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Brussels, 12 December 2006

The Commission takes action against Member States which have still not properly opened up their energy markets

With the 26 reasoned opinions it has sent out today to 16 Member States, the Commission has confirmed its intention to follow up the implementation of internal energy market legislation. This second phase of the infringement procedure for the breach of the 2003 Directives on the opening of the gas and electricity markets concerns Germany, Austria, Belgium, the Czech Republic, Estonia, Spain, France, Greece, Ireland, Italy, Lithuania, Latvia, Poland, Sweden, Slovakia and the United Kingdom. Finland and Austria alone – but only for gas – have put forward sufficient arguments for the procedures against them to be stopped.

Andris Piebalgs, the Energy Commissioner, has stated: "Only full and complete implementation of the Directives by the Member States can ensure the establishment of an internal electricity and gas market which guarantees a real choice of gas and electricity supply for all European consumers as of 1 July 2007."

The Commission decided to send the reasoned opinions after examining the Member States’ replies to the letters of formal notice sent last April. The principal problems in transposing the legislation that have been observed are the following:

  • Persistence of regulated supply tariffs for eligible clients, which blocks the arrival of newcomers and prevents the free choice of supplier;
  • Insufficient separation between the vertically integrated network operators and production and supply activities, especially as regards functional separation which aims to guarantee the independence of the network operators and prevent any discrimination with regard to network access;
  • Discriminatory access of third parties to the network, and especially maintained preferential access for the dominant operators’ historical contracts;
  • Insufficient regulator competencies, especially as regards network access and tariffs;
  • Absence of notification of public service obligations;
  • Insufficient indication of the origin of the electricity.

Upon reception of the reasoned opinions, Member States have two months to submit their observations to the Commission, which can then decide to bring the case before the European Court of Justice. For the most part, these procedures concern only the conformity of the general legislative frameworks with the Directives. The Commission will also take action against all breaches of the Directives which come to its attention, particularly through complaints, as regards their effective implementation, at regulatory level or as regards the practices of network operators.

The Court of Justice has already ruled against Luxembourg for gas and electricity, and Spain for gas, on 19 May and 16 November 2006 respectively. Spain could also be ruled against in the near future for failure to transpose the electricity Directive. In parallel, the Commission is continuing to examine the conformity of Hungary’s and Estonia’s gas legislation. Letters of formal notice were also sent to Portugal and Hungary on 4 July and 18 October last regarding electricity.

These persistent infringements underline the failings of the current legislative framework

Most importantly, regulators are not endowed with the independence and powers that would allow them to ensure the establishment of open markets that function in an efficient and non-discriminatory manner.

Furthermore, effective regulation of the cross-border aspects of access to gas and electricity networks can only be ensured with great difficulty under the current legal framework. The persistence of preferential access to cross-border interconnectors testifies to this.

Lastly, the numerous infringements regarding functional separation demonstrate Member States’ persistent incapacity to effectively transpose these complex measures. Even where this separation exists, the legal and functional separation of the vertically integrated network operators from production and supply activities does not always enable the equal access of all suppliers to the network to be ensured, as shown by the persistence of infringements regarding discriminatory and preferential access for dominant operators. The difficulties of implementing these rules and their ineffectiveness make it necessary to consider reinforcing the independence of the network operators.

In view of these shortcomings, the Commission has conducted in-depth studies in each country to analyse the efficiency of the legislative and regulatory measures designed to open up the markets in practice. The Commission will publish a report containing the results of its analyses in the competition sector at the beginning of next year.

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