NMa Stimulates Level Playing Field on the Energy Market
The Netherlands Competition Authority (NMa) wishes to increase the competitive pressure on the energy market by improving the competitive position of new entrants relative to existing energy suppliers. By doing so, NMa will eliminate the unfair competitive position which exists between the present energy suppliers, which are part of a concern which has its own electricity grid, and new energy suppliers which are not part of a concern that has its own electricity grid. The regulator has published a draft decision in this regard, which is available for inspection as of today.
It emerged from an investigation that new energy suppliers have to provide much higher financial guarantees to grid managers than existing energy suppliers which are part of a concern which has its own grid manager. This results in a competitive disadvantage to newcomers relative to existing energy suppliers. Grid managers have a strong regional position because they are the only party responsible in a particular region for the transmission of gas and electricity. Energy suppliers in this region are obliged to make use of this electricity grid or gas network and inversely electricity grid and gas network managers are obliged to give suppliers access to their electricity grid and/or gas network.
In the present situation, electricity grid and gas network managers demand financial guarantees from newcomers, which are much higher. These include advance payments in case the newcomer goes bankrupt and has not yet paid the electricity grid or gas network manager all the fees owing for the use of the electricity grid or gas network. This competitive disadvantage arises when the so-called supplier model is applied. In the supplier model, consumers receive a single bill because the energy supplier at the same time collects not only its own payment for the supply of gas and/or electricity, but also the electricity grid or gas network manager's transmission charges. The electricity supplier then passes on the transmission charges which it collects to the electricity grid or gas network manager.
The draft decision drawn up by NMa to amend the Electricity Tariff Code makes it superfluous for electricity grid managers to require guarantees. The amendment makes it possible for electricity grid managers to recover any loss of income from transmission charges due to bankruptcy of an energy supplier through their transmission charges. By making this amendment, NMa aims to increase the competitive pressure on the energy market.
Peter Plug, Acting Director of the Office of Energy Regulation (DTe) of NMa explains: 'If a newcomer wishes to serve its customers optimally by only sending a single bill for both the supply and transmission of electricity, it is at a disadvantage relative to existing suppliers. This uneven playing field weakens the competitive position of new parties, which are necessary to provide existing companies with an incentive to compete with each other."
The draft decision is consistent with the outcomes of research conducted for DTe by KPMG at the end of last year. On the basis of the results of this research, DTe requested EnergieNed (the branch organisation of the energy companies) to present concrete proposals on how it could develop and implement the most important recommendations. Since DTe has not received proposals which are sufficiently concrete, the regulator has drawn up its own draft decision amending the Electricity Tariff Code. DTe intends to include a similar provision in the Gas Tariff Code, which is currently being developed.
The draft decision was made available for inspection today and can be obtained from DTe's website under the heading of 'Publications'. Parties can respond to this decision until 7 November 2005. After this date the regulator will take a final decision.