250M EUR levy on the electricity producers in Belgium

Last week, the federal Council of Ministers agreed upon an one time indirect levy on the nuclear electricity producers in Belgium (SPE and Electrabel). The federal state will charge Synatom, the company responsible for the provisions for the phase-out of nuclear installations, for 250M EUR. Within 15 days, the nuclear electricity producers are obliged to reimburse Synatom with 250 M EUR. If the companies do not reimburse Synatom, a penalty of 2% of their annual income could be imposed upon them. The act prohibits passing the charge on in higher prices for the final customers.

250M EUR levy on the electricity producers in Belgium

Powers of the energy regulator strengthened

Last week, the Council of Ministers adopted a draft act awarding the CREG, the federal energy regulator, judicial powers for supervising the functioning of the energy markets in Belgium through the appointment of judicial police officers within its organisation.

Powers of the energy regulator strengthened

Belgian prime minister states that Suez' share in LNG-terminal must decrease

In the Belgian parliament, the prime minister declared yesterday that new legislation will impose a decrease of the participation of Suez in the LNG Terminal of Fluxys (of which Suez yesterday sold 12,5% to Ecofin).

Belgian prime minister states that Suez' share in LNG-terminal must decrease

The federal government slaughters the CREG

Last Friday, the federal governement decided to suspend the decision of the CREG on the interim transit tariffs, claiming that this decision is "contrary to the energy interests of Belgium" and would have "an unfavourable impact on the investment policy in the natural gas sector". The suspension increases the value of D&Co (in which Suez holds an indirect stake of 57%) with 500 MEUR to 700 MEUR.

The CREG has now fifteen days to issue a new decision, in which it has to follow the motivated suspension decision of the government.

Today, the federal minister of energy announced that he reached an agreement with the electricity producers. They will contribute to the budget 2008 by paying a tax of 250 MEUR. Suez is the major electricity producer in Belgium (market share of 96%).

Silly coincidence, isn't it?

The federal government slaughters the CREG

CREG's reaction on the negative reactions on transit tariffs

The CREG issued a press release today in which it concluded:

The different decisions of the CREG in relation to the transport and transit tariffs have been taken in the general interest:

1. The natural gas consumers are being protected against a take over price of the transit contracts of Distrigas & Co by Fluxys that might be too high;
2. A return on investment of 9% for a monopoly is a stimulus to keep on investing in the natural gas transmission system; in this way, Fluxys has the perspective for a higher profit margin for the planned investment projects (VTN/RTRbis and North-South);
3. Lower transit tariffs will attract foreign companies with a real chance of synergies on the Belgian market;
4. Belgium gains attractiveness as a transit country for natural gas, which will enforce the security of supply and the Belgian economy;
5. A balanced distribution of the costs of transport and transit will lead to a substantial decrease of interior transport tariffs for all Belgian gas consumers;
6. The non-regulated monopolistic profits of Distrigas&C°, which have never been reinvested in the gas network, will decrease;
7. The profits of the transit activity will finally be Fluxys’s, who will be able to invest in its transmission system.

CREG's reaction on the negative reactions on transit tariffs

Reactions on the reactions on the CREG's decision on transit tariffs

In the competent commission of the Chamber of Representatives, the Minister of Energy stated today:

“This week, the CREG has set the transit tariffs. The spokesman of the CREG was pleased that the tariffs were reduced by 70 to 75%. Nonetheless, as politically responsible person before the representatives of the Nation, I would like to ask the CREG who will pay the transit tariffs. It will be the international transit shippers. To whom will the transit tariffs be paid? To the TSO. What will he do with the money? He will invest in the modernisation and development of the network. He could also decide to set beneficiary transport tariffs for the consumers. Today, thanks to the tariffs set by the CREG, it is cheaper for Gazprom to have its gas transited to Belgium than to have it transported within Belgium. I see no logic in this decision. I do not think that it serves the general interest. I confirm thus that I am not convinced that impartial regulators always work in the general interest. Sometimes, they work in function of doctrines or calculated objectives and it is quite happy that a political authority conserves a certain margin, to be able to restart the debate, like I will do on the transit tariffs in the following days."

Some comments:

• The “doctrine” is laid down in the Second Gas Directive and in the Gas Act, voted an accepted by the representatives of governments and members of parliaments;
• If the role of Zeebrugge is of extreme importance for the government (as set out in the governmental agreement of last April), than lower tariffs will certainly enhance this role;
• If there will be no cross subsidisation between transport and transit, because only the transit shippers pay the transit tariffs, than how would it be possible that transit revenues would support the enlargement or development of the transport network or how the revenues be used for lower transport tariffs;
• The CREG has stated before that the interconnection between the transit and transport network in Belgium, and the limitations on the use of the transit network are burdensome for the development of a liberalised gas market in Belgium;
• Following the CREG’s decision, all but four contracts will not only be subject to regulated tariffs, but also to the code of conduct and the technical regulations on the gas market. This would normally allow shippers to access more easily the transit network, and, given the interconnection, the transport system.

