Following the CREG’s decisions of 15 May 2008 and 6 June 2008 imposing regulated tariffs on transit of natural gas (transit meaning the border-to-border transmission of transport of natural gas), Fluxys, Distrigas and some other shippers instigated legal proceedings before the court of appeal of Brussels requesting the suspension and annulment of these decisions.
At the beginning of the summer 2008 Distrigas sold its transit subsidiary Distrigas & Co to Fluxys.
On 11 November 2008, in the procedure initiated by Fluxys, the court of appeal decided to suspend both decisions. In the court’s view:
(i) there is no legal framework allowing a different set of tariffs for transit and transport; and
(ii) the CREG does not have competence to qualify transit service contracts as regulated or exempted.
On 10 March 2009, the Belgian legislator adopted a new act amending the Belgian Gas Act, establishing a different tariff system for transit activities in Belgium and (ii) interpreting indirectly article 32.1 of the Second Gas Directive by specifying that all contracts concluded before 1 July 2004 between (i) Fluxys, Distrigas or a subsidiary thereof and (ii) transit shippers are exempted contracts in the sense of article 32.1 of the Second Gas Directive and article 15/19 of the Gas Act.
The CREG decides to seek the annulment of the Act of 10 March 2009 by the Constitutional Court. On 2 October 2009 it issues a press release that its decision was motivated by referring to “the need to clarify the legal situation of natural gas transit in the interests of the market and the end consumers".
A week later, on 8 October 2009, the European Commission opened an infringement proceedings against Belgium concerning its gas transit system because Belgian legislation would discriminate between transit and transport of natural gas.
Notwithstanding its own criticism and the arguments of the European Commission, CREG reaches a compromise with Fluxys on the new transport tariffs as from 1 January 2010. In the joint press release of 29 October 2009, CREG and Fluxys state that the new tariffs will be “highly competitive compared to others across Europe and at the same time provide a reasonable return on capital investment made by Fluxys”. In the decision of 22 December 2009, officially approving the tariff proposal by Fluxys, the CREG also approved the maintaining of the difference between border-to-border transport and internal transport.
In the beginning of December 2009, Ms Katrien Partyka, a christian-democrat member of parliament, and a few colleagues, submitted a proposal to amend the Gas Act aiming at the abolition of the Act of 10 March 2009, thus responding to the request of the European Commission. At the same time this proposal aims at lifting all exemptions for historical contracts as from 1 January 2010. This proposal is currently debated in the competent commission of the Parliament.
Wednesday, 30 December 2009
Update on the current legal status of transit of natural gas in Belgium
Thursday, 8 October 2009
Transit and the European Commission
No further comment:
The Commission opens infringement proceedings against Belgium concerning its gas transit system
The European Commission decided today to commence infringement proceedings against Belgium as the Belgian Law of 10 March 2009 which lays down exemptions for natural gas transit contracts infringes Community law establishing an internal market in natural gas. Since 2004 under Community law the concept of transit has ceased to exist and all transmission of natural gas is now subject to the setting of tariffs to be determined by the independent regulatory authority of each Member State.
Non-discriminatory third-party access to the natural gas transmission network has become a central aspect of the opening up of the markets to competition. Community law no longer makes any distinction between transmission of gas involving transit of natural gas and the transmission of gas intended for national customers.
Article 2 of the Belgian Law of 10 March 2009 introduces exemptions from the general rules on access to the network for the transit of natural gas and provides for negotiated tariffs which apply for a period fixed by contract. In addition, the law makes it possible to set a fair profit margin for transit which is clearly higher than that applicable to other transmission activities and makes a distinction between existing and future installations.
The Law of 10 March 2009 discriminates between network users carrying on similar activities, a practice which is incompatible with Community law.
Community law concerning the internal market in natural gas provides for third-party access to the natural gas transmission market in order to enable new suppliers to enter the market in a transparent and non-discriminatory manner on the basis of tariffs negotiated between the gas transmission network operator and the regulator and published in advance. Since the markets were fully opened up to competition on 1 July 2007, alternative providers can thus offer to supply potential customers.
In the first phase of the partial opening up of the markets, Community law allowed access to be negotiated between network operators and suppliers, but this has not been possible since 2004. Since then, exceptions to regulated access have been strictly controlled under Community legislation.
Friday, 2 October 2009
CREG seeks the annulment of the 2009 Natural Gas Transit Act
The CREG announced today that it has requested the Constitutional Court to annul the Act of 10 March 2009 (that, as you might recall, modified the tarifary system for new transit activities and that also excluded all pre 2004 transit contracts from the scope of the Second Gas Directive).
The Constitutional Court normally renders its judgement within a year from the lodging of the appeal.
Wednesday, 1 July 2009
Energy Undertakings Cannot Hold More Than 24,99% of the Fluxys' shares
On the basis of an act, voted by Belgian parliament last week and amending the Gas Act, at the latest on 31 December 2009 all supply undertakings, electricity producers, electricity suppliers, intermediaries, and affiliated companies of the aforementioned companies cannot hold solely or jointly more than 24,99% of the shares of the natural gas transmission system operator (Fluxys).
Moreover, the bye-laws and statutes of the transmission system operator cannot grant special rights to the aforementioned undertakings.
Wednesday, 3 June 2009
CREG Examines EDF's Share In SPE
Following a question by federal representative Tinne Van der Straeten, the federal minister of energy, Mr Magnette, yesterday declared that the CREG, the federal energy regulator, is examining the take-over by EDF of Centrica's shares in Segebel, the majority shareholder of SPE. According to the minister, the CREG is looking at the consequences of the operation on the competition of the Belgian electricity production market. If the CREG would raise objections, it will propose the necessary measures to the Competition Council or the minister of energy.
Tuesday, 28 April 2009
New Proposal for Gas Code of Conduct
Thursday, 9 October 2008
Powers of the energy regulator strengthened
Thursday, 22 May 2008
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:
- 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;
- 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);
- Lower transit tariffs will attract foreign companies with a real chance of synergies on the Belgian market;
- Belgium gains attractiveness as a transit country for natural gas, which will enforce the security of supply and the Belgian economy;
- 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;
- The non-regulated monopolistic profits of Distrigas&C°, which have never been reinvested in the gas network, will decrease;
- The profits of the transit activity will finally be Fluxys’s, who will be able to invest in its transmission system.
Tuesday, 20 May 2008
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.
Friday, 28 March 2008
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.
Thursday, 20 March 2008
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.
Wednesday, 1 August 2007
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.
Tuesday, 24 July 2007
Proposals for the new federal government
Yesterday Yves Leterme presented his memorandum for negotiations with a view of the formation of the next Belgian federal government.
In his memorandum, two pages are dedicated to the energy market.
At first sight, Leterme did a good job in hiding his understanding of the liberalised energy markets.
A short overview of his proposals:
- SPE must be "structurally strenthened";
- Next to SPE and Electrabel, only one third producer must enter the market;
- Both SPE and the third producer must be able to buy together a 30% stake of the nuclear capacity at a cost plus price;
- Producers and suppliers cannot hold more than 25% of the shares of the TSO;
- The import and transport of natural gas must be based on non-discriminatory conditions for all parties;
- The federal state will invest in storage capacity and interconnection capacity;
- Zeebrugge must remain an important hub;
- The nuclear phase-out is softened;
- The CREG must be strengthened, but also more monitored.
On my Dutch weblog I give a full overview of and some first comments on the memorandum.
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