Select Committee on European Scrutiny Seventh Report


COM(01) 125

Commission Communication on completing the internal energy market.

Draft Council Directive amending Directives 96/92/EC and 98/30/EC concerning common rules for the internal market in electricity and natural gas.

Draft Council Regulation on conditions for access to the network for cross-border exchanges in electricity.

Legal base: (b) Articles 47(2), 55, 95 and 251 EC; co-decision; qualified majority voting
(c) Articles 96 and 251 EC; co-decision; qualified majority voting
Department: Trade and Industry
Basis of consideration: SEM of 19 November 2001
Previous Committee Report: HC 152-iii (2001-02), paragraph 1 (31 October 2001)
To be discussed in Council: No date set
Committee's assessment: Politically important
Committee's decision: For debate in European Standing Committee C, together with the Commission Green Paper on security of energy supply (decision reported 31 October 2001)


3.1  As part of the drive to complete the Single Market, the Council adopted in 1996 Directive 96/92/EC[11] setting out common rules for the internal market in electricity. In addition to laying down general rules for the organisation of the sector, it contained a number of more specific provisions governing generation, transmission and distribution systems, the unbundling[12] and transparency of the accounts of vertically integrated concerns, and access to the system (where Member States were required to ensure at least a "significant" opening of their markets). Two years later, a comparable measure (Council Directive 98/30/EC)[13] was adopted for the internal market in natural gas, though the market access targets were set slightly lower.

3.2  In March 2001, the Commission put forward the current documents, comprising a Communication (in which it analyses the way in which these two measures have operated to date), accompanied by proposals for a Directive and Regulation. These reflect the findings in the Communication, with the former further liberalising the rules applying nationally to access to the supply networks for both electricity and gas, and the latter laying down further conditions governing the network for cross-border exchanges of electricity.

3.3  The content of these documents, and the issues to which they give rise, are set out at some length in our Report of 31 October 2001, which recommended that they be debated alongside the Commission's Green Paper on the security of energy supply, already recommended for debate in European Standing Committee C. However, in view of the importance here of the views of the other Member States, we said that it would be helpful if, before the debate took place, the Minister could set out in a Supplementary Explanatory Memorandum their reactions to the proposal and the likelihood of it being adopted in its present form.

Supplementary Explanatory Memorandum of 19 November 2001

3.4  In his Supplementary Explanatory Memorandum of 19 November 2001, the Minister for Industry and Energy at the Department of Trade and Industry (Mr Brian Wilson) says that the majority of Member States support the main elements of the proposal, but that France and Germany object to them in important respects.

3.5  France is resisting 100% market opening, and will, at present, commit only to liberalising its industrial and commercial sector. He says that the French have doubts as to whether liberalisation would benefit domestic consumers in France, and that the UK is working bilaterally with the Commission to overcome those concerns. Germany is in favour of full market opening, but objects to significant sections of the proposal, particularly ex ante regulation, legal separation in the gas industry, and published tariffs for access to networks. The Minister says that these objections are "generally not supported" by other Member States, although some also have concerns about legal separation for gas. He adds that Germany is under considerable pressure from the Commission and other Member States, including the UK, to change its stance, and that there have been several UK-Germany meetings at senior level in recent months to discuss a way forward. He says that there are signs that Germany is becoming more flexible, and that the Government is reasonably hopeful that an acceptable compromise can be found.

3.6  Overall, the Government believes that the objections of France and Germany will eventually be overcome, and the proposal adopted in more or less its current form, although the timetable may be rather more protracted than originally envisaged.


3.7  Since the debate recommended in European Standing Committee C is to take place on 28 November, the information provided in this Supplementary Explanatory Memorandum is timely, and we are accordingly drawing it to the attention of the House.

11  OJ No. L 27, 30.1.97, p.20. Back

12  The separation of the various elements within integrated businesses. Back

13  OJ No. L 204, 21.7.98, p.1. Back

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