Despite aggressive posturing by EU member states before the recent Barcelona economic summit, France has won a compromise. Gas and electricity markets will be opened up in the commercial sectors of member states, with 2004 as a target date, leaving the opening up of the domestic sector unresolved.
France is now alone in opposing the increase of cross-border competition, resisting calls fully to liberalise its gas and electricity markets and indicating instead that it would be prepared to face competition in the market for commercial and industrial users – an idea floated by Brussels to break a year-long impasse on wider-ranging proposals.
France is emphasising the need for a social agenda to protect employees’ rights against feared job losses. However, politicians also cited recent events in California and elsewhere to argue that the retail domestic market should remain in the tightly controlled hands of Electricite de France (EDF). These statements came as industrial action among French power workers cut some 6000 MW of capacity in protest at market liberalisation. Looming French elections were making presidential rivals Jacques Chirac and Lionel Jospin anxious to appease the French public who are broadly opposed to liberalisation. Ratings agencies have expressed concern that the credit status of the group may be changed for the worse as a result of full privatisation.
Chirac and Jospin have publicly stated their opposition to the privatisation of EDF, while approving the idea of using the capital markets to finance projects and acquisitions. Chirac has ruled out any possibility of weakening the company by legislation. In addition, both candidates suggested that capital investment in EDF would be barred to foreign entities. Given EDF’s eager exploitation of openings in other EU markets, France’s attitude has exasperated its EU partners. Spain and Italy have been particularly vocal, complaining that they did not privatise their utilities only for them to be consumed by protected foreign state monopolies. The target for full liberalisation is 2010. To attain the 2004 deadline, the EU is also looking at the adoption of rules on cross-border tariffs and congestion management for electricity; the development of a member state infrastructure plan for energy and to reach reciprocal agreements on opening the electricity market with the EU’s neighbours. Transmission and distribution is to be separated from production and supply, as well as establishing a regulatory body in each member state, a move that Germany had opposed.
Until now, EDF had shied away from the suggested compromise, insisting that liberalisation should not proceed until the state of the German market, dominated by RWE and E.On, is addressed. The move secures EDF’s enormous cash flow and bolsters its position against competitors in France where EDF supplies 90 per cent of the market. The company’s notorious acquisitive streak first became apparent in 1999, when EDF strengthened its presence in a deregulating Europe where it now supplies around 40 million customers. It has already invested nearly E$11 billion in some twenty countries in Europe, Latin America, Africa and Asia representing a generation capacity of 32,700 MW under construction or in operation, with, nearly 10 million customers outside Europe.