Breaking Up The Power Giants?

Battle may be about to be joined. EU competition commissioner Neelie Kroes is back in the news. She made a speech yesterday, and in that speech she suggested that the golden days of the EUs unreformed energy giants may be numbered, as the European Commission is considering launching an onslaught on monopolistic energy utilities and the politicians who protect them (and here). According to The Economist Angela Merkel has recently gone for a policy of “underpromise and overdeliver”, so I do hope she has taken a leaf out of Merkel’s book, and that this won’t be yet another example of ‘overpromise and underdeliver’. The stakes, as I was suggesting yesterday, are really quite high.

Kroes principle objective seems to be those companies that control both the supply and distribution of energy, and in so doing effectively block their rivals from entering the market. But in taking on these companies she will also need to take on the political networks that support them. As Euractiv (which incidentally has a useful dossier on the energy topic) puts it “The EU considers common energy policy amid national sovereignty concerns”. My question is, just who is it who has so much vested interest in this national sovereignty idea? Can it be simply a coincidence that Kroes hails from the Netherlands, one of the smaller EU member states? Oh well, one more time onwards and upwards to the coalition of the willing.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

4 thoughts on “Breaking Up The Power Giants?

  1. There are 2 lines of attack for Kroes: the weak, and the impossible. The weak option is to use the tools already at her disposal, designed for generic competition matters. She and Piebalgs have launched their sectoral enquiry, but while this is useful, it is not going to get to grips with the issue of unbundling / separation of supply and distribution.

    For that you would need new legislation – a 3rd Energy Market liberalisation package. The 2nd package, implementation of which is due to be complete by 2007, was drafted in a very different economic climate and with France, Spain and others behaving as they are presently, I don’t see how Member States would agree to anything much more radical than the 2nd package. With France, Spain and Germany reluctant to change, this option seems impossible to me in the short term.

    So in conclusion, I reckon Kroes is overpromising!

  2. The whole unbundling issue is fraught. The so-called national champions are often able to run rings round their governments or have captured them. How long before the European Commission buys the idea that European champions like Eon are the best to negotiate with Gasprom rather than the Commission itself?

    The new Green Paper has some wonderful fantasies for foreign energy policy

  3. “The new Green Paper has some wonderful fantasies for foreign energy policy”

    “So in conclusion, I reckon Kroes is overpromising!”

    well you may well both be right. Certainly no-one could accuse you of not being realists. But on the other hand the problem is quite serious in principle, so this time there may well be that pressure to actually do something.

  4. While the concerns over the last couple of years about European energy policy are new, at heart the reasons why Europe is not going to get to grips with this are far older: a lot can be traced back to the 1970s and different Eu countries’ approaches to nuclear power.

    Nuclear has been such a touchy issue for many EU member states, with Austria cheerleader for the opposition and France being very supportive.

    Any efforts to get to grips with the current situation are going to have to say something about nuclear – you can’t talk EU energy policy without mentioning it somehow – whether your take is for or against.

    This issue has meant that bold decision making, or real Commission initiatives on energy policy have been hard to achieve. Combine this with the adverse take on liberalisation in some countries, a cleavage that cuts very differently to the nuclear one, and you have an extremely hard situation to solve.

    If I was to try to think positive, we have at least reached the first stage needed for a consensus: that things need to change and new approaches are needed. But that could be a lot easier than working out what actually to do…

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