EU Commission to take unbundling one step further
The European Union’s Competition Commissioner, Neelie Kroes, is adamant that further unbundling in Europe’s energy markets is essential to create the right investment climate and to halt anti-competitive practices.
At an industry seminar in London, Kroes said: “I am convinced that further unbundling of network and supply activities is needed to effectively remove conflicts of interest and to create the right investment incentives. Investments should be made when it is good for the network business and not only when it is good for the integrated company itself.”
Kroes warned member states that legal unbundling was proving to be insufficient in light of the Commission’s enquiry into the EU energy markets and said that ownership unbundling would most certainly figure among the concluding recommendations in the Commission’s final report, to be published in January.
“We have indications that legal unbundling has not prevented information flows between network and supply units. All these examples strengthen the case for moving towards ownership unbundling and this is definitely something I will discuss with my colleagues in coming months,” Kroes said.
Currently, the EU energy directives require only the legal separation of generation and sales activities, and thus allow the companies to remain under the ownership of a common parent.
A representative from one of the UK’s intensive energy associations welcomed the Commission’s plans to push for ownership unbundling, but urged the authority to take action fast. Kroes called on the Spring EU Council as well as the forthcoming German presidency to endorse the recommendations and to back the Commission’s wish to take the issue one step further. “Time is not our friend,” she insisted, adding that the publication of the Strategic Energy Review at the beginning of next year would be a credibility test for the Commission. The Sectoral Competition Energy Enquiry and the Strategic Energy Review to be revealed early next year will form the foundations of an Energy Action Plan to be adopted by member states later in 2007.
Legally implementing ownership unbundling would not be an easy task, Kroes admitted, with certain member states already having to be constantly reminded of the current energy Directive. A majority of EU regulators back full ownership unbundling and sent a recommendation letter last month to the Commission highlighting their near unanimous support for such a move.
Although Kroes refused to be drawn on details of the energy sectoral enquiry, in which the Commission conducted dawn raids on certain energy companies in five different companies, she did not rule out that cartel-like practices on price fixing had emerged. “It is too early to say at this time, but of course it could be the case,” she said. She added that the Commission would continue to fight such behaviour. Kroes insisted the Commission would keep the pressure on member states and companies to open their power and gas markets, with emphasis on transparency.
The conclusions of the energy enquiry presented in January will also include new analysis of the LNG market, an increasingly important factor for European gas markets, as well as studies of the downstream electricity market and a probe into the functioning of power exchanges.
She reiterated her firm stance on forcing member states and energy incumbents to comply with the Directive. “Europe needs open markets. I am ready to force them open,” Kroes said.
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