WRITTEN QUESTION P-1688/01

by Renato Brunetta (PPE-DE) to the Commission

(1 June 2001)

Subject: Purchase by Electricité de France (EDF) of a 20 % holding in Montedison

On 24 May 2001 Electricité de France (EDF), the French energy company, officially took up a 20 % stake in Montedison, the holding company which controls Edison-Sondel, an Italian private energy company (electricity and gas).

With the support of the French Government and French legislation, EDF has managed thus far to maintain its monopoly in the French electricity sector.

Exploiting its dominant position in a large national market, it has attempted on several occasions to acquire large holdings in private companies operating in the energy sector in other EU Member States.

Given that similar expansion attempts in other Member States have been challenged, and that an operator which is a 100 % publicly-owned monopoly in one Member State and is not quoted on the stock market is able to use the profits generated by its monopoly to gain a hold on other national markets, thus creating imbalances and distortions, how does the Commission - particularly its President and the Commissioners responsible for competition and energy policies - intend to guarantee the proper functioning of the internal market by ensuring fair competition, and what steps does it intend to take to prevent imbalances of this kind from occurring?

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.