1.SECURITY OF ENERGY SUPPLY
(23825)
12228/02
COM(02) 488
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(a) Commission Communication: "The internal market in energy: Coordinated measures on the security of energy supply".
(b) Draft Directive concerning the alignment of measures with regard to security of supply for petroleum products.
(c) Draft Directive concerning measures to safeguard security of natural gas supply.
(d) Draft Council Directive repealing Council Directives 68/414/EEC and 98/93/EC imposing an obligation on Member States of the EEC to maintain minimum stocks of crude oil and/or petroleum products, and Council Directive 73/238/EEC on measures to mitigate the effects of difficulties in the supply of crude oil and petroleum products.
(e) Draft Council Decision repealing Council Decision 68/416/EEC on the conclusion and implementation of individual agreements between governments relating to the obligation of Member States to maintain minimum stocks of crude oil and/or petroleum products and Council Decision 77/706/EEC on the setting of a Community target for a reduction in the consumption of primary sources of energy in the event of difficulties in the supply of crude oil and petroleum products.
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| Legal base: | (b) and (c): Article 95 EC; co-decision; qualified majority voting
(d) and (e): Article 100 EC; unanimity
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| Department: | Trade and Industry
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| Basis of consideration: | Minister's letter of 31 March 2003
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| Previous Committee Report: | HC 63-i (2002-03), paragraph 1 (20 November 2002)
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| To be discussed in Council: | 14 May 2003
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| Committee's assessment: | Politically important
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| Committee's decision: | For debate in European Standing Committee C (decision reported on 20 November 2002)
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Background
1.1 In this Communication, the Commission set out its
latest thinking on the need to safeguard the Community's energy
supplies. In particular, it noted that, despite the measures which
have been taken to establish the internal market, the Community's
structural weakness resulting from its undue reliance on imports
make it vulnerable to external factors. It also pointed out that,
although rules for the maintenance of stocks of crude oil and
petroleum products are laid down by both the International Energy
Agency (IEA) and the Community itself, the mechanisms concerned
are no longer suited to present circumstances, and it highlighted
the lack of any Community decision-making power to dispose of
oil stocks on the market. It therefore suggested that a more coordinated
approach was required, based upon predefined mechanisms.
1.2 The Communication was accompanied by two specific
legislative proposals. First, on the organisation and coordinated
use of oil stocks, it proposed that all Member States should
set up a public body to hold such stocks; that the Commission
itself, assisted by a committee made up of Member States' representatives,
should be empowered to adopt as a matter of urgency the measures
needed to respond both to any actual disruption of supplies and
to circumstances where market volatility suggested that disruption
was to be expected; and that the minimum volume of stocks which
Member States are required to hold should be increased from 90
to 120 days. Secondly, it put forward a number of measures for
the security of gas supplies, including coordinated action
at Community level, and the need for Member States to maintain
minimum stock levels (though those levels would not, at this stage,
be laid down).
1.3 The Explanatory Memorandum supplied by the Government
on 17 October 2002 made it clear that the UK is opposed to these
proposals, on the grounds that:
- existing IEA and Community arrangements for holding stocks
already provide sufficient cover for oil supply disruptions;
- oil is an internationally marketed commodity, and emergency
plans need to cover key world players, which only the IEA is in
a position to do;
- the proposals on gas are premature, pending a full liberalisation
of Community energy markets;
- the proposals have not been adequately costed by the Commission,
and would impose considerable burdens on Government, business
and the consumer;[1]
- in terms of subsidiarity, individual countries, acting as
members of the IEA, are best placed to respond to an international
oil emergency.
The UK also has reservations about the suggestion that the proposals
should be based on Article 95 of the EC Treaty, believing that
Article 100 (which provided the legal base for the existing oil
stocking Directives) may be more appropriate.
1.4 We therefore concluded in our Report of 20 November
2002 that these were potentially highly significant proposals,
not only in terms of the likely costs, but more particularly in
relation to the fundamental difference between the Government
and the Commission over the extent to which action of this kind
should be taken by the Community as opposed to individual Member
States. In view of this, and the Government's reservations over
the legal base proposed, we recommended the document for debate
in European Standing Committee C.
Minister's letter of 31 March 2003
1.5 That debate has now been arranged for 8 April, and,
in his letter of 31 March 2003, the Minister of State for Industry,
Energy and the Environment at the Department of Trade and Industry
(Mr Brian Wilson) draws attention to a number of compromise proposals
issued by the Greek Presidency during February and March, which
will be before the Standing Committee.
1.6 In the case of oil, the Minister says that there
have been two Presidency texts, dated 3 and 27 March, where he
identifies three points:
- on cost, he recalls that the UK opposed the original proposal
to increase the stocking requirement from 90 to 120 days, and
says that the first compromise withdrew this, but substituted
other proposals which would have the same effect: he adds that,
because of opposition from Member States, these have largely been
removed from the second compromise, but that there is still no
sign of any cost-benefit analysis from the Commission, though
an explicit reference to a derogation allowing the UK, as a producer,
to keep a lower level of stocks has been reinstated;
- on the respective roles of Member States, the Commission and
the IEA, the Presidency has attempted to address concerns about
the effects of the original proposal on the IEA's ability to co-ordinate
a global response to disruptions in oil supply, but the Minister
says that, although these represent an improvement, they still
leave too much scope for intervention by the Commission;
- as regards the public stocking agency, the Minister says that,
although the first compromise was an improvement on the original
proposal, it was still too prescriptive, but that the second compromise
is less so.
1.7 The Minister also comments that the compromise proposals
do not address the question of the legal base, where the UK continues
to favour the use of Article 100, rather than Article 95.
1.8 On gas, the Minister says that there have also been
two Presidency compromise texts, dated 14 February and 14 March.
On these, he comments that:
- as regards Commission intervention, the first text made clear
the circumstances under which it could issue recommendations in
the event of a major supply disruption, but still retained the
Commission's right to intervene both in the case of a major supply
disruption, and if it perceived the number of long-term supply
contracts to be insufficient: the second compromise, whilst taking
on board Member States' opposition to this as regards long-term
contracts, is still a long way from satisfying both Member States
and the Commission;
- both Presidency texts retain the requirement on Member States
to set minimum storage targets, which is a matter for subsidiarity.
1.9 The Minister also points out that, to the extent
these various texts seek to meet the concerns of Member States,
they are unlikely to satisfy the Commission, whose original proposals
remain on the table. He expects further compromises to emerge
before the next meeting of the Energy Council on 14 May.
Conclusion
1.10 We are grateful to the Minister for this update,
which we are drawing to the attention of the House in advance
of next week's debate.
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