Equal access to all energy networks: fact or fiction?

 In a competitive sense, effectiveness requires that the energy market system operators or the owners of networks allow any given gas or electricity supplier equal access to these networks. As a result, operators of transmission and distribution systems must provide non-discriminatory services to all users.They must offer the same level of service to different users under contracts that are identical in terms of their contractual conditions (duration, nature, pricing, etc.) (Bartlomiej, 2010). Non-discriminatory and effective access by third parties to the networks is crucial for the existence of a genuine and competitive internal energy market within the EU and all parts of it. However, if the EU is to be considered for a competitive internal energy market, it is mandated that the EU foster not only legal development but also provide necessary support to the construction of storage and network infrastructure in its Member States.Additional infrastructure and interconnectors need to be built to strengthen the existing network and ensure the development of cross-border trade (Bartlomiej, 2010). However, research has proven that the existing national legal frameworks don’t have room for independence, transparency, and efficiency in the regulation of cross-border issues in relation to network access for electricity and gas. Presently, the EU is not able to guarantee any EU company the absolute right to sell electricity in any given Member State on equal terms without discrimination.

On such accord, one can easily see that the whole idea of equal access to all energy networks is nothing more than a fiction, as each Member State (especially the energy-producing nation) is adopting contradictory policies (coupled together with a lack of quality legal execution and regulation in the EU) that favor profitability for its national companies and economy. Thus, equal access to all energy networks does not exist at present (Bartlomiej, 2010; Creti and Villeneuve, 2004; Brunekreeft and Twelemann, 2005; Bartholomew, 2005).

Impact of equal access to energy infrastructures on promoting competition in the EU

The EU stated in its Communication Note on the Future of Internal Gas and Electricity Markets (2007) that preferential access granted to cross-border interconnectors demonstrates the limitations of current energy regulations (Bartlomiej, 2010).Also, the legal and functional unbundling that it adopts for network operators poses serious issues. Inasmuch as these unbundlings remain vertically integrated, they create a direct barrier to equal access to the networks for all independent suppliers, with special reference to distribution, an area where legal separation was prohibited until 2007 (Bartlomiej, 2010). Unless ownership is separated, the current unbundling rules do not remove the incentives associated with companies' self-cross-subsidization or the discrimination leveled against other companies seeking third-party access, as they create irrelevant technical barriers, maintain artificial small balancing zones, and make unused capacities unavailable.On that accord, ownership unbundling, as exercised in cases where transmission or distribution companies would own the infrastructural access without owning major stakes in supply and generation, does seem to be the best solution for ending discriminatory practices with respect to non-discriminatory third-party access, while at the same time increasing competition on the market. For instance, the whole unbundling game can permit a company to hold certain non-controlling shares in both the transmission or distribution system operator and in a supply or generation company. As such, the minority shareholder won’t have blocking rights in either company, it can’t appoint members of their boards, and it could not have its own members serving on the boards of either company. In other words, the precise ways in which unbundling occurs can be difficult to express and vary.Unbundling thus has the power to block all rights of the company, limiting equality in terms of how it accesses energy resources.

As such, the absence of equal and transparent third-party access to networks does create a high level of entry barrier for the new players and, as such, has a huge negative impact on the development of a competitive energy market (Bartlomiej, 2010; Creti and Villeneuve, 2004; Brunekreeft and Twelemann, 2005; Bartholomew, 2005). The main reason is that those with an advantage due to a higher level of shares and a preferential system end up turning the entire network into a monopolistic pile block, scaring off new interested investors from venturing into such businesses.Therefore, equal access to energy infrastructures is important for the development of a competitive energy market in the EU, and such development will inevitably be impossible without the presence of equality in terms of third-party access to these infrastructures.

In conclusion, the absence of equal access to energy infrastructure is weakening the supply side of the energy network. This is because the highly privileged corporations have succeeded in creating a huge entrance barrier, and as such, they now focus on profit generation instead of investing in new innovative systems that can enhance overall supply. The lack of succulent competition means that third-party networks have no choice but to accept their conditions.

As such, it is now important that the EU ensure independent energy infrastructure service in the internal energy market project of its system, and such policies should be built to challenge, in the same way, the dominant structure of vertical integration and open more rooms for a transparent and competitive energy market in the EU (Bartlomiej, 2010), as this is the only possible way for creating equal access to energy infrastructures.

References

Bartholomew, M. (2005). The UK electricity market from pool to exchange. In: Roggenkamp, M., Boisseleau, F. (Eds.), The regulation of power exchanges in Europe. Intersentia, Antwerpen – Oxford, pp. 81–117.

Bartlomiej, N. (2010). Equal access to the energy infrastructure as a precondition to promote competition in the energy market. The case of European Union. Available at: http://ac.els-cdn.com.ezproxy.liv.ac.uk/S0301421510001515/1-s2.0-S0301421510001515-main.pdf?_tid=f23c40f2-7b37-11e4-a2bc-00000aab0f01&acdnat=1417644274_b509aae4d1e69c9145cb8e887d752b78 [Accessed on: 3-12-2014].

Brunekreeft, G., and Twelemann, S. (2005). Regulating the electricity supply industry in Germany. The Energy Journal 26 (special issue), 99–126.

Creti, A., and Villeneuve, B. (2004). Long-term contracts and take-or-pay clauses in natural gas markets. Centre de Recherche en Economie et Statistique (CRES) publications.