Notice pursuant to Article 19 (3) of Chapter II of Protocol 4 to the Agreement between the EFTA States on the establishment of a Surveillance Authority and a Court of Justice concerning case No COM 0100 - Stockholm Energi (94/C 292/09)

A. The application and notification

1. On 2 August 1994, the EFTA Surveillance Authority received an application pursuant to Article 2 and notification pursuant to Article 4 of Chapter II of Protocol 4 to the Agreement between the EFTA States on the establishment of a Surveillance Authority and a Court of Justice (SAC-A) of agreements concerning cooperation in the energy sector from Stockholms kommun, Stockholms Stadshus AB and Stockholm Energi AB.

2. The same agreements have been notified to the Swedish Competition Authority under national competition law on July 18, 1994.

B. The parties

3. Stockholm Energi is owned to 91 % by Stockholms Stadshus, which in turn is owned by Stockholms kommun. The remaining shares are owned directly by Stockholms kommun. The total turnover of Stockholm Energi in 1993 was approximately SKr 6 billion almost all of which was achieved in Sweden from energy-related activities. Stockholms Stadshus' turnover for the same period, including that Stockholm Energi, was approximately SKr 15,4 billion most of which was generated in the Stockholm region from housing and utility-related activities. Stockholms kommun's total turnover was some SKr 28 billion in 1993, also including non-commercial activities such as taxes and government funding.

4. Scarcroft is a recently formed subsidiary to Yorkshire. The Yorkshire group is mainly active on the British electricity market in the Yorkshire and Humberside regions. Yorkshire's 1993/94 group turnover was £ 1307,9 million. Yorkshire, which was previously publicly owned, was privatized at the same time as the British electricity market was deregulated.

C. The agreements

5. There is a shareholder's agreement between Stockholms Stadshus AB, Yorkshire Electricity Group Plc (Yorkshire) and Scarcroft Holdings Ltd (Scarcroft) governing the relationship between Stockholms Stadshus and Scarcroft in regard to Scarcroft's purchase of approximately 17 % of the shares in Stockholm Energi. It includes an obligation for Yorkshire, and companies in which it has a controlling interest, not to enter into any kind of strategic alliances with any company which competes or is reasonably likely to compete with Stockholm Energi on the Swedish electricity, gas or district heating or cooling market. Similarly, Stockholms Stadshus and companies in which it has a controlling interest shall not enter into any kind of strategic alliances in the United Kingdom which are directed against, or otherwise in competition with, Yorkshire's business within energy production, distribution and supply. Furthermore, there are several conditions relating to the safeguarding of Yorkshire's interests in Stockholm Energi.

6. In addition, there is a share subscription agreement between Stockholms kommun (the municipality of Stockholm), Stockholms Stadshus, Yorkshire, and Scarcroft governing Scarcroft's actual purchase of approximately 17 % of the shares in Stockholm Energi.

7. The agreements were signed on 8 June 1994. The shareholders' agreement is valid until 31 December 2005, with automatic five year extensions unless 24 months written notice is given by either party. Both agreements are conditional upon the approval and/or clearance from relevant authorities or bodies, e.g. the Swedish Competition Authority, and the execution of certain obligations on the part of Stockholms kommun before 15 December 1994.

8. A main objective of the cooperation seems to be to increase the competitiveness of Stockholm Energi and Yorkshire on their respective home market through the exchange of market and technological know-how between the parties. Yorkshire's aquisition of shares will also strengthen Stockholm Energi financially.

D. The market

9. The arrangements mainly affect the product market(s) for electricity. The geographical markets affected are primarily Sweden and the United Kingdom, in particular England and Wales. Due to structural and regulatory differences, Scotland and Northern Ireland can be excluded for the purpose of assessing the effects on the British electricity market. There is no direct competition between national operators of different countries due to existing national regulations.

10. The Swedish Electricity Act (1902:71) gives regional concessions to producers and distributors of electricity, in practice a granting of regional monopolies. Furthermore, prices are regulated to a considerable degree. The Swedish Parliament has, however, recently adopted a Government proposal on a deregulation of the electricity market allowing for competition within the country, which will enter into force on 1 January 1995.

11. The total turnover of electricity in Sweden was approximately 140 TWh in 1993. There are at least eight significant electricity producers in Sweden. The two major producers, Vattenfall and Sydkraft account for some 50 and 20 % respectively of the total turnover, whereas Stockholm Energi accounts for less than 10 %.

12. In the United Kingdom, national electricity legislation functions as a barrier to entry. However, the British electricity market has been deregulated to allow a considerable degree of competition between operators within the country.

13. The total turnover in England and Wales in 1993 was approximately 270 TWh. The three main producers of electricity in England and Wales, National Power, Power Generation and Nuclear Electric, have a combined share of the total production of approximately 85 %, whereas Yorkshire's share is 1 % or less. As regards the distribution and sale of electricity, 12 regional companies are active in addition to the major producers. Yorkshire is one of these regional companies with a total market share of less than 10 %.

E. The intentions of the EFTA Surveillance Authority

14. In view of the limited transnational trade in electricity, the relatively weak position of the parties on their respective home market and the seemingly limited restrictive effects of the cooperation, the EFTA Surveillance Authority intends to take a favourable view on the agreements summarized above and in due course close the file with the sending of an administrative letter ('comfort letter`). Before doing so it invites interested parties to send their comments within a month from the date of publication of this notice, quoting file number COM 020.0100, to the address below:

EFTA Surveillance Authority,

Competition Directorate,

1-3, Rue Marie-Thérèse,

B-1040 Brussels.