Spotlight turns to gas in EU energy battle

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The battle over energy liberalisation shifted to the gas sector yesterday (19 May) when Parliament’s industry committee threw its weight behind France and Germany in their bid to prevent the forced break-up of large integrated gas groups.

MEPs on the Parliament’s industry committee voted on Monday (19 May) to reject a proposed gas directive that would force groups such as Gaz de France and RWE Gas in Germany to sell off their pipelines and storage assets in a bid to force more competition onto EU markets.

The vote represents a victory for France, Germany and six other member states which have together proposed an alternative to the Commission’s controversial proposal to break up energy utilities, a process known as ‘ownership unbundling’.

The committee backed a compromise text similar to the Franco-German alternative on Monday but it remains to be seen whether the full Assembly will back it again in a plenary vote scheduled on 16-19 June.

Speaking after the vote, Angelika Niebler (EPP-ED, Germany), chairwoman of the Parliament’s industry committee, expressed her satisfaction with the outcome. “I am happy because we have a third-way option,” she said, according to Bloomberg.

Different approaches for gas and electricity?

Monday’s vote also indicates that a broader compromise package will eventually need to be found for both gas and electricity as the Parliament appears to be heavily divided over the issue. 

Indeed, in a vote on electricity earlier in May, MEPs on the industry committee decided on that occasion to back the Commission’s proposals to break up energy firms (EURACTIV 07/05/08).

But faced with strong resistance from France and Germany, the Commission last week tabled a compromise proposal for the gas sector only, saying it would seek a solution for electricity at a later stage (EURACTIV 16/05/08). 

It is this compromise proposal that the industry committee supported in its vote on Monday, although it left some of the details for decision later. “Given the very short time since the Commission presented its new compromise plans, the committee decided […] not to hold the final vote on the report to allow time for further discussions with a view to finding a broader consensus on some key issues,” stated a Parliament press release on Tuesday (20 May). “The Industry Committee will therefore return to the report and may vote on further compromise texts at its next meeting,” the statement added.

With the Parliament's industry committee taking opposite stances on gas and electricity, the debate is now shifting to whether the proposal should be split up, with the Franco-German 'Third Way' option made available only for the gas sector.

However, according to a Council source, attempts to differentiate the two markets are likely to run into opposition from a majority of countries in the EU Council of Ministers.

"The staunchest supporters of ownership unbundling are now saying there should be a differentiation between gas and electricity as a safety exit," said a diplomat from one of the eight countries opposed to unbundling, explaining that "there is the idea that gas is less mature as a market".

"But to go to the bottom of things, what they want is to attack EDF and E.ON," added the diplomat, who was speaking on condition of anonimity because of the sensitivity of the talks.

According to the diplomat, a majority of EU countries would reject this approach, however. "What is clear is that, in COREPER, the Presidency and a majority of member states" beyond the group of eight, said they were in favour of treating gas and electricity markets in the same way, he said.

"What we are saying is that for electricity, there should be an option on ownership unbundling and an alternative. For gas, it should be the same."

At a press briefing on 16 May, the Commission's energy spokesperson Ferran Tarradellas Espuny confirmed that the draft compromise deal was "just for gas". Explaining the move, he said that once the gas issues are solved, finding a compromise on electricity would be "much easier".

The spokesperson firmly denied suggestions that the Commission was backtracking on its earlier stance to treat gas and electricity in the same way. "The Commission still considers that the problems that are affecting electricity and gas markets are the same and they need similar solutions," Tarradellas said. He added that the Commission was now seeking "to address the question of gas first because technically it has particular problems". 

Tarradellas added that the Commission now "accepted that a company can remain basically integrated so long as particular measures are taken that ensure that in practice, the transmission grids are operated de facto separately from the supply activities".

In its energy liberalisation proposals presented in September 2007, the European Commission argued in favour of treating gas and electricity markets in the same way, saying energy firms such as EDF and E.ON should split their energy production and transmission businesses - a process known as 'ownership unbundling'.

In an explanatory statement, it said ownership unbundling should apply to both because "the fundamental conflict of interest" between energy generation and transmission "applies equally to both sectors".

  • 27-29 May 2008: Parliament's ITRE committee to vote on further compromise amendments.
  • 6 June 2008: Energy Council to aim for "general approach" on the liberalisation package. Energy ministers could then formally adopt the plans under the French Presidency in the second half of the year (at first reading). 
  • 16-19 June 2008: Parliament plenary vote on the proposed gas directive (La Russa report). 
  • If the Council's position is different from that of Parliament, a second reading must take place.

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