New draft governmental agreement

Today, the Belgian media publish the new draft on their respective websites. Below is a (free and quick and almost literal) translation of the part on the TSO's:

The Government resolutely chooses for the independence of the TSO’s through a predominant public ownership and a public operation of the systems and by reducing the share of the producers/suppliers below 25%. Energy sector companies can acquire shares, but cannot have or use a blocking minority, for example by means of a shareholders agreement or special voting rights, nor can they appoint independent directors.

The TSO’s must have sufficient financial means to carry out replacements and new investments and the necessary maintenance to the system, inter alia in order to allow Belgium to continue its development as junction of the European transmission system.

The government watches over the promotion of interconnections at the borders.

The government will provide non-discriminatory access conditions to competitors for the import, storage and transport of natural gas. In order to safeguard our natural gas supply, the government will see to it that the policy of the CREG relating to the monitoring of the costs of the TSO’s allow the latter to invest in natural gas storage capacity and interconnection capacity. The government will continue the transformation of the Zeebrugge hub in order to strengthen the position as international pivotal point for the supply of natural gas. In general, the government will see to it that the policies of the CREG allow SO’s to guarantee an optimal quality of the systems.

New draft governmental agreement

The new federal government and the nuclear phase-out

According to press articles, the negotiators for the formation of a new federal government agreed upon maintaining the phase-out for Doel I (392-393 MW) and II, but decided to postpone the phase-out for the remaining nuclear reactors in Belgium (Tihange I, II and III, and Doel III and IV). The negotiators want to levy taxes on the remaining nuclear reactors and use the proceeds for investments in renewable energy.

The new federal government and the nuclear phase-out

Investigation by the CREG on the retail price increases announced by Electrabel

After the announcement by Electrabel of a price increase of electricity and natural gas on the retail market in Belgium, the federal minister of energy, Marc Verwilghen, requested an investigation by the CREG, the federal energy regulator, and the Competition Council.

Today, the CREG issued a press release with the telling title: “The CREG finalises its investigation on the price increases announced by Electrabel, notwithstanding the limited cooperation of Distrigas”.

The CREG concludes that the reasons invoked by Electrabel to justify the retail price increases of natural gas “are sometimes but not always equally pertinent”:
- The higher fuel prices were already charged to the end consumers;
- The new natural gas contract between Electrabel and Distrigas entered into force on 1 January 2007. Consequently, eventual negative price effects arising out of this contract would have been noticed at that date and will not have effect only as from 1 September 2007;
- Only the part of the price increase related to a fixed term in the new natural gas contract was not yet charged to the end consumers.
- The CREG has noticed that at the moment of the opening of the Walloon and Brussels energy market (1 January 2007) Electrabel has set its prices very low, which could imply predatory pricing. Although there are indications for such predatory pricing, the CREG is unable to prove this due to of the limited cooperation by Distrigas. Lacking the necessary cooperation, the CREG was also unable to conclude that Electrabel tried to provoke a price squeeze. The CREG asks the Competition Council to investigate this further.

The reasons invoked by Electrabel to justify the retail price increases for electricity for professional customers are again “sometimes but not always equally pertinent”:
- The prices Electrabel wants to increase differ on the basis of parameters taking into account the fuel and employment costs. These parameters are less volatile than parameters based upon more volatile price changes on the exchange. Electrabel invokes the increased wholesale prices. According to the CREG it is “strange” that Electrabel uses parameters in its contracts with industrial customers different from the increased wholesale (exchange) prices.
- The price increase seems to be inspired by the concern of Electrabel to safeguard its profit margin.

The CREG gives some recommendations:
- Price regulations can be temporarily adopted;
- Structural measures to improve competition must be adopted;
- CREG’s competences must be strengthened (including the possibility to conduct market monitoring);
- Part of Electrabel’s production capacity must be put at the disposal of other market players;
- The independence of the system operators must be strengthened;
- Investments in production, transmission/transport, distribution and transit must be carried out.

Investigation by the CREG on the retail price increases announced by Electrabel

National Petroleum Council on the future of energy: not bright...

Jérôme Guillet, director energy at Dexia, posted last week his comments on the report "Facing the hard truths about Energy" (attention: 11 MB pdf-file!) of the US National Petroleum Council on the Oil Drum.

He concludes:

"So I'd chalk this report as a major step forward in the acknowledgement that there is indeed a supply problem for both oil&gas."

National Petroleum Council on the future of energy: not bright...