DEREGULATION
Ten of the 15 member states of the EU opted for regulated third party access to their electricity grids when the EU liberalizing law came into effect on 19 February. Only two countries, Germany and Greece, chose negotiated third party access (TPA).
Under regulated TPA, grid access is granted on the basis of published, regulated tariffs. Negotiated TPA allows eligible producers and consumers to enter voluntary contracts on the basis of indicative prices supplied by the system operator. These prices should be based on the average prices over the proceeding twelve months.
Portugal and Italy chose a mixture of negotiated TPA and single buyer model, with supply contracts passing through a central buyer. Denmark’s position was unknown as we went to press. France, which fought hard for incorporation of the single buyer model during the seven years of negotiations leading up to market liberalisation has chosen regulated TPA option for its T&D system.
The legislation required member states of the EU to open at least 25 per cent of their market by 19 February, rising to 33 per cent by February 2003. In practice, the Commission believes, 60 per cent of the market will be liberalized this month.
The move to a competitive market threatens the viability of some utilities and plants. All countries except Britain, Sweden and Greece asked permission to compensate utilities for investments rendered uneconomic.
The Austrian utility Verbund, in which the government holds a 51 per cent stake, took out insurance against losses incurred from liberalization. The cover, which cost the company $1.2 billion, pushed its 1998 earnings into the red. The company was feeling the effects of competition even before the liberalization deadline in lower volumes and weaker prices. The Austrian government has applied to the EU for permission to recover stranded costs through surcharges.
Renewable plan delayed
Meanwhile, the Commission has delayed plans to introduce a law that obliges member states to ensure national support for renewable energy does not distort the market. Liberalization raises complex problems of balancing promotion of renewable energy with the desire to see a fair and balanced market across the member states. Plans were to have been published last month, but the then European Energy Commissioner, Christos Papoutsis, decided to delay publication.
Electricity that produced from renewable sources is generally more expensive than that from traditional sources, so they require a subsidy in order to be economically viable.
The Commission wants to harmonise subsidies, and control the price of electricity from different renewable sources, thus balancing competition between renewable technologies.