European Commission

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European Commission Europes Consumers Advocate
The Reluctant Reformer
Stefano Negri Christian Patouraux John
Offord Marios Klapsis David Reilly Rutger von Post
Group 9 IPIC E10 Vanessa Strauss-Kahn
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Agenda

• Who we are European Commission and existing
  agreement
• Why a liberalised European electricity market?
• How to achieve it British success
• Current status
• EDF the reluctant reformer
• The French perspective - what youll hear, and
  why its not true

Source European Commission Report on Electricity
Deregulation, September 2003
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European Commissions Goal
The prime aim of the European Community's energy
policy is to ensure a supply of energy to all
consumers at affordable prices while respecting
the environment and promoting healthy competition
on the European energy market.
--European Union Website http//www.europa.eu.int
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Why a Liberalised Electricity Market?

• Decreased prices
• Increased choice
• Increased efficiency in production, transmission
  and sales
• Equality and transparency across Europe no
  market distortions
• Greater flexibility in electricity supply
• Increased innovation use of environmentally
  friendly technologies
• Reinforced EU security of electricity supply
• All EU member states agreed on liberalisation and
  single market.

Consumer Benefits
Societal Benefits
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Evidence of Success Britain
Increased innovation use of environmentally
friendly technologies The evidence from Britain
is encouraging the years after liberalization
saw a 40 drop in carbon dioxide emissions and
50 fall in nitrous oxide emissions.
The halcyon days when things were better never
existed. Since privatisation, the number of power
cuts in Britain has fallen by 10 per cent and
the duration of those cuts has fallen by nearly a
third. --Callum McCarthy CEO, Ofgem Financial
Times, Sept 24, 2003
Decreased prices. Greater efficiency. Decreased
pollution. Fewer blackouts.
Source The Economist, February 18, 1999
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How to Liberalise the Electricity Mkt
Key Drivers
Future Issues
Potential For Competition
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EU Electricity deregulation timeline
France/EDF Formally Delays Open Market
Sweden
Norway
Germany
Finland
U.K
1998
1990
1993
1994
1995
1996
1997
1999
2000
2001
2002
2003
1991
1992

• 1986 First consideration of single energy
  market
• 1990 Directive on Price Transparency for Gas
  Electricity
• 1992 Proposal for EU internal market, including
  unbundling
• 1997 EU Electricity directive
• compelling all sectors to deregulate

• 1999 Introduction of consumer choice
• 2001 EU directive to
• fully open market by 2005
• 2002 Barcelona
• conference delays open
• market to 2007

• EDF on aggressive buying spree across Europe
• Currently 40 of customers outside France
• Goal of 50 revenues from outside France by 2005

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EDF Some facts
EDF French Electricity Market
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Point and counterpoint

• France is a signatory to EU legislation
• Service Publique
• A challenging labour environment is no excuse for
  anti-competitive behaviour.
• Concerns regarding discrimination can be solved
  within an appropriate regulatory environment

France is different
Electricity is a natural monopoly

• The industry comprises 3 separate industries
  generation, transmission/distribution, sales and
  service
• Only transmission is a natural monopoly

Liberalisation leads to lower profits
under-investment

• Monopoly leads to underinvestment
• Liberalisation, with proper regulation, should
  lead to greater consumer choice and lower costs,
  not necessarily lower profits

• Currently only 37 open for large commercial
  customers a year late and only done after
  intense political pressure
• In return for this concession, liberalisation
  of consumer market delayed until 2007
• Opening is underway, but much too slow

Market is open
Prices are low

• but they could be lower
• (current price around 90 Euro/MwH cost around 30
  Euro/MwH)

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EC Recommendations

• Falling in Line
• EDF Do what the other EU countries have already
  done
• And what France has already agreed to.
• Unbundle the 3 businesses generation,
  distribution and sales service, to avoid
  cross-subsidisation and facilitate competitive
  entry
• Facilitate transmission across borders i.e.
  increase capacity of electricity interconnections
  between countries (avoid another Italy!)
• Open residential market before 2007 (undo the
  French revision).
• Failure to comply will be regarded as unfair
  competition Commission will be forced to
  prohibit EDF MA activity outside of France, and
  ultimately may call into question Frances
  commitment to the EU.

Were not asking France/EDF to be a special case
were asking them not to be.
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The deregulated internal market has been a
tremendous force for economic and social good
increasing GDP per capita by, on average,
5700. But much of its potential is being
wasted it's as if we are driving a Ferrari in
second gear. -Frits Bolkestein, EU
Commissioner, Head of Single Market Reforms
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EU Electricity Market Agreement
Brussels Belgium December 31, 1992 The
creation of an Internal Market at European level
is concerning the electricity market in
particular. it abolishes exclusive rights, it
requires unbundling of network activities from
generation and supply activities and its
fundamental objectives are transparency and non
discrimination.

• Agreed

Source European Commission Report on Electricity
Deregulation, September 2003