollowingmembers,presentorrepresented,votedagainsttheamendment :
Mr/Mrs/Miss:ABEJON,AMATO,ANDRADE,ARENA,W.A.ATTLEY,BAGLIANO,BELTRAMI,
BERNABEI,BLESER,BOISSEREE,BONVICINI,BORDES-PAGES ,BOTTAZZI,BREDIMASAVOPOUL­
OU,BRIESCH,VascoCAL,CARROLL,CASSINA,CEYRAC,CHEVALIER ,CHRISTIE,COLOMBO,
CONNELLAN ,vanDAM,DAWSON,vonderDECKEN,DELOROZOY ,vanDIJCK,DONCK,DOUVIS,
DRAIJER,DRILLEAUD ,DUNKEL,ENGELEN-KEFER ,EULEN,FLUM,FRANDI,FREEMAN,GAFO
FERNANDEZ ,GEUENICH,GIACOMELLI ,GOMEZMARTINEZ ,GREDAL,HAGEN,JANSSEN,JENK­
INS,deKNEGT,LACAMARTIN,LAPPAS,LARSEN,LAUR,LIVERANI,LÖW,LYONS,MADDOCKS ,
MARGALEF MASIA,MARVIER,MAYAYOBELLO,McGARRY,MERCEJUSTE,MERCIER,MEYER­
HORN,MOBBS,MOLINAVALLEJO,MORIZE,MORRIS,MOURGUES,MÜLLERR.,MUNlZGUARD­
ADO,NIELSENB.,NIELSENP.,NIERHAUS,NOORDWAL ,OVIDEETIENNE,PANEROFLOREZ,
PARDON,PASQUALI,PE,PELLARINI,PELLETIERCh.,PELLETIERR.,PERRIN-PELLETIER ,PIETTE,

15.3.93 OfficialJournaloftheEuropeanCommunities NoC73/57
POMPEN,PRICOLO,PROUMENS,QUEVEDOROJO,RAMAEKERS ,RODRIGUEZ GARCIA-CARO ,
ROMOLI,ROSEINGRAVE ,SAITIS,SALA,SANTILLAN CABEZA,SANTOS,SAUWENS,SCHADE­
POULSEN,SCHMIDT,SCHMITZ,SCHNIEDERS ,vonSCHWERIN ,SEQUEIRA,SMITH,STECHER
NAVARRA,TESOROOUVER,TIXIER,TUKKER,VANDERMEEREN ,VELASCOMANCEBO,VER­
BOVEN,WAGENMANS ,WALDACK,WICK,ZUFIAURNARVAIZA .
Thefollowingmembers,presentorrepresented,abstained:
Messrs:ATAIDEFERREIRA,BEALE,CEBALLOHERRERO,FRERICHS,GARDNER,GIESECKE,GROB­
EN,KAZAZIS,LUSTENHOUWER ,PEARSON,PETERSEN,PETROPOULOS ,STOKKERS,STRAUSS,
WHITWORTH .
OpiniononTheEuropeanCommunityandEconomicCooperationintheMiddleEast
(93/C73/11)
On25March1992theEconomicandSocialCommittee,actingunderthefourthparagraph
ofArticle20ofitsRulesofProcedure,decidedtodrawupanOpiniononTheEuropean
CommunityandEconomicCooperationintheMiddleEast.
TheSectionforExternalRelations,TradeandDevelopmentPolicy,whichwasresponsible
forpreparingtheCommittee'sworkonthesubject,adopteditsOpinionon15January1993.
TheRapporteurwasMrBeale.
Atits302ndPlenarySession(meetingof28January1993)theEconomicandSocialCommittee
adoptedthefollowingOpinionunanimously .
1.Introductorycomments
1.1.InitsOwn-initiative OpinionofJuly1989(*),
ontheCommunity'sup-datedMediterranean Policy,
anAdditionalOpinionofApril1990(2)andasecond
AdditionalOpinionofNovember1991(3),theCom­
mitteeputforwardviewsandsuggestionswithregard
totheCommunity'spolicyontheMediterranean area
asawhole.Insodoing,itstressedtheneedforeconomic
andsocialdialogue,preferablyatregionallevel,with
themaineconomicandsocialinterestgroups.1.3.Overtheyearstherehavebeenaseriesofagree­
mentsbetweentheCommunityandtheMiddleEast
States.TheCommunitymaintainscloserelationswith
allsouthernMediterranean countries,withtheexcep­
tionofLibya,aswellaswithJordan.Therehasbeen
anagreementontradeandeconomiccooperationwith
Israelsince1975,andcooperationagreementswere
signedwithEgypt,Jordan,SyriaandLebanonin1977.
TheCommunityisalsothemainproviderofaidto
theOccupiedTerritories.From1973theCommunity
startedtodeveloplinkswiththeArabLeagueviathe
Euro-Arabdialogue,althoughlittleornoprogresshas
beenmade.Acooperationagreementwasrecently
signedwiththeGulfCooperationCouncil(GCC),
whichshouldsoonbesupplemented byafree-trade
agreement.WiththeadoptionoftheNewMediterrane­
anPolicybytheCouncilinDecember1989,theCom­
munitymadeitclearthatitsobjectivewasnotmerely
tostrengthenitsbilateralrelationswiththesouthern
Mediterranean States,butalsotopromoteregional
cooperation .Thisisclearlydemonstrated bythefact
thatalmosthalfoftheNewMediterranean Policy's
five-yearbudgetisearmarkedfortheco-financingof
regionalprojects.1.2.ThepresentOpinioncouldactasastimulusfor
suchadialogueinthesouth-easternMediterranean area
andtheMiddleEast.Thedialoguewouldconcentrate
initiallyontheopportunitiesforregionalcooperation
andCommunitysupportwithintheframeworkofEuro­
Mediterraneancooperation .TheOpinionhighlightsthe
economicandsocialgroups'interestineconomiccoop­
erationandstabledevelopmentintheregionandlooks
atvariousformsofcooperationandsupport.
(!)OJNoC221,28.8.1989,p.5.
(2)OJNoC168,10.7.1990,p.14.
(3)OJNoC40,17.2.1992,p.19.