European Utilities: July 1st 2007 will lead to tough EU sanctions

Publication Date	August 2006
Publisher	Datamonitor
Product Type	Report
Pages	8
ISBN Number	not applicable
Product Code	DAT00446

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Summary

Introduction

EU Directives require the European gas and electricity markets to open to full retail competition by July 1st, 2007. Many countries will not properly adopt or enforce the national laws necessary to implement the EU Directives. Yet even where national laws are adopted, the unbundling/liberalization approach of the EU Directives will in some places fail to strengthen competitive intensity.

Scope

A review of the requirements of the EU Gas and Electricity Directives.
An examination of options for the European Commission to ensure Directives are implemented at a national level.
A projection of the areas where effective implementation of the Directives is likely to falter.
An analysis of the likely response by the EU's Competition Directorate General and the implications for European energy companies.

Highlights

Only in April 2006 did the EU Commission formally notify 17 member states that they had not yet properly applied, or transposed into domestic legislation, relevant (B2B) portions of the Gas and Electricity Directives due to be implemented in 2004.

EU citizens (rather than corporations) may use the Directives as the basis for legal action in their domestic court system, effectively suing for personal damages due to their country's failure to implement the Directives.

If compliance with national laws reflecting the EU Directives does not produce results in areas like 'vertical foreclosure' and 'market integration' (competition law concepts reflecting aspects of market openness), then the Competition DG can and will pursue legal action on its own.

Reasons to Purchase

Understand what the requirements of the EU Gas and Electricity Directives are and where implementation is likely to falter.
Understand the limitations of the European Commission in enforcing national implementation of the Directives.
Project the implications for companies as policing of legislation by the EC moves to policing of markets and companies by the Competition DG.

Content

Prediction

EU Directives require the European gas and electricity to open to full retail competition by July 1st, 2007.

Summary

Many countries will not properly adopt or enforce the national laws necessary to implement the EU Directives. Alternatively, even where national laws are adopted, the unbundling/liberalization approach adopted by the EU Directives will in some places fail to produce a significant degree of competitive intensity. The EU Competition Directorate General will step in to fill the legal void, pushing liberalization even further than was contemplated by the Directives themselves.

Methodology

Analysis

The EU Electricity Directive has five key components that should be reflected in national laws and regulations
The EU Gas Directive has three key components that should be reflected in national laws and regulations
Failed market opening in some jurisdictions will push the onus on compliance with EU Directives from the national to the corporate level
Many countries will not properly adopt or enforce the national laws necessary to implement the EU Directives
Many countries still have not properly implemented some July 1st, 2004 Directive requirements
Options to enforce EU Directives are weak
Even if formal national legal frameworks are adopted, many countries will fail to properly implement and police them
The unbundling/liberalization approach adopted by the EU Directives will in some places fail to produce competitive outcomes, and the EU Competition Directorate General will step in to fill the legal void
In some countries the EU Directives will not achieve the desired outcomes of enhanced competition and benefits to energy consumers
The Competition Directorate General may push energy market liberalization further within the framework of competition law than the EU Commission contemplated through its Directives
All indicators point to the Competition DG adopting a tough, activist stance with respect to energy market liberalisation
Compliance with the EU Directives will be pushed from the governmental to the corporate level