Who’s general interest is the minister talking of?

Reactions on the reactions on the CREG's decision on transit tariffs

Monitoring of costs by the CREG (II)

The chamber of representatives adopted an act granting new powers to the CREG.

The CREG will monitor the compliance of every energy undertaking, supplying electricity or natural gas to off takers situated in Belgium, with the competition regulation and with the fair trade practices. These undertakings, individually or upon concertation with other undertakings, will refrain from all non-competitive behavior or unfair trade practices that could have an impact on the good functioning of the energy market in Belgium. If the CREG would establish an infringement to the competition regulations or the fair trade practices, it will send a report with its findings and with a proposal for remedies to the minister. The CREG will also inform the Competition Council of the content of its report (including the confidential preparatory documents).

With regard to unfair trade practices, based upon the proposal by the CREG, the federal executive can adopt the urgent measures the CREG could take. More generally, the CREG can formulate advices and propose all measures necessary to safeguard the good functioning of and the transparency on the energy market.

The undertakings must adopt an objective accountable ratio of the prices to the costs of the undertaking. The CREG will judge the ratio based upon a comparison of the costs and the prices of the undertaking with the costs and prices of comparable undertakings, if possible also internationally. In the event that an undertaking is a related undertaking, an abuse of dominant position is suspected if it proposed discriminatory prices and/or conditions to non related undertakings.If the CREG determines that there is no objective accountable ratio of the prices to the costs, it will send a report to the minister with its findings and the measures it proposes. The CREG will also inform the Competition Council of the content of its report (including the confidential preparatory documents). Based upon the proposal by the CREG, the federal executive can adopt the urgent measures the CREG could take.

The CREG can request from the undertakings all reports and information it judges necessary to be received within thirty days of its request. If the undertaking does not procure the information within these term, the CREG can visit the undertakings to review the necessary information and documents and can copy these documents.

Monitoring of costs by the CREG (II)

CREG's position on Transit of natural gas

The CREG issued its decision imposing provisional tariffs for the transport, storage and transit activities of Fluxys. It is the first time the CREG decides upon tariffs for transit activities. These activities are being operated by Fluxys for the account of Distrigas & Co.

In its decision, the CREG states that only four transit contracts fall under the scope of article 32.1 of the Second Gas Directive, that sets out that transit contracts which are concluded pursuant to article 3 of the Directive 91/296/EEC remain valid and implemented in accordance with the provisions of said Directive. These contracts are:
- The Contract between Distrigaz NV and WINGAS of 27 November 1996 related to the transit from Zeebrugge to Eynatten;
- The Contract between Distrigaz NV and Ruhrgas of 13 December 1996 related to the transit from Zeebrugge to Eynatten;
- The Contract between Distrigaz NV and Gaz de France of 30 June 1998 related to the transit from Zeebrugge to Blaregnies;
- The Contract between Distrigaz NV and Gaz de France of 27 April 1967 related to the transit from Poppel to Blaregnies.

CREG's position on Transit of natural gas

Nuclear phase out in Belgium

Notwithstanding the three existing studies and the alarming messages from the CREG, the federal energy regulator, on the risk of shortages in electricity production in Belgium, the federal governemental parties decided to launch another study on the nuclear phase-out, as foreseen by the Act of 2003.

In the competent commission of the Belgian parliament, representatives recently questioned the minister of Climate en Energy on his statements that the phase-out might be postponed.

The minister responded that given the variety of existing studies and the discrepancies in the conclusions, there is a need for a new, "impartial" commission to look at the nuclear question. Since most researchers in Belgium are (in)directly connected to stakeholders, the minister wants to liaise with foreign researchers.

Nuclear phase out in Belgium

Monitoring of costs by the CREG

As set out in a previous blog, the federal government has submitted a draft act allowing the CREG to monitor the electricity and natural gas prices in Belgium.

The draft act modifies the Electricity Act and the Gas Act and stipulates that electricity and natural gas prices must be in reasonable proportion to the costs of the electricity and natural gas undertakings. The CREG will evaluate the relation between the costs and the prices by comparing the costs and prices of comparable undertakings, if possible also in an international context. If electricity or natural gas undertakings are affiliated companies, an abuse of a dominant position is suspected if it offers discriminatory prices or conditions to third parties.

If the CREG judges that there is no objective reasonable relation between the costs and the prices, it will draft a report for the minister of energy that will include its findings and the measures it proposes. The CREG will also communicate the alleged infringements to the Competition Council.

It goes without saying that the new draft act leaves more questions open than answered.

Monitoring of costs by the CREG

New federal coalition agreement

The new federal government resolutely chooses sustainable development as guideline for her policy and acting. Therefore, she will develop a federal policy concerning sustainable energy in cooperation with the Regions and Communities.

