Junior Isles
Managing Editor

Talk is cheap. If you ‘talk the talk’, you have to be able to ‘walk the the walk’. It was clear from the recent Stockholm Summit that the European Union did a lot of talking yet walked away empty handed.

In the Lisbon Summit two weeks earlier, the European Commission put forward proposals which would see the full liberalization of gas and electricity markets by 2005. The new proposals also included new rules aimed at ensuring competition can flourish. Notably, they set strict rules on how grid operators charge for carrying transit flows on their networks and would launch efforts to ensure that interconnectors are operated fairly. Cross-border flows of electricity are currently equivalent to only around eight per cent of production. This has essentially left Europe resembling individually liberalized markets instead of a single pan-European market.

The proposals were aired for the first time at the Stockholm summit on March 23-24. Some aspects of the plan were expected to encounter opposition. And sure enough, they did. Just like last year, France refused to accept the new deadline.

French prime minister, Lionel Jospin argued: “We think that the question cannot be put exclusively in terms of fixing early dates for liberalization. We are in favour of the creation of an internal market and properly controlled liberalization particularly in the case of public monopolies…but when talking about these services, one shouldn’t just look at it from a liberalization point of view. You also have to consider equal access, network safety and the question of how you can supply the consumer at the best price and make sure there is security of supply.”

But it was not just the new deadline that posed a problem. Germany also objected to the EC’s insistence that each country should appoint a regulator. Germany has managed to fully deregulate its market without a regulator. The industry is regulated by voluntary agreements and competition authorities.

This year’s CEEPIF (Central and Eastern European Power Industry Forum) held in Budapest provided a perfect opportunity to hear views from utilities operating in these two countries. One session saw members from French monopoly, EDF, and Germany’s two biggest utilities E.ON and RWE, give their comments on European liberalization.

EDF said it was in favour of deregulation but noted that there was no ultimate model: “We do not know if any of the solutions are sustainable over the long term”. EDF also said it thought it was important to have a regulator. Both German utilities, meanwhile, argued that regulation should be kept to a minimum if you wanted real competition.

On the sidelines of the conference, Bo Källstrand, senior vice president of EDF, commented more closely on the latest EU talks: “The EU discussions are between governments, not EDF. Many issues have to be resolved between countries but these are political questions.” Wolfgang Straßtaburg, head of international business developments at RWE, said: “We were disappointed with the Stockholm summit. Members should not use clashes with national elections as an excuse to slow down the [liberalization] process…also, we are not in favour of a regulator.”

Reiner Lehmann, head of corporate development at E.ON noted: “It will be difficult for the EU to impose these rules. It is unlikely we will see a fully deregulated Europe by 2005; 10-15 years is more likely.” And this is a key point. The EU may set directives but legally imposing them as law at the national level may be another issue. Past experience has shown that France does not have a problem with playing by its own rules.

Countries working towards EU accession must be wondering what to make of the in-fighting between countries. It seems somewhat hypocritical to lay down certain rules to countries outside the club when some member countries do not conform to them themselves. A case in point is the stance (particularly from Austria) on the Temelin nuclear plant in the Czech Republic. In the same CEEPIF session, Jaroslav Míl, chairman of the Board & CEO of CEZ noted: “What is the EU criteria on nuclear plants? I am not sure that one exists. Is it the German standard or the French?”

He has a fair point. Perhaps the EU needs to get its house in order before inviting in guests; and what’s more, have the authority to make its members realise that what it says is not just talk.