Energie-Blog

André Jurres

13 okt 2006
457

This week it has become clear that the Commissioner Mrs. Kroes is sticking to her strategy and that of the entire Commission to really start opening the until now closed energy market.  The merger between Suez and Gaz de France is coming on a turning point in the liberalization or better the lack of it in Europe.
The Commission has come to the conclusion that the market will not open just because the legal and regulatory environment exists. 
The historical national monopolists of every country have been successful in creating a status quo in Europe during the first years after the decision was taken and has even achieved to increase their margins and decrease any market openings.
The announced decision to enforce more remedies for the proposed merger is logical when taken into regard the above; furthermore the forced sell of Distrigas is just one step to insure a real competitive market.  The value of Distrigas is to say at least rather volatile as it has almost no assets but mostly a large customer base.
This brings a weak point into this remedy, besides selling of large quantities of customers it is necessary to force the sell of assets which can provide and/or create a competitive product.  The fact that some of the long term gas contracts are taken out of Distrigas weakens the possible competitiveness of new players on the electricity market for example.  These long term contracts are for example used to provide gas towards the power plants against aggressive conditions.  A new competitor that wants to build a gas plant will not have the benefit of these aggressive conditions.  As such any potential interest of constructing new gas fired power plants is killed because the output price of these plants will be considerably higher than those of the historical dominant former monopolist.
Nevertheless the decision of the Commissioner clearly shows that she means business for the energy market and that is good news. 
The other potential risk is that the announced measures of the historical dominant party to please the Belgium prime minister can be cancelled or at least been weakened.
The Commission must know that besides the gas market the electricity market is linked to this.  It is possible to look at this market separately and propose measures to increase competition as long as we realize that these markets have an impact on each other.
To give some examples, higher gas prices have resulted in higher electricity price, higher gas prices put a burden on new construction projects to built gas fired power plants, having a dual fuel proposition helps new entrants to be successful, being dominant in one of the areas creates market disturbances while opening them for competition, etc…
Every remedy in neither the gas- or electricity market has an impact on the other and this also across the border.  Especially neighbouring countries feel the impact of each other when measures are taken. 
For this it seems necessary to create a European energy strategy with clear guidelines that provides solutions for an integrated liberalized market. 
The Commission is now focussing on stimulating (read limit state intervention to stop these type of mergers) mergers across borders such as Eon and Endesa to at least ensure cross border competition across Europe, this could lead towards a guideline creating one European energy market.