Unbundling energy means unbundling disagreements first

The European Parliament’s Industry Committee on May 6 will debate proposals on draft legislation to separate the supply and production of electricity and gas that were recommended by the European Commission in September, 2007. It would allow smaller companies into the market, offer more choice to consumers and boost renewables, but has become a contentious issue between some lawmakers.
Unbundling, as it is called, is one of the most important proposals of the so-called 3rd Energy Package. It is designed to separate the operation of gas pipelines and electricity networks from the business of providing gas or generating power. This would mean, for example that integrated companies such as Electricite de France would not be able to generate power and own the grid.
MEPs expressed strong political support for a common energy policy, and ownership unbundling, in a resolution last July, 2007. Supporters said they believe unbundling will encourage investment in energy infrastructure. The Commission pointed to Britain where unbundling has taken place and four new liquid natural gas (LNG) terminals have been built - compared to none in Germany where the market is still protected. If states are unwilling to unbundle, the Commission is also proposing an Independent System Operator system under which companies would retain ownership of the network, but hand over management control to an independent company, which would make commercial and investment decisions.
British Labour MEP Eluned Morgan is parliament’s rapporteur for the Electricity directive. She explained that “there is now, in theory, a duty for generation and network companies to be legally separated, in many cases this is not being implemented and there is evidence of massive abuse – evidence which has led to the biggest energy company in Europe agreeing to unbundle. She said that, “in principle, a single European market in electricity already exists in the EU, but the reality is very different,” adding that “some countries have easy access to competitors - for example French and German companies have secured over 40 percent of the UK market - companies in Spain or the UK have found it very difficult to access French and German markets.”
Unbundling is not entirely popular - France and Germany oppose the Commission’s plans. Along with Austria, Bulgaria, Greece, Latvia and Luxembourg and Slovakia said they believe that enforced unbundling is unconstitutional and could have negative social consequences. Given such opposition the extent to which MEPs from those countries will support their government’s opposition to the plans is expected to be one of the most fascinating aspects of the debate. The full plenary of the European Parliament will debate both the gas and electricity directives in June. When the measures were first debated by MEPs in the Industry Committee on February 28, Czech Member Jan Brezina pointed out that in many countries that joined the EU after 2004 “We are dependent on one supplier” and unbundling doesn’t make sense. MEPS said there can be no sure data as to whether energy costs will go up or down given the number of variables such as soaring demand from China and India and the price of a barrel of oil approaching USD 120. However, supporters said they believe an open market will encourage more efficient energy production and keep prices at a reasonable rate.
There will also be measures to protect poorer consumers. Europe’s energy market is changing rapidly, as are people’s energy’s needs. Some people are more interested in price, some in green energy and some in generating their own power. It is hoped that by opening up the market, people will have more choice.
The Commission believes that only with a proper market in electricity and gas can the Emissions Trading Scheme (ETS) and renewable energy be boosted. It pointed out that with more competition the generators of energy, the network operators, the owner and suppliers all have an incentive to invest in renewable energy and alternative sources of energy. At present the ETS is hampered, as Europe’s electricity companies include carbon costs in their prices to customers, whilst accepting free emissions permits. In a free market, low emissions will become a real competitive advantage, then demand for efficient power plants, renewables and carbon capture and storage will increase, analyst said.
Also envisaged in the Energy Package is the setting up of an Agency to coordinate National Energy Regulators to complement the existing 27 national regulators. An Energy Consumers Charter in 2008 should allow consumers to choose suppliers and defend their rights when buying energy, it was said. The political groups have nominated rapporteurs for the key issues. Italian MEP Romano La Russa (UEN) for the gas directive, Bulgarian Atanas Paparizov (PES) and Spanish Member Alejo Vidal- Quadras (EPP-ED) are the rapporteurs for technical aspects of the gas and electricity regulation changes. Finally, Italian Member Renato Brunetta (EPP-ED) is rapporteur for the regulation establishing an energy agency.