Vestager: Gazprom is partitioning markets in Central and Eastern Europe

Margrethe Vestager at the Parliament hearing [European Parliament / Flickr]

Margrethe Vestager [European Parliament / Flickr]

Russia’s Gazprom may have leveraged its dominant position by obtaining unrelated commitments on pipelines from its customers, as a condition of supplying gas to Bulgaria and Poland, says Margrethe Vestager.

Margrethe Vestager is the EU’s Commissioner for Competition. She spoke to EURACTIV’s Georgi Gotev and Sarantis Michalopoulos.

Why are there still EU countries with energy monopolies, and how does this affect energy cost?

We all benefit from competitive energy market conditions, because utilities try to become more efficient than their rivals, by keeping costs down and offering better services. Many different factors affect the price of energy, but typically prices are lower in countries that have competitive energy markets.

EU law aims to remove obstacles to competition in energy markets. The department of the European Commission I lead enforces these rules throughout the EU. In some EU countries, competition conditions are not good yet, and we need to work on that. However, we can only create the conditions for competition, not competition itself. That is the task of competitors.

What is the main challenge for the European Commission regarding Greece’s electricity market?

Competition in Greek electricity markets is very limited. This affects generation and wholesale supply, and also the supply that reaches end consumers, which is virtually a monopoly. This is bad news for consumers and for the economy. Clearly, there is a need to strengthen competition.

The Commission reached this conclusion in a 2008 decision, which concluded that PPC had quasi-exclusive access to lignite – the cheapest fuel in Greece – and called on Greece to extend access to competitors too. That decision is currently before the EU courts. In general, it is important for competition that Greece has the right regulatory framework and a strong and independent regulator.

Last year, the Commission informed Bulgarian Energy Holding (BEH) that the territorial restrictions on resale contained in BEH’s electricity supply contracts for the unregulated Bulgarian wholesale electricity market may breach EU antitrust rules. In a separate investigation, the Commission is investigating whether BEH’s gas supply subsidiary, Bulgargaz, and its gas infrastructure subsidiary, Bulgartransgaz, might be hindering competitors from accessing key gas infrastructure, in breach of EU antitrust rules. What is the status of these procedures?

In both cases we informed the companies of the objections raised against them and we are following our procedures – strictly, as we always do – before taking the next steps. Our objections in the electricity case were sent to BEH in August 2014. Currently, we are analysing the replies we have received. In the gas case, the Commission sent its objections to BEH, Bulgargaz and Bulgartransgaz in March 2015. All three companies now have the right to reply in writing and to request an oral hearing.

In June 2014, the Bulgarian energy regulator asked the Commission to investigate if renewable energy producers in Bulgaria are receiving excessive state aid. What is happening following this request?

The Commission received the concerns from the Energy Regulator that the support levels were set too high in the Bulgarian renewable support scheme. As the Bulgarian authorities did not notify the scheme, the Commission is currently collecting all the information it needs to assess whether the Bulgarian support scheme is in line with state aid rules.

Having said this, I would like to emphasise that the Commission supports the promotion of renewable energy generation and their integration in the market. However, we must ensure that such promotion does not result in overcompensation and undue negative effects on European energy markets.

Bulgaria has also sent a complaint to the Commission concerning possible unlawful state aid to two US-owned thermal power plants.

In this case, Bulgaria’s Energy Regulator had concerns that the long-term agreements for the purchase of electricity from two power plants were concluded at too high prices, which could be against state aid rules. We have contacted Bulgarian authorities to receive more information about the contracts.

The contracts were concluded a long time ago, and we understand they are being renegotiated. We have not reached any conclusion yet if state aid is involved. If it is, the Commission will make sure that the aid is compatible with the internal market and does not lead to undue distortions.

Anything else you would like to say regarding cases involving Bulgaria?

Bulgaria is one of the EU countries concerned by the Commission’s investigation of Gazprom’s possible abuse of dominance in the gas supply sector. Gazprom received a Statement of Objections expressing our concerns in April 2015.

The preliminary view is that Gazprom is implementing a strategy to partition several markets in Central and Eastern Europe by preventing its customers from reselling the gas cross-border. This has allowed Gazprom to charge unfair prices in certain member states, including Bulgaria. Gazprom may also have leveraged its dominant position by obtaining unrelated commitments on pipelines from its customers as a condition to supply gas to Bulgaria and Poland.

Recently, the Minister of Energy of Azerbaijan, Natig Aliyev, expressed concerns about the European Commission’s delay to decide if the deal with DESFA is compatible with EU law. Will the deal go ahead?

The Commission opened an in-depth investigation in November 2014 to see whether the proposed acquisition of DESFA by SOCAR impedes competition on the Greek gas market. The deadline for the Commission to make a decision between the DESFA and SOCAR was suspended on 21 January, and has not been restarted yet. As part of our process, we have sent questions to SOCAR, and we are waiting for the company send us complete and full replies. This means that it is premature to speculate on the final outcome of the review at this stage.

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