Rules with exceptions

The European Commission is ready to turn a blind eye to some vertically integrated energy concerns

The European Commission's proposals for reforming the gas and electricity markets , officially announced on Wednesday, were published yesterday. It turned out that the authors of the idea of ​​​​separation of transport networks from energy concerns, as an exception, are ready to provide the opportunity for some concerns to maintain vertical integration. It is obvious that these exceptions are unlikely to be in favor of Gazprom, whose expansion was opposed by the head of the EC, Jose Manuel Barroso, and Energy Commissioner Andris Piebalgs. In addition, yesterday the European Commission's initiatives received support from the Organization for Economic Cooperation and Development. The OECD published the first report analyzing the economic situation in the EU, which substantiates the need to break up vertically integrated energy concerns by separating out their transport infrastructure.

Analyzing the current situation in the EU, the report's authors note that the directives regarding the gas and electricity markets adopted by the European Commission in 2003 contained a number of important provisions, in particular, giving customers the opportunity to choose their suppliers. However, in their opinion, these directives “have not been correctly applied in practice by EU member states.” In particular, this is expressed in the fact that vertically integrated giant corporations in the sector today have the ability to behave “disloyally” towards competitors, prevent new companies from entering the market and keep wholesale energy prices under control. Brussels wants to retain the right to allow investors in some new infrastructure projects to own the transport of gas or electricity and at the same time be involved in their production and distribution on European markets.

As is known, according to the documents of the European Commission, the legal separation of gas and electricity networks from the structures of the energy concerns that own them, which finally took place this summer, gives rise to three types of problems. Firstly, a transport infrastructure operator company can treat its shareholder “better than outside competing firms.” The authors do not provide any specific examples to confirm this suspicion. Moreover, in their opinion, it is “virtually impossible” to control the presence of preferences and discrimination. Secondly, there is no guarantee that the owner of the pipes and wires will not have the advantage of faster access to information about available capacity. Thirdly, a vertically integrated holding has no incentive to invest in the development of its own infrastructure in the interests of other market participants. “Investment statistics over the past few years show that vertically integrated concerns have reinvested significantly less funds received from cross-border operations into the development of new infrastructure facilities connecting EU countries than fully independent operating companies,” the documents say. Moreover, they argue that in the last ten years, electricity prices from network owners have been higher than from energy sellers without their own infrastructure.

In order to implement the complete separation of transport infrastructure from energy concerns, the EC proposes the following scheme to the EU countries: “The shares of a vertically integrated concern are divided into shares of the company that owns the networks and shares of the company involved in supplies. These securities may subsequently be transferred to the shareholders of the former parent company.” Realizing that the scheme does not look very convincing, the developers of the document propose an alternative - to transfer infrastructure facilities to the full management of an independent operator who will not have any obligations to the owners of networks and gas pipelines.

At the same time, no special approach to gas pipeline systems, which are largely filled with imported gas, is expected. “The key to winning long-term contracts with producing countries is not the ownership of infrastructure, but the presence of a stable consumer base,” the text says. “The EU undoubtedly remains a highly attractive gas market, regardless of the ownership structure of gas distribution companies, the allocation of pipes from which will not in any way affect their ability to compete in gas procurement.”

However, Brussels wants to maintain a loophole to bypass its own innovations for the “correct” projects. “In order to stimulate investments by mining and supplying concerns in new transport facilities, it is proposed to provide for the possibility of a temporary exception from the rules of such projects. Such exceptions will be applied from case to case, taking into account the economics of investments, the needs of the domestic market and the security of energy supply,” the authors of the proposals believe. The projects themselves have not yet been listed, but Brussels’ love for pipes that allow gas to be supplied bypassing Russia leaves no doubt about the list of favorites.

Alexey GRIVACHS