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EU opens probe Into Hungary's electricity power agreements

European Union regulators started an investigation into agreements between Hungary's state-owned electricity network operator MVM Rt and power generators, the European Commission said in a statement. The European Commission, which can outlaw subsidies that distort competition, said the long-term agreements may harm competition. The deals cover about 80% of Hungary's power market and ``present a serious potential obstacle to the
liberalization of this market,'' the commission said in a faxed statement today. The EU regulator must ``ensure that state compensation is proportionate and does not deter new competitors from entering the market,'' Neelie Kroes, the EU's competition commissioner said. The commission, the antitrust regulator of the 25-nation EU, said the deals guarantee a return on investment to the electricity generators without any risk. Under EU rules, companies can be forced to return illegal subsidies. MVM operates nuclear and coal-fired power plants and the
country's power transmission network. It also purchases electricity from power stations in Hungary and abroad and sells it to distribution companies in Hungary. Under the agreements with power generators, MVM must buy a fixed quantity of electricity at a fixed price, guaranteeing a return on investment to the generators. The deals also include a guaranteed profit. They were signed between 1995 and 2001 and expire between 2010 and 2020 depending on the generators, the
commission said.