Brussels Energy Brief - October 2006
October 2006
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KEY DEVELOPMENTS
Commission Presents New US Co-operation Agreement on Energy Efficiency of Office Equipment
Geert Dierickx
The European Commission has proposed a new five-year Agreement with the US on the ENERGY STAR programme. This new agreement reinforces the initial programme introduced in 2001. The programme aims to foster and reinforce energy efficiency of office equipment by encouraging producers and consumers to purchase products which bear the label showing that they comply with the programme’s energy efficiency criteria. The programme also provides extensive information to consumers and businesses on how to save energy and money by the proper use of equipment. The new agreement contains innovative and demanding energy criteria for copiers, printers and similar equipment, resulting in energy savings. The Commission will present an Energy Efficiency Action Plan with the objective of saving 20 per cent of current energy consumption by 2020.
Investigation of New Danish Energy Tax Reductions to Energy Intensive Businesses
Elena Kostadinova
The European Commission has opened an investigation to examine the compatibility with EU State aid rules of Danish plans to grant energy tax exemptions to companies covered by the EU’s Emissions Trading Scheme (ETS). The Danish Government is proposing to introduce a full exemption from national tax on fuel consumption for energy-intensive businesses, and a 50 per cent reduction for non energy-intensive businesses, if they are already covered by the EU ETS. By doing so it aims to eliminate the double burden on these businesses. During the first emissions trading period Denmark provided 95 per cent of ETS allowances free of charge. From January 2008 these allowances should no longer be allocated for free to businesses which, unless the government’s proposals are implemented, will result in a higher cost for these companies. The Energy Tax Directive, however, has set out EU-wide minimum tax rates. With the proposed exemptions, the energy tax paid by the businesses concerned would be less than these minimum rates, which in the Commission’s view may distort competition. Furthermore, the Danish measure might go against the “polluter-pays” principle, a leading principle of the EU’s environmental policy. It should be noted that the Commission's Action Plan for Energy Efficiency considers an amendment to the Energy Tax Directive integrating notably energy efficiency considerations and environmental aspects.
European Commission to Censure Eight Member States on Carbon Emissions
James Arneill
The European Commission has announced that it is to launch proceedings against eight EU Member States for failing to present plans on how they intend to cut carbon dioxide emissions from 2008 to 2012. Austria, Czech Republic, Denmark, Hungary, Italy, Portugal, Slovenia and Spain will all be put on formal notice this week. Member States had been set a deadline of the end of June 2006 to declare their national allocation plans (allocating permitted levels of carbon dioxide emissions to industry producers) according to the Emissions Trading Scheme (ETS) for 2008 to 2012. The ETS is seen as one of the driving factors of EU environmental policy, following the 1997 Kyoto Protocol. Participants are set a quota of permitted carbon dioxide emissions and face stiff financial penalties for every tonne of carbon dioxide that exceeds the threshold.
EU Competition Commissioner Says No Slow Down in New Regulatory Proposals
Frank Schoneveld
Commissioner Kroes, responsible for EU competition issues, in a speech on energy regulation at the end of September, predicted a cascade of reports, analyses and regulatory initiatives in the first quarter of 2007. As well as the European Commission’s strategic energy review and energy package with new regulatory proposals, her own competition service’s report on the energy sector inquiry would be released, including new analysis of the liquid natural gas (LNG) market, the downstream electricity market and the functioning of power exchanges. She also emphasised that investigations into possible cartels and abuses of market dominance would continue to be prosecuted vigorously. Commissioner Kroes envisaged two “next steps” in European energy policy: First, new regulation on transparency in the energy markets so that information on gas and electricity flows are readily available, forcing energy companies to publish details of their operations and trading activities. Second, further unbundling of network and supply activities so that network companies do not so easily favour their own distribution or generation companies, at the expense of independents.
EU Energy Regulators Release Guidelines on Transparency in Electricity Markets
Frank Schoneveld
The organisation of EU Energy Regulators (“ERGEG”) has published Guidelines of Good Practice on Information Management and Transparency in Electricity Markets. ERGEG makes it clear that the Guidelines are intended to form the basis of legally enforceable rules throughout the EU, probably through future legislation of the European Union. The Guidelines are directed at the wholesale and not retail market for electricity. The basic criteria are that all market sensitive information must be made available simultaneously over the internet in a detailed and explanatory way approved by the regulator. The Guidelines specify the required transparency of information, including the timeframe, presentation method and entity required to provide different types of information. There are detailed specifications applicable to System Load, Transmission and Access to Interconnections, Generation, Balancing and Wholesale Market Information.
Commission Initiates Infringement Proceedings Against Spain for the Endesa/E.ON merger
Yannis Virvilis
The European Commission has sent a letter of formal notice to Spain for not lifting the conditions that were imposed by the Spanish Energy Regulator (“CNE”) following the clearance of the E.ON bid for the Spanish energy company Endesa. A formal notice is the first stage of infringement proceedings against a Member State. At the end of September, the Commission adopted a formal decision finding that Spain had breached the EC Merger Regulation. The breach of the EC Merger Regulation consisted of CNE (i) adopting a decision without prior communication to, and approval by, the Commission; and (ii) submitting the clearance of the merger to a number of conditions going against the principles of freedom of establishment and free movement of capital.
