Brussels Energy Brief - September 2007
September 2007
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KEY DEVELOPMENTS
Commission Proposal for a Third Legislative Package
Elena Kostadinova
The European Commission has proposed new legislation that seeks to resolve structural failings in the electricity and gas markets and improve a number of areas. The technical measures cover five main areas: (i) unbundling; (ii) regulatory oversight and co-operation; (iii) network cooperation; (iv) transparency and record keeping; and (v) access to gas storage and liquefied natural gas (LNG) facilities. The most controversial issue has been the proposed ownership unbundling (the separation of the operation of electricity and gas transmission networks and supply and generation activities). According to the proposal, electricity and gas network operators would no longer be affiliated to, or part of, a group which is also active in supply and generation. However, there may be a derogation whereby the network assets would remain with a company also active in supply, but the technical and commercial operation of those assets would be put in an independent company to be designated by the Member State concerned. Despite this derogation possibility, France and Germany have already expressed their concerns about the ownership unbundling aspects of the legislative package.
Environment: UN Climate Conference Proposes 25 – 40 Per Cent Emission Cuts by 2020
Benoît Keane
Industrialised countries met in Vienna in August to discuss the international regime to combat climate change after 2012 when the first commitment period of the Kyoto Protocol draws to an end. The Kyoto Protocol required signatory states to reduce emissions by five per cent of their 1990 levels. The UN conference agreed that the post-Kyoto regime should reduce greenhouse gas emissions by 25 to 40 per cent of 1990 levels by 2020. The European Union views this commitment as a starting point and is encouraging an even greater commitment. China, however is refusing to commit to specific emissions reductions. The G8, China, Brazil and India have all committed to work towards an agreement for a major United Nations conference on climate change in December 2007.
Commission Appoints Coordinators for Key Energy Projects
Yannis Virvilis
The European Commission has appointed four coordinators in the energy sector. Their task will consist of monitoring and facilitating the implementation of four important European energy projects by offering strategic support and practical advice. Mario Monti, the former Commissioner for Competition, will be in charge of coordinating the high voltage France-Spain connection. Georg Wilhelm Adamowitsch will be responsible for the offshore wind connections in the Baltic and North Sea areas (Denmark-Germany-Poland). Jozias Johannes van Aartsen will deal with the Nabucco gas connection project and Wladyslaw Mielczarski will be responsible for the implementation of power connection between Germany, Poland and Lithuania. The coordinators have each been appointed for a term of four years.
Emission Trading: Commission Adopts Decision on Danish NAP for 2008 to 2012
Chen Dingsheng
The European Commission has adopted its Decision on the proposed Danish national allocation plan (NAP) for carbon dioxide (CO2) emission allowances for the 2008 to 2012 trading period, as part of the EU Emissions Trading Scheme (ETS). The Commission accepted the total number of emission allowances proposed by Denmark, two million tonnes lower than Denmark's verified emissions in 2005. The plan will be approved under the condition that Denmark ensures the use of credits does not represent an addition to its annual allocation of more than 17 per cent. The Commission's approval of the plan will become automatic once Denmark has made the necessary change.
New EU Member States to Challenge Commission Decision Reducing Caps on Emissions Trading Allowances
Elena Kostadinova
Eight of the new EU Member States have threatened the European Commission with legal action in relation to its decision to reduce the amount of carbon allowances allocated to certain companies under the EU Emissions Trading Scheme (ETS). The eight EU Member States concerned are the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland and Slovakia. These Member States argue that the strict limits imposed by the Commission are disproportionately low and will hamper their industries’ ability to remain competitive with the rest of the European Union. If the European Court of Justice rules in favour of these Member States, changes will almost certainly have to be made to the ETS. The ETS was already seriously criticised during its first 2005 to 2007 phase because of governments over-estimating the amount of pollution credits required by their industries. The objections raised by the new Member States come before a debate this autumn over how the European Union should share the burden of cutting CO2 emissions by 20 per cent by 2020 as set out in the EU Energy Plan of March 2007.
EU Aviation Emissions Plan Too Weak
Emanuel De Duonni
According to a recent scientific report commissioned by Friends of the Earth, the present EU proposal to include aviation carbon dioxide emissions in the European Emissions Trading Scheme (ETS) will only slightly lower the aviation industry’s contribution to climate change. As a result, Friends of the Earth and other NGOs are demanding that the ETS proposals be toughened, stressing the need for additional measures limiting growth in flights. The Commission proposals were modified following intense pressure from the aviation industry. Friends of the Earth was given the opportunity to present its findings to Members of the European Parliament in Strasbourg on 4 September, where they hoped to bolster their position. In the coming weeks, discussions will be held concerning the proposal and a vote will be taken in Parliament on the amendments.
