European Commission energy review: Any short term impact?

Implications: The European Commission will publish a package of findings and possible new measures related to the power and gas sectors on 10 January.

The work of DG COMP and DG TREN on their analyses has been closely coordinated.

Anti-trust actions, or threats of action, combined with proposals to introduce a third package of EU internal energy market legislation, may precipitate far reaching industry restructuring.

Analysis: Based on this FT prediction of part of the content of final DG COMP report findings from the European Commission's electricity and gas sector inquiry, there will not actually be very much on the anti-trust side which is new and concrete. Some individual corporate investigations are underway, especially in the gas sector, but DG COMP may lack evidence of real abuses. In addition, potential third party complainants have hesitated to come forward.

The significance of the report lies more in the manner in which it has been closely coordinated with the work of DG TREN, paving the way for a proposed third EU legislative package. We will see that the core elements of such a package, also due to be unveiled in a Commission Strategic Energy Review on 10 January, will centre around greater unbundling of transmission businesses from linked production and supply businesses and around a strengthening of national energy regulators' powers.

The game between the Commission as a whole, the MemberState governments and the national integrated energy champions those governments in some cases "protect" will become one of threat, bluff and counter-bluff following publication of the 10 January documents. But over the medium to long term the Commission's insistence on stricter unbundling, more harmonized conditions of transmission access across national boundaries, greater transparency, and overall ease of market entry will lead to fundamental restructuring of parts of the European power and gas sectors. That process has already reached a mature stage in Britain and in Scandinavia (at least on the power side), has started in Italy, Spain, the Netherlands and Switzerland, but has yet to take hold in France, Germany and much of eastern Europe.