Brussels, 11th October 2007
Commitments offered by Distrigas to open the Belgian gas market have been made legally binding by a formal decision just adopted by the European Commission. The commitments address concerns raised by the Commission in the course of an investigation under EC Treaty rules prohibiting the abuse of a dominant market position (Article 82). The Commission had concerns about supply problems on the Belgian gas market through long-term contracts concluded by Distrigas with gas customers. Under the commitments, Distrigas would reduce the gas volumes tied in long-term contracts. This would allow other gas suppliers to compete with Distrigas to build up a portfolio of customers, and thereby encourage competition on the Belgian gas market. In the light of the commitments offered by Distrigas, the Commission has now closed its investigation.
Competition Commissioner Neelie Kroes commented: "Prior to the liberalisation of the gas markets, Distrigas was the only gas supplier on the Belgian wholesale market and it continues to be able to set prices and other conditions on the market. Its long-term gas supply contracts make it difficult for its competitors to build up a customer base and delay the development of competition. I am therefore pleased that Distrigas will reduce both the volume and the duration of these contracts."
On 10 May 2006, the Commission sent a Statement of Objections to Distrigas (see MEMO/06/197) expressing concerns that Distrigas might prevent other suppliers from entering the Belgian gas market in violation of the EC Treaty rules on the abuse of a dominant market position (Article 82). For competition to develop in the energy markets competitors need access to wholesale gas or electricity, transport and customers, and this decision will remove any barriers to access to customers. Given the very strong market position of Distrigas on the relevant market, the Commission was concerned that other suppliers find it difficult to do business with Belgian customers, due to the combination of two factors: the duration of the contracts and the volumes of gas tied to Distrigas.
To address these concerns, Distrigas proposed to conclude no new gas supply contracts with gas resellers with a duration of over two years. The maximum duration of new contracts with other large gas customers (industrial consumers and electricity generators) would be five years, except for new gas fired power plants. Furthermore, Distrigas would ensure that an average of 70% of the gas that it has contracted to supply to these customers would return to the market every year (in principle because the contract ends).
Distrigas has some flexibility to meet this average over the lifetime of the commitments, but each year at least 65% of its total contracted volumes must return to the market. The commitments also ensure that, even if Distrigas' sales volumes decrease, it would be able to tie a fixed volume of gas for more than a year ahead. This fixed volume represents about 20% of the total sales to these customers.
The commitments also ensure that the rights of Distrigas' existing customers with long-term contracts would not be affected. For such customers, Distrigas will grant unilateral termination rights with prior notice and without indemnity and these contracts will be treated as short term contracts for the purpose of the commitments.
The effect of these commitments is to ensure that Distrigas does not tie an excessive proportion of customers for more than one year ahead, while allowing Distrigas as much flexibility as possible in managing its portfolio of contracts.
Distrigas is a member of the Suez Group, which includes a number of other companies active in the Belgian energy markets. According to the Commission's Gaz de France/Suez merger decision (see IP/06/1558), Distrigas must be divested if the merger is completed and in the meantime it is managed independently under the control of a trustee. The commitments therefore address three scenarios: the current position where Distrigas is managed as a separate company; the reintegration of Distrigas within the Suez Group if the merger does not go ahead; and the divestment of Distrigas. While Distrigas is managed as a separate undertaking, the commitments only apply to Distrigas. If the merger is called off, the commitments would be respected by Distrigas and the other companies in the Suez Group. If Distrigas is divested, the purchaser of Distrigas would also have to respect the commitments provided that it had significant activities on the relevant market.
The Commission's decision, based on Article 9 of Regulation 1/2003 on the implementation of the EC Treaty's competition rules, takes into account the results of the market test launched on 5 April 2007 (see IP/07/490). This decision legally binds Distrigas to the commitments it offered until 31 December 2010 and ends the Commission's investigation. If Distrigas were to break its commitments, the Commission could impose a fine of up to 10 percent of Distrigas' total turnover without having to prove any violation of the EC Treaty's competition rules.
In July 2007 the Commission opened parallel cases into the French and Belgian
electricity market (see MEMO/07/313).