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