EU Gas Market:
Turning hopes into reality
The 1
st
July 2007 deadline for fully opening European gas markets to competition has come and
gone. Here, Moffatt Associates’ Expert Panel* believe that new sources of gas supply and
voluntary measures to improve wholesale market liquidity will help, but legislation is needed to force
the pace of change.
Slow Progress on Liberalisation incumbents declines and there is easier access for new entrants.
Directive 2003/J5/EC of 26
th
June Countries where gas has only been introduced relatively recently,
2003 requested full market opening by such as Latvia, Portugal, Finland and Greece, have been allowed to
July 2007, but implementation is late or derogate from the requirement to open their gas markets until 2010,
unsatisfactory in a number of EU states. in the case of the first two, and as soon as certain conditions are
In Germany, (which is of crucial met, in the case of Finland and Greece. Gas Regulation 1775/2005
importance for the whole of Europe in of 28
th
September 2005 sets minimum obligatory requirements for
terms of its volume, and the role it access to transmission systems. These must be offered in a non-dis-
plays in transit and in price-setting), criminatory way on terms that may also suit new entrants, for exam-
ple firm or interruptible capacity, long- or
The Commission has acknowledged that the
short-term contracts.
The Energy Sector Enquiry by DG COMP and
gas market differs in certain ways
DG TREN, completed earlier this year, made a
from the power market
number of recommendations for further
action to improve competition in the EU ener-
gy markets. These included ensuring non-dis-
criminatory access to networks through
unbundling, improving the regulation of net-
work access at national and EU level, and coor-
dination between TSOs.
Other proposals covered reducing the scope
for unfair competition and strengthening the
enforcement of competition law, including
rules governing market concentration and
market integration.
TSO Unbundling is Essential
Many of our expert panel believe that full
unbundling of integrated companies is neces-
sary if liquidity is to be developed in the whole-
sale market, as this will create more market
players and increase transparency. There is also
gas competition has scarcely devel- a tendency for capacity that could be used to be kept idle, and this
oped and there is a lack of transparen- practice could be ended if vertically integrated incumbents were
cy in the market. This has serious con- required to separate out transmission and supply.
sequences for the establishment of a The European Commission is in favour of full ownership
liquid and transparent gas market in unbundling, but this idea is strongly opposed by the European gas
the EU. The European Energy industry and by some Member States, principally France and
Exchange (EEX) started trading gas on Germany. Indeed, some energy companies, particularly in Germany,
2
nd
July 2007, but believes that it will have threatened to challenge full unbundling in the courts if it goes
take up to three years in which to get a ahead, and have warned that such a course of action could be con-
gas reference price, during which time strued as expropriation of assets, and therefore illegal.
the volume trading will increase only The Commission has acknowledged that the gas market differs in
slowly. Liquidity in the European gas certain ways from the power market, and that these differences
market is really only expected to need to be taken into consideration when addressing effective
improve if the dominance of the unbundling. These include the nature of gas flows, which allow the
70 SEPTEMBER 2007 COMMODITIES NOW
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