The liberalisation of the electricity sector in the CEEC

The necessity of implementing the acquis communautaire has, over the last five years, certainly been the most powerful impulse for the reform of the electricity sector in the candidate countries.

As regards electricity, the acquis, breaks down into two sub-groups:

The regulations relative to the “Electricity transit” Directive (90/547/EC), which aims in particular at ensuring non-discriminatory third party access (TPA) to the networks – and thus to the link with the Western European electricity production and distribution grid (UCPTE* system) – and at allowing and facilitating direct negotiations between producers, distributors and final consumers.

The regulations relative to the setting up of a single European electricity market, as defined in the “Electricity” Directive (96/92/EC), which aims at increasing efficiency and security of supply. It leads to the end of the state monopoly model and implies in particular, in the applicant countries: 1) the creation of regulatory bodies for the electricity sector; 2) the setting up of competitive conditions in the sector whilst strengthening the competitiveness of the local players; 3) the introduction of transparency in pricing.

Overall, the applicant countries have efficiently transposed the European acquis regarding the regulation of the energy sector and, in particular, the production and distribution of electricity.

With the exception of Romania, all the eleven other countries were thus able to close chapter 14 on “Energy”, by December 2002 at the latest. As regards electricity, only one transitional period was granted, to Estonia, which has four additional years in which to open its domestic market, strongly concentrated in the local production of electricity from oil shale.

Major positive improvements are indeed visible: establishment of regulators in all the countries; connection of Poland, the Czech Republic and Hungary in particular to the UCTPE European network; authorisation for consumer access to foreign producers (since 1st January 2003, foreign producers can for example contribute up to 33% of the Hungarian electricity consumption).

The candidate countries are engaged in ambitious programmes aimed at the creation of a competitive market environment. The generally adopted plan first involves the segmentation of the activities of the old monopolies, then the privatisation of their assets. Slovenia and Romania have separated the various activities. In the Slovak Republic, privatisation of distribution is complete and scheduled for production in 2003. Partial privatisation of production has been operational in Hungary since 1995. Poland and the Czech Republic have each drawn up a calendar beginning in 1998 and providing for the complete opening of the market in 2005/2006.

The impact on tariffs of the opening up of the markets has until now been variable. The trend was towards an upward adjustment in Romania, the Slovak Republic and Slovenia in order to restore the profitability of the operators. It was however possible for price reductions to be made on the liberalised market in the Czech Republic, where eligible customers (large industrial consumers) who had opted for a change of supplier would thus have reduced their costs by 6% in 2002. Price reductions of the same order are also observed in Poland. However, the number of companies involved remains low. In Hungary, 5 to 10% of the customers would be able to choose the liberalised market in 2003; for the others, prices remain fixed by law. In general, the returns on investments appear on the whole too unattractive in the eyes of private investors, whilst at the same time the need for capital investment in the sector remains pressing.

For more analyses, see the

enlargement website of DREE.