Balts greet EU energy policy with skepticism

  • 2007-09-26
  • Staff and wire reports

LONG SHOT: Commissioner Piebalgs will face an excruciating uphill battle to win support from the EU parliament for the energy reform plan.

RIGA - The European Commission's strategic plan to reform the energy system, primarily by forcing energy companies to separate production and transmission sides of the business, was greeted with a good deal of skepticism in the Baltics.
In Latvia, for instance, a top energy official said that the reforms would lead to a surge in costs and thus increase prices for services.
"The separation of energy generation and transmission into independent enterprises may be useful in large countries with big energy companies, but this does not mean that it will automatically be useful in Latvia, which is a small country with a specific energy market," the CEO of Latvenergo, Karlis Mikelsons, said in a statement.
Larger companies also enjoy financial benefits, he added, such as the ability to obtain cheaper loans.
"But if the company is divided into small enterprises, these abilities will also diminish, which would mean costlier resources and services, limited investments and threats to the safety of energy supplies," Mikelsons said.

According to the European Commission, too many EU energy companies control power generation and transmission, leading to market dominance that gives energy companies "an inherent interest to limit new investment." The commission said billions of euros of investment were needed to upgrade Europe's energy system.
"Energy is the driving force of our economy… [and] we need to achieve greater energy security and provide abundant energy at a fair price for citizens," the commission's president, Jose Manuel Barroso, said Sept. 19.
Large EU member states such as Germany and France also met the announcement skeptically, since their energy companies stand to lose the most if the reform policy is adopted. Germany's E.ON, for instance, would feel a tremendous impact. The company is currently cooperating with Russia's Gazprom to build a gas pipeline under the Baltic Sea.
In Mikelsons' opinion, the separation of the transmission network from Latvenergo would not ensure cheaper transmission services and would complicate development of the energy market, as well as hamper investments in infrastructure.

He said that the Latvenergo concern has already set up a parent company with legally separated transmission and distribution operators, so that each consumer could freely choose his own electricity supplier. Subsidiary Augstsprieguma Tikls has been a legally independent transmission operator since Sept. 1, 2005, while Sadales Tikls has been the operator of the distribution network since July 1, 2007.
The new EU reform proposal, by contrast, calls for energy companies to either sell off their grids (or pipelines) or create fully independent transmission operators.
Mikelsons said Latvenergo supported the latter alternative, which would allow the concern to retain the transmission network's assets that are currently managed by an independent company.
In Estonia, a member of Eesti Gaas (Estonian Gas) said that dismantling the company would not benefit consumers. "In Eesti Gaas' case, this would not make anything cheaper because gas will still come from the same place anyway," Raul Kotov said.