Infringement Proceedings Against Malta for Failure to Abolish Petroleum Products Monopoly
Maria Scimemi
The European Commission has opened infringement proceedings against Malta for its failure to abolish the existing monopoly for the importation, storage and wholesale of petroleum products. Under the Accession Treaty, Malta was required to undertake the liberalisation of the energy import and distribution markets by 1 January 2006. According to the Treaty, Member States are obliged to adjust any State monopolies of a commercial nature so as to ensure that no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of different Member States In order to comply with EU law, Malta should have ensured that petroleum products could be traded through a licensing system. However, trading licences are yet to be issued and Enemalta Corporation remains the only company authorised to import petroleum for the inland fuel market.
Action Plan for Energy Efficiency
Elena Kostadinova
The Commission has adopted an ambitious Action Plan for energy efficiency with the aim of achieving at least a 20 per cent saving in energy consumption by 2020. This plan is part of an EU strategy to face increasing energy import dependency, concerns over supplies of fossil fuels and environmental problems, including climate change. The proposed measures focus on setting dynamic energy performance requirements for a wide range of products, improving energy performance of buildings, minimising loss of energy through transformation, reducing vehicles’ CO2 emissions, changing energy behaviour in the EU and facilitating the funding of energy efficiency projects. The success of the plan depends mainly on Member States’ cooperation and on voluntary initiatives of regional governments and economic operators. However, the Commission does not exclude legislative intervention, if necessary. The plan envisages amending, for example, the Labelling Framework Directive, the Energy End-Use Efficiency and Energy Services Directive, and the Energy Performance of Buildings Directive.
Energy Performance of Buildings: European Commission sends Reasoned Opinions to nine Member States
Maria Scimemi
The European Commission has sent reasoned opinions - the final step before lodging a formal complaint to the European Court of Justice (ECJ) - to nine EU Member States for failing to meet the 4 January 2006 deadline for notifying sufficient national implementation measures as required in the Energy Performance of Buildings Directive. The countries in question are Austria, Belgium, Czech Republic, Finland, Luxembourg, the Netherlands, Slovak Republic, Spain and the United Kingdom. The Directive aims to reduce energy consumption in buildings by requiring Member States to lay down minimum energy performance standards for different categories of new and existing buildings. Once established, these will have to be reflected in energy performance certificates, to be made available when buildings are constructed, sold or rented out. In the absence of satisfactory replies to the reasoned opinions within two months, the Commission may bring these cases before the ECJ.
Suez – Gaz de France Merger to Get EU Approval
Alexandra Rogers
It is believed that the European Commission will give its formal approval to the merger of two French gas operators, Gaz de France (GDF) and Suez SA at a meeting in Strasbourg within the next few weeks. The Commission originally had concerns that competition in the gas and electricity markets in Belgium and the gas and heating network markets in France would suffer if the merger proceeded. However, after considering the proposals put forward by the two operators in relation to the divestiture of prime assets and consulting other stakeholders in the relevant markets, the Commission’s concerns appear to have been allayed. Legislation opening the way for the effective privatisation of GDF and its merger with Suez has meanwhile been approved by the French legislature. On 6 October, Suez reached an agreement with the Belgian Government over concessions it will make in exchange for government support of the merger. (See Brussels Energy Brief of September 2006).
Commission Closes Case Against Italy Regarding Law on Investment in Energy Companies
Michal Cieplinski
The European Commission has decided to close an infringement procedure against Italy in view of the measures taken to comply with a European Court of Justice (ECJ) ruling regarding the Italian law on investment in energy companies. The ECJ found in its ruling that the automatic suspension of voting rights for shareholders in excess of 2 per cent in Italian electricity and gas companies breaches EC Treaty rules on the free movement of capital. The ECJ found that the suspension of voting rights prevents effective participation by investors in the management and control of Italian undertakings operating in the electricity and gas markets. The Commission decision follows the measures taken by Italy on 1 August 2006 to comply with the ECJ ruling.
Commission Proposes €100m Fund for Developing Countries to Boost Energy Efficiency and Renewables
Geert Dierickx
The European Commission has proposed the creation of a global risk capital fund to mobilise private investment in energy efficiency and renewable energy projects in developing countries and economies in transition. The Global Energy Efficiency and Renewable Energy Fund (GEEREF) will accelerate the transfer, development and deployment of environmentally sound technologies, thereby helping to bring secure energy supplies to people in poorer regions of the world. Moreover, these projects will combat climate change and air pollution. The Commission intends to kick-start the fund with a contribution of up to €80 million over the next four years, and expects that financing from other public and private sources will take funding to at least €100 million.
Commission Inquiry into France’s Guarantee to Finnish Electricity Producer TVO
Maria Scimemi
The European Commission has launched an in-depth investigation under EU State aid rules into France’s export guarantee of a €570 million loan granted to the Finnish electricity producer, Teollisuuden Voima Oy (TVO), by a banking syndicate. The purpose of the loan was to enable TVO to purchase equipment from the French company, Areva/Framatome. The Commission’s initial investigation did not enable it to exclude the possibility that the provision of the guarantee has lowered TVO’s financial costs below the levels corresponding to market conditions. Through the in-depth investigation, the Commission aims to take a final view on the compatibility of the measure with the Single Market, having regard, in particular, to the amount of the guarantee premium paid by TVO.
MERGER NOTIFICATIONS
End September – October 2006
Case COMP/M.4348 — PKN/Mazeikiu (29 September 2006)
MEETINGS
November 2006
Parliamentary Committee Adoption of Green Paper on Europe’s energy strategy (expected on 13 November 2006)
European Parliament’s Committee on Industry, Research and Energy (29 November 2006)
Transport, Telecommunications and Energy Council (23 November 2006)
