EU fines Electrabel

By Benedict De Meulemeester

By Benedict De Meulemeester on 10/06/2009

The European Commission has fined Electrabel for taking over the Compagnie du Rhône without warning the EU competition authorities in due time.  The Belgian energy company contests the grounds for the fine and claims it has respected the rules.

I have double feelings about such interventions by the EU commission. On the one hand, we must acknowledge that the European Commission is the authority which shows most clout in countering (or at least trying to) non-competitive behavior in the energy market. The amounts that are being fined are impressive. This issue with Electrabel seems to be over a technicality. Electrabel did notify the Commission, but according to that Commission it did so too late.

The takeover was finally approved by the Commission. Hence, the fine has nothing to do with the fact that this takeover was unacceptable, it is simply about the moment that the Commission was notified. And still, Electrabel is to pay 20 million euro. I heard a leftist populist say in the run-up to European elections last week, that Europe was over-protecting large corporations. That this is complete nonsense is clear from such hefty fines for such large corporations.

From the many contacts that we have with Electrabel, it is clear that it is adapting its behavior because of the actions of the European Commission. So, we could say that the Commission is a powerful instrument in ensuring that large dominant players do not block the way towards more competitive energy markets.

On the other hand, I am often confused by the content of the Commission's interventions. The technicality of this issue is one example of that. On other occasions, it is clear that the Commission doesn't really grasp which behavior is really harmful to end consumers. A clear example of that is the Commission's position on long term contracts by Electrabel and Distrigas in the Belgian energy market. I admit that by signing long term contracts before liberalisation these two dominant market players tried to fend off competition. The Commission was right in reacting on that. But then it decided that these companies could not sign contracts with terms that exceed two years and at some point even one year. First of all: if other market players can sign e.g. three year contracts, how could it harm competition if these companies do exactly the same? In my conception, the dominant players only exert undue market power if they offer conditions that no one else but them can offer. Secondly: many consumers want to sign contracts for longer than two years. They want to be able to fix prices and protect their budgets against rising commodity markets for periods that extend this two year limit. Many clients were frustrated to find out that they couldn't do this with Electrabel and Distrigas. You have a tender, Electrabel comes out with the best proposal and then you can only sign it for two years. No consumer asks for suppliers to be blocked from signing contracts for the terms that they want to sign them.

So, it is a good thing that competition authorities try to sanction dominant market players to force them to make life less difficult for their competitors. On the other hand, they should try to do this with only one purpose in mind: improving the market for consumers. There is much discussion about European decision-making being to far away from what citizens really think and feel. There is some ground for that argument. But then on the other hand, this distance makes it easier for Europe to sanction companies without the sort of political influence that local authorities are subject to. Let's use this distant sanctioning power wisely.

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