Select Committee on European Scrutiny Thirty-Seventh Report





COM(02) 304


Amended draft Council Directive amending Directives 96/92/EC and 98/30/EC concerning rules for the internal markets in electricity and natural gas.


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

Legal base:

(a) Articles 47(2), 55, 95 and 251 EC; co-decision; qualified majority voting

(b) Articles 96 and 251 EC; co-decision; qualified majority voting


Document originated:

7 June 2002

Deposited in Parliament:

19 June 2002


Trade and Industry

Basis of consideration:

EM of 2 July 2002

Previous Committee Report:

None; but see footnote 36

To be discussed in Council:

November 2002

Committee's assessment:

Politically important

Committee's decision:

Cleared, but request to be kept informed



    1. As part of the drive to complete the Single Market, the Council adopted in 1996 Directive 96/92/EC[34] 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, including a requirement for Member States to ensure at least a "significant" opening of their markets. Two years later, a comparable measure (Council Directive 98/30/EC)[35] was adopted for the internal market in natural gas, though the market access targets were set slightly lower.
    2. In March 2001, the Commission put forward a Communication analysing the way in which these two measures had operated, accompanied by proposals for a Directive and Regulation[36]. The former would further liberalise the rules applying nationally to access to the supply networks for both electricity and gas, whilst the latter would lay down further conditions governing the network for cross-border exchanges of electricity.
    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[37] on the security of energy supply in European Standing Committee C. That debate took place on 28 November 2001, but before then, the Government had supplied at our request a Supplementary Explanatory Memorandum (SEM) of 19 November 2001, setting out the views of the other Member States.
    4. As we noted in our Report of 21 November 2001, the SEM said that the majority supported the main elements of the proposal, but that France and Germany objected to them in important respects. France was resisting 100% market opening, and would, at present, commit only to liberalising its industrial and commercial sector, having doubts as to whether liberalisation would benefit domestic consumers. Germany was in favour of full market opening, but objected to significant sections of the proposal, particularly ex ante regulation, legal separation in the gas industry, and published tariffs for access to networks. The Government added that these objections were "generally not supported" by other Member States, although some had concerns about legal separation for gas. However, overall, the Government believed that the objections of France and Germany would eventually be overcome, and the proposal adopted in more or less its current form, although the timetable might be rather more protracted than originally envisaged.
    5. The current document

    6. The Commission has now brought forward the current document, which amends its original proposals to take into account some of the amendments proposed by the European Parliament at its first reading on 13 March 2002, as well as the conclusions on the internal energy market adopted by the Barcelona European Council on 16 March 2002.
    7. According to the Explanatory Memorandum of 2 July 2002 which we have received from the Minister for Energy and Construction at the Department of Trade and Industry (Mr Brian Wilson), the Commission has made two key changes to the proposed Directive:

    • the public service obligations for electricity and gas would now apply to all final consumers, rather than to all household consumers (as in the previous proposal and under the UK's current licensing regime);

    • all electricity bills would have to specify the fuel used to generate the electricity supplied, and the contribution of each to the production of greenhouse gases.

    1. As regards the proposed Regulation, the Minister says that the key change is the addition of provisions — originally suggested by the UK — on investment incentives for "merchant" interconnectors (those built speculatively, and not as part of a transmission company's regulated asset base).
    2. The Government's view

    3. The Minister says that the Government supports full market opening in the Community electricity and gas sectors, and is happy with the broad thrust of the latest version of the proposals. He adds that, whilst there is widespread support for liberalisation, some Member States (and Members of the European Parliament) are concerned that competition will damage service levels, and it is this which has led to consumer protection measures being included in the proposal. He adds that the UK, along with a number of other Member States, believes this is a matter for subsidiarity, but hopes to reach an acceptable compromise.
    4. Conclusion

    5. We are grateful to the Minister for this further information. Given the earlier debate, and the UK's continuing general support for this measure, we see no need to withhold clearance of this latest document, but we would like to be kept informed of any significant developments.


34  OJ No. L 27, 30.1.97, p.20. Back

35  OJ No. L 204, 21.7.98, p.1. Back

36   (22385) 7218/01; see HC 152-iii (2001-02), paragraph 1 (31 October 2001) and HC 152-vii (2001-02), paragraph 3 (21 November 2001). Back

37   (22096) 5619/01; see HC 28-xi (2000-01), paragraph 2 (4 April 2002); Official Report, European Standing Committee C, 28 November 2001. Back

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