WRITTEN QUESTION P-1664/01

by Francesco Fiori (PPE-DE) to the Commission

(1 June 2001)

Subject: Asymmetries in the internal electricity market

The failure to ensure uniform transposition of Community directives which are designed to liberalise public utilities is creating serious distortions within the internal market.

In the energy sector in particular, France has found ways of preserving essentially intact the role of Electricité de France (EDF), a state-owned monopoly in the electricity sector.

EDF is taking advantage of its dominant position on the French market (which it is guaranteed under national law) in order to acquire significant holdings in private companies operating within the same sector in other Member States. It has recently announced that it is to acquire 3,9 % of Montedison Spa, an Italian multi-utilities company which is also active in the electricity sector.

Such a state of affairs is unacceptable since the failure to establish a level playing field as required under Community law places the sector's operators in different positions according to their Member State of origin and causes serious discrimination against operators from Member States which are more progressive in terms of liberalisation.

This situation also thwarts the liberalisation process initiated by the Community and discourages the Member States from actively pursuing such an objective. This will have an increasingly serious effect on the competitiveness of the European economic system.

In view of the above, what action is the Commission intending to take in order to prevent public companies which enjoy a monopoly status guaranteed under national law from exploiting that privilege in order to seize control of other businesses which are now denied such a privilege?

Joint answer to Written Questions P-1664/01 and P-1688/01 given by Mrs de Palacio on behalf of the Commission

(13 July 2001)

In many respects the progressive creation of the internal market for electricity has been highly successful. Whilst the Directives themselves require market opening for electricity of only 30 % (rising to ± 35 % in 2003), an overwhelming majority of Member States have decided to go far further. Four Member States have already opened 100 % of their electricity markets, a further four will do so by 2003 and another three will open up their markets fully by 2007 at latest.

A similar picture exists regarding qualitative market opening - ensuring effective third party access to networks. It is rarely disputed that the most effective method to ensure non-discriminatory access to these essential facilities is through regulated third party access, enforced by an independent regulator, and real and effective unbundling of transmission and distribution from generation and supply.

However, this more rapid than expected movement towards full market opening and reliance on regulated third party access has resulted in very important market distortions and increasing inequalities between competing Community companies. Some Member States have limited market opening to the minimum legally required. This wide difference in both quantitative and qualitative market opening has lead to the progressive development of a very uneven internal market.

The Commission had a debate last 20th June on cross-border investment restrictions and energy market distortions.

As regards differences in the current extent of liberalisation in the energy sector, the Commission confirmed that these should be addressed by the rapid adoption by the Council and the Parliament or the Commission's March 2001 proposals to further liberalise energy markets (all non-domestic electricity open to competition by 1st January 2003, non domestic gas open to competition by 1st January 2004 and all customers (including domestic) open to competition by 1st January 2001 - see IP/01/356).

The Commission agreed that to address distortions of competition and inequalities in the short term before adoption of the further liberalisation proposals:

- it would monitor Member States to ensure timely and proper implementation of the existing electricity and gas liberalisation Directives and ensure that the Treaty's competition rules are applied fully in the energy sector;

- in particular, the Commission will continue to apply the rules of the Treaties on restrictive business practices and abuse of a dominant market position against restrictions and distortions in supply competition and against discrimination in network access, to scrutinise any state aid granted to electricity and gas companies

(including state aid in the nuclear sector) and to apply competition rules against limitations on consumer's right to choose a supplier. Examples of such cases treated by the Commission in the last two years are the interventions against joint selling (e.g. GFU and EDF/CNR), reinforcements of dominant positions through mergers (e.g. VEBA/VIAG, EDF/EnBW), privileged network access (e.g. Danish/German and French/UK interconnectors), stranded cost schemes and locking-in of key customers (Gasnatural/Endesa).

The Commission also agreed that if adoption of the proposals to further liberalise energy markets were delayed, it would consider adopting itself Decisions or Directives, on the basis of Article 86 (ex Article 90) of the EC Treaty, and notably its third paragraph, to address possible distortions of competition resulting from different levels of liberalisation. Such and approach, whereby the Commission adopted Directives addressed to the Member States based on Article 86(3) of the EC Treaty was previously used in the telecommunications sector.