France's Electricity Market Faces EU Backlash

The European Union is growing increasingly frustrated with France's slow implementation of electricity market liberalization. Britain has joined Spain and the Netherlands in threatening retaliation, citing the EU's "reciprocity" provision to restrict French access to its market. This provocation is understandable, given France's failure to enact the directive, which aims to open its electricity market to foreign competition. Despite promises from ministers, the bill remains stalled in the National Assembly due to fierce opposition from unions and the Communist party.

Key Takeaways:

• France has yet to enact the EU directive liberalizing its electricity market, despite its implementation in February.
• The country's state-owned monopoly, Electricite de France (EDF), remains free to use profits from its closed home market to subsidize cheap electricity sales elsewhere in the EU.
• Britain, Germany, and other EU members object to France's 26% market share cap for foreign suppliers, which would allow EDF to dominate the market.
• France's critics, including Britain, argue that the country's foot-dragging hampers the EU's goal of creating a unified energy market.
• Britain's energy imports from France already saturate the available cross-channel transmission capacity, making threats to curb future expansion appeared hollow.
• The UK's domestic wholesale market is less competitive due to an oligopoly in power generation, which has prevented benefits of deregulation of distribution from showing through in a sustained drop in consumer prices.

Statistics:

• France's electricity exports supply about 6% of UK demand.
• French electricity exports already saturate the available cross-channel transmission capacity.
• The UK's domestic wholesale market is less competitive, with an oligopoly in power generation preventing benefits of deregulation of distribution from showing through in a sustained drop in consumer prices.
• The EU directive aimed to open France's electricity market to foreign competition has been implemented in February.

Sources:

• "Financial Times Limited 1999."