Energy Council (Hansard, 16 October 2002)

§ Mr. Wilson

I represented the UK at the EU Energy Council held in Luxembourg on 4 October.

Discussion at this Council centred on the issue of liberalisation of the EU's electricity and gas markets. There was also a short presentation of the European Commission's proposals for directives for Community-level oil and gas stocks.

The majority of Member States agreed that full legal separation of transmission and distribution system operators was essential for the creation of a genuinely competitive electricity and gas internal market. A minority maintained reserves as they had doubts about the necessity of legal unbundling, arguing that there were other ways to guarantee transparency and fair access to the networks.

Supporting the majority, the UK said the current proposed exemption threshold of 100,000 customers for distribution operators was too high, because it would exclude a large part of the market in some Member States. The UK could not accept the postponement of legal unbundling for those operators until 1 January 2005, since unbundling was as essential for non-household customers as it was for household customers. The UK emphasised that the need for political agreement was particularly important in the light of the increasing consolidation across Europe. If we did not put in place the conditions needed to ensure nondiscriminatory access to networks for all market players, and this meant legal unbundling, there was a danger that incumbents might be able to use their dominant positions to thwart competition. The Commission agreed that legal separation of both transmission and distribution network operators was essential, reminding delegations that this need not imply any transfer of assets.

On public service obligations, there was split between those preferring the universal service provisions to apply to all final customers and those, including the UK, wishing to limit them to household customers only.

On energy labelling, most delegations agreed that any labelling system should be simple, cost-effective and accurate.

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Discussion on access to gas storage generated strong support for a UK-inspired compromise whereby noncompetitive segments of the market would be subject to regulated third party access, while competitive segments could use negotiated access. But some Member States maintained a preference for negotiated access only.

Nearly all Member States emphasised the need to complete the full internal market as soon as possible, supporting the dates of 2004 for opening the non-domestic sector and 2005 for the domestic sector. The Commission agreed on these operative dates, but signalled the possibility of flexibility to achieve consensus.

The Presidency concluded that the EU remained on course to reach political agreement at the next energy Council meeting on 25 November.

A progress report on the electricity cross border Regulation was noted without discussion. The Commission emphasised that it was an essential part of the package.

The Commission presented proposals for two directives containing new arrangements for stocking oil and gas within the Community, explaining that the main objective was to improve security of supply of oil and gas. The Commission argued that the EU's arrangements for emergency oil stocks needed updating to take account of the current political situation; and that the development of gas as a fuel of choice for electricity generation meant that special arrangements were needed to guarantee security of supply, particularly in view of the rising proportion of gas imported into the EU.

The UK disagreed, arguing that the existing oil arrangements of the International Energy Agency had proved to be both flexible and adequate, and that the gas measure was premature until the internal market was functioning properly.