Brussels on Tuesday trained its legal artillery on European Union member states in one of the biggest judicial barrages ever mounted by the EU executive to chase up recalcitrant governments. The legal proceedings launched by the Commission cover not only energy, but also telecommunications, gambling and tobacco advertising in order to combat spreading economic nationalism in the EU’s single market. But the Commission’s core concern is energy, where no fewer than 17 governments have been served with formal letters of complaint at their failure to follow existing EU legislation to open up their gas and electricity markets.
Tuesday’s moves dramatise how far Europe is from its agreed goal to achieve total liberalisation by mid-2007. The urgency of the liberalisation challenge is not just because that deadline is now so near, and progress to date so feeble. It is also because only a competitive market can enable Europe to minimise waste and maximise resources so that it can cope with the pressures of rising prices, uncertain supply and climate change in the energy market. That is why Brussels is pursuing certain governments for failing to encourage renewable energy and to hold sufficient oil stocks as well as to liberalise.
It will not be easy to get governments to loosen their protective hold on their energy sectors. Even inside the US, it has been very difficult to get individual states to agree to energy liberalisation. Politicians know that they are first in the firing line of voters, if somehow the lights go off. Ironically, energy security can increase with scale. For deregulation could enable a multinational market such as the EU – if its national grids and pipelines were properly linked to each other (which they are not) – to manage with less spare capacity. In a single market countries could depend more on each other’s spare capacity.
But the Commission, whose president, José Manuel Barroso, clearly now sees energy as a defining issue of his tenure, has other energy initiatives that may equally rile governments. Brussels will soon have to take merger decisions that may displease governments in Spain and France. It has launched antitrust investigations, which if they probe too deeply into the concentrated German market may cause that country’s new leader, Angela Merkel, to drop her early backing for the Barroso Commission. Brussels is also considering the case for new “unbundling” legislation that would require the break-up of integrated energy companies, as the UK did in its national market.
The UK would undoubtedly like to see its model forced upon other EU states. But it is far from clear that this would solve Britain’s own problem. London has been quick to blame soaring UK gas prices on “continental cartels” gaming the market, but slow to acknowledge the role played by inadequate UK planning and investment.
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