It may have been a disastrous few months for the European Commission as a whole but as of 19 February its electricity liberalization mission looked reasonably on track. This was the deadline set two years ago for implementation of the electricity single market directive, ie its “transposition” into domestic law. Actually the deadline does not apply to all 15 member states as three were given extra time: “Belgium, Greece and Ireland may, due to the specific technical characteristics of their electricity systems, have an additional period of respectively 1 year, 2 years and 1 year,” the directive stated.
In an impressive feat of brinkmanship, Italy got the legislation through on the day of the deadline itself. Three countries missed: the Netherlands (surprising), Luxembourg and France (not suprising). But all three are moving towards enacting the necessary legislation soon. In France draft legislation was approved in a vote of the national assembly on 2 March (with communist deputies abstaining) and will now go to the upper house where it will be further modified before returning to the lower house for a second reading. All this will take a good few months, but one way or another, some form of legislation should be enacted, and in the interim, agreements are in place providing third party grid access. A draft law is under discussion in Luxembourg. While in the Netherlands legislation is expected to be completed by July and in the meantime interim arrangements have been put in place which amount to de facto implementation of the directive, going well beyond its minimum requirements. The directive, adopted unanimously by all EU countries on 19 December 1996, mandated full
competition among generators with effect from 19 February 1999. It also set a timetable for introducing choice of supplier to large and medium purchasers of electricity, which is meant to allow them eventually to purchase freely from anywhere in the EU. The minimum requirement is that for each country as from 19 February 1999 all consumers of 100 GWh/y must have a free choice of supplier and the proportion of national electricity where the purchasers have a free choice of supplier must be at least 26.48 per cent.* This figure must rise to about 28 per cent as from 19 February 2000 and around 33 per cent as from February 2003.
In the event the average degree of opening actually achieved is much greater than this, with around 60 per cent of consumers in EU countries now estimated to be able to choose their suppliers, the Commission claims.
However, there remain significant differences between the countries in the way they have gone about liberalization and the speed at which they have done it. Expecting uniformity would of course be unrealistic and counterproductive. Allowance for diversity in approach was a feature of the 1996 directive. Inevitably, some difficult issues remain, for example what to do about stranded costs. On the whole though, the targets of the directive are being achieved or exceeded and there is good evidence that electricity prices are being brought down, which is what it is all about.
But this is only the beginning. The real internal market will only exist when there is fair, simple and transparent electricity trading between member states. “We have to create one single market, not 15 liberalized or partly-liberalized, but largely independent electricity markets,” said Commissioner Christos Papoutsis (shortly before his resignation on 16 March along with all the other Commissioners), “Thus cross-border transmission tariff systems, payment mechanisms and effective flow management systems … need to be developed in partnership between the Commission, the member states and Europe’s electricity industry.” This is going to take a lot of work and, in the wake of the Commission’s current disarray, perhaps rather longer than we might have hoped.
