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SMEs and traders push for effective liberalization of EU energy markets

Quasi-monopolistic structures across most EU countries are leaving small businesses with no real choice of supplier as energy markets prepare for full liberalization on 1 July, warns UEAPME, the European small-business organization.

EU leaders in March called for the „effective separation of supply and production activities from network operations (unbundling)”, but stopped short of supporting full „ownership unbundling” which would involve dividing large integrated energy groups. The European Commission is currently drafting legislation to do just that, despite resistance from France and Germany, which want to preserve national energy champions such as EDF and E.ON. Brussels says that ownership unbundling is the only way to ensure fair access to networks for small suppliers and increase competition in European gas and electricity markets for the benefit of consumers.  But opponents say that it would only weaken European companies against dominant suppliers such as Russia and point to the UK, where full liberalization has so far led to price increases.

„European crafts and SMEs are disproportionately affected by the current lack of competition in the energy sector,” said Hanns-Eberhard Schleyer, chairman of  the Economic and Fiscal Affairs Committee of UEAPME, the association representing SMEs at EU level. UEAPME repeated earlier calls for greater energy liberalization and for EU regulators to force integrated energy groups to split up their networks distribution activities from energy production as a way to loosen their grip on the market. „'Ownership unbundling' is necessary but not sufficient in this respect,” UEAPME said on 24 April. „It must be accompanied by the strengthening of a European Regulatory Power capable of loosening the iron grip of energy behemoths and larger businesses on the market, as well as by measures increasing cross-border transport capacities.” „As long as these conditions are not met…regulations such as calculation guidelines or price caps for certain clients are justified and supported by UEAPME.” However, price caps are roundly rejected by EFET, the European Federation of Energy Traders, which represents the trading branches of large European energy groups.

In a statement on 24 April, EFET criticized France's regulated tariff system which allows industrial gas and electricity consumers to switch back to the regulated capped price for a limited duration of two years. Called 'TARTAM' (tarif réglementé transitoire d'ajustement du marché), the system acts as a safety net for industrial energy consumers which are have been significantly affected by rising market prices for gas and electricity. But EFET said TARTAM had unwanted side-effects, including uncertainties for electricity producers and reduced activity on energy markets as industrial consumers prefer sticking to the often lower regulated capped price. „The lowering of activity is already felt,” said EFET, warning that competition in the French electricity market was „under threat”. „New competitors are discouraged from entering and some already present are even led to leave the electricity market.” This, EFET added, comes on top of other market mechanisms, which traders say are already hampering market liquidity.

In May 2006, a group of around 60 energy-intensive companies, including chemical producers Rhodia and Solvay and steelmaker Arcelor, formed a consortium to buy electricity at bulk prices from dominant suppliers. Called Exeltium, the consortium will allow participants to negotiate long-term contracts with electricity companies below market price, and weigh against large energy groups in negotiations. Exeltium is open to other industrial groups, within the limits of criteria set by the French authorities. Among other conditions, electricity must be a substantial element in their creation of value and their consumption must be steady. (