EPSU calls on European Council: Focus on real problems and reject Commission’s forced ownership unbundling
EPSU calls on European Council:
Focus on real problems and reject Commission’s forced ownership unbundling
(19 January 2007) The European Commission published its energy package 10 January 2007. It addresses many issues including climate change. The European Federation of Public Service Unions (EPSU) supports addressing climate change. EPSU is critical of the hardcore of the energy package which is to continue to create the internal market for electricity and gas. A key issue is to force ownership unbundling. EPSU affiliated unions met to discuss this and other proposals, 19 January 2007, Brussels.
Sven Bergelin, President of the EPSU Standing Committee Public Utilities argues: “The ownership unbundling proposals of the Commission will increase prices, will risk investments and are a slap in the face of those companies who implemented legal unbundling as the law prescribes. The Commission changes the rules of the game again after only three years. And once again nothing on the social consequences. Unacceptable. We ask the Council to reject these proposals.”
Steve Thomas, Professor with Public Services International Research Unit of University of Greenwich and one of Europe’s leading critical academics on liberalisation of electricity and gas stated: "Competition in electricity and gas will not function. And what is the Commission’s next step: ownership unbundling of wholesale (generation) and retail. That will be a disaster. It will risk creating the conditions that led to the catastrophic failure of the California electricity system in 2001, when prices went sky-high, companies serving consumers were bankrupted and companies such as Enron made a killing."
And Jan Willem Goudriaan, EPSU Deputy General Secretary added: “The Commission’s sector inquiry reads as one long indictment of the results of liberalisation, and it does not even address the negative social consequences or the negative impact of liberalisation on research & development and training. The only sensible conclusion you can draw is to stop this process. EPSU favours a cooperative system, not the wasteful competition the Commission seeks. The Council should put its shoulders under what really matters: addressing climate change, rather then loosing time and energy chasing the fantasy of competition in electricity and gas.”
The existing legislation should be implemented and regulators should do their job of ensuring that there is no abuse of dominant positions and non-discriminatory access to networks.
Background and announced actions
- Liberalisation does not help in meeting the two biggest challenges: addressing climate change and ensuring security of supply. It is a distraction and does not help in mobilising the energy and resources needed to confront these problems. And that is the problem with the European Commission’s energy package: it does not mobilise Europe’s citizens due to its reliance on markets and its neglect of the social dimension.
- The current proposals do not offer the gas and electricity companies stability which are needed for long term investments. Already the Commission’s sector inquiry prepares us for a next round of changes. It demonstrates the internal market for electricity and gas creates many problems such as vertical foreclosure. This implies that wholesale (generation) and retail are in the same company and thus a sizeable part of power is not traded. A market with sufficient liquidity to trust the price signals does not exist. The European Commission (DG Competition) is preparing the sector for unbundling wholesale and retail.
- The proposals of the Commission treat electricity and gas in the same way while practice demonstrates there are differences which are evident also in the fact that very few countries have ownership unbundling in gas, and quite a few have not even implemented legal unbundling in gas. EPSU has criticised the one-sized fit all approaches of the Commission in the electricity and gas sector on several occasions.
- The Commission is also focusing on unbundling of distribution and generation. Unbundling distribution and retail and challenging the threshold for exemption of 100.000 clients will be next. If the Commission’s proposals are adopted, it serves the small fish on a plate for the large fish. Concentration in the sector will increase and local (public) power companies destroyed.
- The Commission’s evidence presented to force ownership unbundling as one of the primary issues to address to create a functioning market in electricity and gas is not compelling. The Commission continues to ignore or underestimate the drawbacks of competition.
The Commission does not offer the sector long-term stability needed for long-term investments. The Commission is not guaranteeing that this will be the last of its interventions. Its proposals should be rejected by the Council.
The suggestion of the European Commission to Member States to tackle regulated prices and leave the prices for domestic, small and medium sized companies and large energy intensive industries to the vagaries of the market, is asking Europe’s citizens to take a jump in the dark and abandon what works. It is upsetting as the Commissioners are not directly responsible for keeping the lights on and ensuring social inclusion in Member States, and are not accountable like local and national politicians are. The complete lack of attention for strengthening democratic control by the European Commission is of grave concern to the unions.
Actions planned
The unions will start preparing actions. Several unions announced actions:
- 7 February, The German union Verdi will organise a national demonstration in Berlin against ownership unbundling. The participation of several European delegations will turn it into a European demonstration. More then 20.000 are expected.
- Hungarians unions have planned strike action on 6 February (2 hours), 8 February (8 hours) and on 12 February a strike for an undetermined period is announced.
- Actions are likely in Austria as well.
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