She will tackle the problem of global warming and supports the “EU 2020” target: the EU needs to cut 20% of its greenhouse gases by 2020 and 20% of the EU energy needs to come from renewable energy sources by 2020. Therefore, the federal government as well as the regional governments will develop a climate plan to decrease the greenhouse gas emissions. The federal government will also stimulate other industrialised countries to act accordingly. To ensure that the targets will be achieved, a group of national and international experts will examine the ideal energy mix on the medium and long term. The Government will support the extension of a grid for decentralized electricity production.

Investments in renewable energy such as offshore windenergy will be increased. The government will encourage investments in sparing energy and create jobs in that sector. The whole plan will be based on third-party financing from investments in sustainably building and energy-efficiency.

The government also ensures the access to biofuels and stimulates its use. In addition, the government makes it possible for new electricity producers to develop on the Belgian market and to create real competition conditions, which means reasonable prices for consumers. The government chooses for the independence of grid operators and for an autonomous management of the transmission grids. The strengthening of the competition, in the advantage of consumers and companies, will be coupled with a real social energy policy that allows private persons and more specifically persons with a modest income to pay their bill and to keep up their consumption

Private persons and companies will be encouraged to limit their energy expenses. The government will launch an extensive plan to facilitate energy efficiency (buildings, vehicles, public tender, transfer of services). She will develop a taxation policy that encourages a well-balanced environmental behaviour, whereby tax advantages will be granted to energy efficient users. For example: encouragements to install a soot filter in the car, incentives for energy saving building improvements, etc.

The government approves the product standards which allow decreasing the amount of waste at source and the energy consumption. She stimulates a more sustainable mobility, opposing the use of cars for commuting between home and work and instead stimulating public transport, carpooling, etc.

All these measures will contribute to a decrease in the greenhouse gas emissions and thus stimulate a sustainable development.

New federal coalition agreement

Future monitoring of the gas and electricity prices by the CREG

The Minister of Climate and Energy, Paul Magnette, wants to extend the competences of the CREG, more specifically, the monitoring of prices as well as the permanent monitoring of the gas and electricity markets. This monitoring also consists in the control of data that allows the CREG to determine the indexparamaters. Furthermore, it implies that they have a periodically access to the real costs, commodity and commodity exclusive, from all licensed producers, importers and suppliers of the Belgian gas- and electricity market.

For to the Minister, this system will lead to a more transparent market and will give the competent authorities the opportunity to improve this market.

The monitoring of the price evolution seems in se useful and necessary. However, the collection of information re costs and especially the details about the origin of these costs, needs to be limited. Since the energy market is very international, there exists a potential risk that currently Belgian companies would move to other countries, only to avoid the excessive control.

Therefore, Mr. Bart Laeremans emphasized that it is necessary to balance the decision, taking into account the possible contra productive consequences.
The reports of the CREG and the ‘Competition Authority’, currently not published yet, will probably give a better view on the situation.

Future monitoring of the gas and electricity prices by the CREG

Pax Electrica II Agreement between Electrabel and SPE

In the framework of the “Pax Electrica II”, Electrabel and SPE reached an agreement in principle on the conditions for the putting at the disposal of SPE of 635 MW nuclear capacity of Electrabel. The first 100 MW consists of a swap with Chooz. The next 250 MW will be sold to SPE. The last 285 MW will be object of a long term supply contract “until 2025 at the earliest”. The agreement will be submitted for approval to the Belgian and European competition authorities and must be fully implemented by the end of the Summer 2008.

It is curious to note that this agreement in principle implicitely neglects the fact that the Act of 2003 on the nuclear phase-out foresees that the last nuclear reactors (Doel 4 and Tihange 3) will have to be shut down in 2025. By stating "until 2025 at the earliest", SPE, Electrabel and Verhofstadt, the Belgian prime minister present at the signing of the agreement, confirm that the nuclear phase out will without any doubt be reviewed by the next governement.

Pax Electrica II Agreement between Electrabel and SPE

The new Belgian Energy Minister is no big fan of a liberalised market

Paul Magnette, the Belgian (federal) Minister of Climate and Energy appears very reluctant toward the liberalisation of the energy market.

In an interview with De Morgen (a Flemish quality newspaper) he declared on a question about the willingness of Electrabel to sign an “ecological pact”:

"I do not know whether this is necessary. For me, free competition is no sacred principle. Even although Europe is fighting so hard for it. I am un homme de gauche. In some sectors, competition was wholesome, like in the telecommunications sector, but in the energy sector it did not lead to any advantage for the small customer. I also do not know very well how to organise competition with a natural monopoly. We cannot build new pipelines next to existing ones, can’t we? Europe has made a distinction between producers, grid operators and suppliers, but this has not given any positive effect. The quality has not increased, the invoices only became more complicated.
“If we want competition to work, there is above all things a need for a strong governmental regulator. Especially in sectors with a quasi-monopoly. We also must impose social and environmental aims in these sectors. That is more important than the competition in itself.."

The new Belgian Energy Minister is no big fan of a liberalised market

Best wishes for 2008

I wish everybody the best in 2008: a good health, a nice working environment and, of course, good energy!

Best wishes for 2008