Gas: Routing Problems for Gazprom’s Baltic Pipeline
Bróna Heenan
Gazprom, the Russian state owned energy company, is planning several re-routings of Nord Stream, the controversial Baltic gas pipeline, for environmental and political reasons. The pipeline is aimed at reducing Russia’s dependence on the energy transit countries of Ukraine and Belarus, giving it better access to Western Europe. Re-routing the section passing between the Danish and Polish parts of the Baltic Sea is intended to minimise the environmental impact and avoid a munitions dump site in Denmark. The part of the route that passes under Finnish, Estonian and Swedish waters is also causing difficulty, as it passes through internationally recognised and protected areas of World War II munitions dumping sites.
Commission Investigates E.ON and Gaz de France for Suspected Market Sharing
Sara Bacchio
The European Commission has initiated proceedings against the German energy group, E.ON, and the French gas company, Gaz de France, in relation to suspected market sharing. In particular, the allegations concern supplies of natural gas transported over the MEGAL pipeline that is jointly owned by E.ON and Gaz de France. The initiation of proceedings against E.ON and Gaz de France arises from information obtained during the energy sector enquiry inspections carried out by the Commission in May 2006. The alleged infringements, which are thought to have been an attempt by the companies to protect their home markets, will be investigated in depth in the course of the proceedings.
Proceedings Against Electricity Suppliers for Suspected Foreclosure
Geert Dierickx
The European Commission has initiated proceedings against both Electrabel, the incumbent Belgian electricity company belonging to the French SUEZ group and EDF, the French electricity supplier, for allegedly abusing their dominant position on the market. The Commission believes that Electrabel and EDF introduced long term exclusive purchase obligations for industrial consumers, making it difficult for new entrant electricity suppliers to acquire these consumers. As a result, the development of a more competitive electricity market in Belgium and France could be seriously hindered. Such a delay in market competition could lead to higher prices and lower quality of service. The alleged infringements will be investigated in depth in the course of the proceedings.
Preliminary Conclusion that Certain Conditions Imposed by Spain on Proposed Enel/Acciona/Endesa Merger Violate EC Law
Juan Gutiérrez
The European Commission has informed the Spanish Government of its preliminary conclusion that Spain has violated Article 21 of the EU Merger Regulation. This is because certain conditions imposed on Enel and Acciona in their proposed acquisition of control over Endesa may be incompatible with EC law. Due to the Community element of the deal, on 5 July 2007, the European Commission approved without conditions the acquisition of joint control of Endesa by Enel and Acciona. However, a number of conditions were imposed by the Spanish National Energy Commission (CNE) before the European Commission’s decision on the merger, without prior communication to, or approval by, the Commission. The European Commission has now reached the preliminary conclusion that certain conditions imposed by the CNE violate EC Treaty rules on free movement of capital, freedom of establishment and free movement of goods. In its preliminary view, the conditions imposed by CNE interfered with the European Commission’s exclusive competence to decide on mergers having a Community dimension.
Mergers: Suez—GDF Merger Seen as Challenge to European Union
Chen Dingsheng
The Gaz de France (GDF) and Suez merger, announced in September, will create Europe's largest purchaser, supplier and distributor of natural gas. Supporters say that the new entity will help ease the European Union’s concerns about ensuring the security of its energy supplies and reducing its dependence on Russian gas. But critics claim the deal will create a “national champion” of which the French State will retain control thanks to a 35.6 per cent share. They add that the merger contradicts the European Commission's ambition to further liberalise the EU's energy market by breaking up the concentration of power held by large companies. In contrast with the original agreement announced in February 2006, the new terms allow the French State to retain control of the new entity's strategy. The companies still need to decide whether the structure of the deal has changed sufficiently for it to be re-notified to the European Commission. In the event that a company fails to notify a “new” deal, it could face fines of up to 10 per cent of its global revenue.
Gas: EIB Grants EUR 85 Million Loan to Fluxys LNG Gas Terminal
Geert Dierickx
The European Investment Bank (EIB) has granted a long term loan of EUR 85 million to Fluxys LNG, the owner and operator of the terminal for liquefied natural gas in Zeebrugge, Belgium. The loan reflects one of the EIB’s primary objectives: the support of the development of large infrastructure projects, so-called Trans-European Network Projects. It is expected that this investment will further increase, secure and diversify gas supplies to the European Union as imported gas from Zeebrugge can easily be moved to the United Kingdom, the Netherlands, Germany, Luxembourg and France. In addition, the loan enables Fluxys, the parent company of Fluxys LNG, to optimise its resources for other infrastructure projects in its gas transport and storage activities.
MERGER NOTIFICATIONS
End July – September 2007
GDFI / ENERGIE INVESTIMENTI (10 August 2007)
M.4895 - MOL HUNGARIAN OIL AND GAS / ITALIANA ENERGIA E SERVIZI (25 September 2007)
MEETINGS
October 2007
Transports, Telecommunications and Energy Council (1 October 2007)
Meeting of the Research Group on Atomic Questions (7 October 2007)
Informal High Level meeting "Building Jointly an European Strategic Energy Technology Plan" (8 October 2007)
