8. We consider that the following raises questions of political importance,
but make no recommendation for its further consideration at this stage:--
Department of Trade and Industry
(17952)
-- |
Amended draft Directive concerning common rules for the internal market
in gas. |
| Legal base: |
Articles 57(2), 66 and 100a; co-decision; qualified majority
voting. |
Introduction
8.1 The aim of this draft Directive is to establish common rules for the
transmission, distribution and storage of natural gas. It lays down rules relating to the
organisation and functioning of the natural gas sector, access to the market, the criteria and
procedures applicable to the granting of authorisations for transmission, distribution, and storage
of natural gas, and the operation of systems.
8.2 The original version was recommended for debate in European Standing Committee
B in 1993[12], which eventually took place on an amended
draft[13] on 16 March 1994.[14]
8.3 Discussion on the proposal was put into abeyance until the completion of the
proposal on common rules for the internal market in electricity.[15] This was adopted by the Energy Council on 19 December 1996, but in his
Explanatory Memorandum (dated 17 March) the Minister for Energy at the Department of Trade and
Industry (Lord Fraser of Carmyllie) tells us that, after a Common Position was adopted on it on 25
July, the Irish Presidency reopened the debate on the gas directive and produced a compromise
proposal on 15 October 1996. This was not deposited but has now been made available to us.
8.4 The Energy Council on 3 December focused on four policy issues --
-- public service obligations;
-- unbundling/transparency of accounts; and
-- market opening and take or pay.[16]
It reconfirmed the necessity for completing the internal market in natural gas and the,
difficult, negotiations continued. The Dutch Presidency expect to produce their own compromise text
towards the end of March, with a view to trying to reach political agreement at the next Energy
Council on 27 May.
The Government's view, and its comments on the Irish text
8.5 As will be clear from the Minister's comments below, the UK has a number of
concerns in relation to this proposal. It has had difficulty in winning support from other Member
States, in most of which gas is still supplied by monopolies. We are assured that there has been
no question of them seeking to reverse the process of liberalisation in the UK and they have been
prepared to ensure that the text respects the situation here. The Minister tells us that it is
broadly compatible with legislation governing the gas industry in the United Kingdom and should
necessitate few if any significant changes to UK law. However, we understand that unless the other
Member States show a change of heart, the outcome may provide a less liberalised market than the
Government would have wanted, in order to provide opportunities for British business.
8.6 The Minister covers a number of aspects of the proposal in his EM, including:
"Public Service Obligations
The general view in the Council was that Member States, if they so wished, should be able
to impose public service obligations in the general economic interest but that competition should
not be unduly hampered."
Access to Networks
8.7 The Presidency compromise would permit Member States to opt either for:
-- a regulated Third Party Access (TPA) system. This is intended to cover the
system in UK; or
-- a negotiated TPA system, under which access would be obtained through
commercial discussions.
8.8 The Minister comments:
"Although the Government has real doubts as to whether negotiated TPA as proposed can
be an effective means of establishing competition, it recognises that it is extremely unlikely that
other Member States will wish to embrace the principles of regulated TPA in their domestic regimes
at this stage. The Government has therefore sought to strengthen the model proposed for negotiated
TPA. However, many Member States do not support the UK's views. The Energy Council recognised that
considerable further work was required on access related issues".
8.9 On unbundling and transparency of accounts, the Minister says that there
was general agreement in principle that a degree of unbundling would be necessary.
Market Opening
"Following recent discussions, it seems likely that the Dutch will pursue a qualitative
approach (identifying the type of customer) to market opening in combination with quantitative
criteria (overall percentage of the market to be opened) with a view to achieving a balanced market
opening throughout the EU. They are also likely to follow the Electricity Directive approach as
to the extent to which competitive supplies can be offered to distribution
undertakings"....."The Government supports a reasonably ambitious initial opening."
Take or Pay
8.11 According to the Minister, the Government does not support a proposal by the
Irish Presidency that the Commission could sanction derogations in the event of difficulties arising
in respect of take or pay contracts entered into prior to a specified deadline. He says:
"Many Member States are concerned that competition could result in major damage to
their national companies, many of whom have entered into long term (15 to 20 years) take or pay
contracts with non-EU suppliers. The Government recognises these concerns, but also believes that
over-generous possibilities for derogating from the market opening provisions of the directive could
materially undermine its effectiveness in introducing competition. It is of concern to the
Government that pressure to widen the proposed derogations from the directive continues to be
applied by a wide range of other Member States. A majority of Member States appear to favour
extending the scope of the take or pay provision so as to permit derogations in respect of
difficulties relating to take or pay contracts entered into at any time in the future."
Conclusion
8.12 In February 1994 the then Minister (Mr Eggar) said that the liberalisation
of the gas market "should help UK gas companies to gain a foothold in EC markets". The
tough negotiations which have taken place since the proposal was revived late last year may not
yield the opportunities for which he had hoped. However, until the Dutch issue their text, it will
be hard to judge.
8.13 There may not be an opportunity for the next Committee to consider
the text on which political agreement is sought at the end of May, but given the significant impact
it could have on access to the internal market, we are not prepared to clear the proposal now.
We ask the Minister to report as soon as practicable on the course of the negotiations.
12.(13568) 4911/92; see HC 79-i (1992-93), paragraph 25 (17 June 1992) and HC 79-xx
(1992-93), paragraph 1 (24 February 1993). Back
13. (15131)-- See HC 48-vii (1993-94), paragraph 2 (9 February 1994). Back
14.See Official Report, European Standing Committee B, 16 March 1994. Back
15.(17811) 12942/96; see HC 36-xii (1996-97), paragraph 12 (5 February 1997). Back
16.The system whereby a customer contracts to purchase certain supplies and must
take them or pay for them, whether eventually needed or not. Back
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