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International Opportunities

Fortnightly Magazine - January 15 1995

"internal market in energy by the end of 1992." To the electricity industry, this seemed tantamount to introducing "third-party access" (em that is, allowing large customers and distribution companies to shop for power. Continental utilities manned the barricades.

On behalf of German utilities, the Vereiningung Deutscher Elektrizitatswerke expressed its opposition to what it regarded as a "violation" of the property right of exclusive use of wires. It further argued a need for franchises to ensure that "new power plant and system capacity can be built to allow for future need." Eurelectric, the association of European electric utilities, repeated the discredited arguments that the CEGB had used against competition (em empty rhetoric about "energy policy" clothing naked political interests and fear of change.

Political cracks began to appear as Dutch distributors argued for competition. The current state of play is a proposal for phased access at an undefined future date, when many of those in management will have retired. The German Minister of Economic Affairs has declared himself in favor of deregulating the system, but the change raises difficult legal and constitutional issues. In November, Italy's Trade and Industry Ministry and Treasury published an agreement to introduce competition and to sell part of the generation capacity of the state power company (ENEL) separately from the grid and distribution. But given its unstable government, what will happen and when is anyone's guess. Even "socialist" Spain is fielding proposals that would allow independent power producers to sell to customers, which could lead to the breakup of its current state mechanism for controlling the largely privately owned monopoly electric companies. That leaves lectricit‚ de France (EDF) effectively blocking change in Europe by advocating a mechanism that emasculates proposals for an integrated energy market. (This so-called "single buyer" approach would create a national power procurer that invites bids from competitive independent power projects and effectively precludes retail bypass.) Other countries are understandably reluctant to open their markets to EDF without reciprocity.

Clearly, the competitive story is far from over. And while change is inevitable, progress is not. Time alone will tell whether competition in power is merely a passing fashion or part of an enduring trend toward greater customer choice and less political control.

Alex Henney is director of European Energy Economics Limited and the author of A Study of the Privatisation of the Electricity Supply Industry in England & Wales.

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