French opposition to European Union proposals to break up energy groups stiffened yesterday, prompting Jacques Barrot, the French commissioner in Brussels, to deplore his country's "whingeing". François Loos, the industry minister, argued in a letter to the European Commission that strong energy groups would help Europe in negotiations to secure its energy supply. The independence of French distribution networks was "widely recognised". Mr Loos told reporters: "Why break EdF and GdF into pieces? It's complicated and I don't see the point." Clients of the French system were content and saw no need to separate production and distribution ownership. EdF, the world's largest nuclear energy producer, controls France's transmissions network RTE, while GdF controls the gas distribution network that generates much of its steady cash flow. Analysts say GdF, which lacks significant production assets, could suffer if forced to separate distribution from its other activities. The Commission's proposal threatens the logic of the government-sponsored merger between GdF and Suez, designed to create a European energy champion. Mr Loos said France, where energy prices were among the lowest in Europe, would also oppose the Commission's proposal to remove regulatory tariffs, arguing in the letter that "competitive prices stem not just from competition, but above all from [investing in] sufficient production capacity at the lowest cost". Mr Barrot took issue with "a whingeing France that looks at Europe as an obstacle rather than a help". He added that France should avoid appearing to "hesitate to play by market rules".
François Loos, the industry minister, argued in a letter to the European Commission that strong energy groups would help Europe in negotiations to secure its energy supply. The independence of French distribution networks was "widely recognised".
Mr Loos told reporters: "Why break EdF and GdF into pieces? It's complicated and I don't see the point." Clients of the French system were content and saw no need to separate production and distribution ownership.
EdF, the world's largest nuclear energy producer, controls France's transmissions network RTE, while GdF controls the gas distribution network that generates much of its steady cash flow. Analysts say GdF, which lacks significant production assets, could suffer if forced to separate distribution from its other activities.
The Commission's proposal threatens the logic of the government-sponsored merger between GdF and Suez, designed to create a European energy champion.
Mr Loos said France, where energy prices were among the lowest in Europe, would also oppose the Commission's proposal to remove regulatory tariffs, arguing in the letter that "competitive prices stem not just from competition, but above all from [investing in] sufficient production capacity at the lowest cost".
Mr Barrot took issue with "a whingeing France that looks at Europe as an obstacle rather than a help". He added that France should avoid appearing to "hesitate to play by market rules".
For some strange reason, the article's title does not focus on the fact that French prices are lower and do not "stem just form competition".
As to Barrot, he has all my contempt. See this story from last year when I confronted him on his mindless droning at a conference. In the long run, we're all dead. John Maynard Keynes
Of course, things are not quite that simple in the case of electricity, where short term demand is mostly a given, and prices are thus determined by the marginal price - i.e. the costliest producer needed at that time.
But what this means is that new, nimble entrants can theoretically come in, bid low prices, and enjoy the higher prices set by the marginal producers (which will be determined by the capacity of the big players).
And of course, banks can sell lots of hedges and other financial products on the back of these markets.
What makes EDF positively hated is that, thanks to its massive nuclear capcity, the marginal price it can propose is the same as the cheapest baseload around, which prevents the small, gas-fired players from skimming off the market.
EDF is too competitive, thus it needs to be broken up so that competition can flourish in the higher price environment that EDF's destruction would create... In the long run, we're all dead. John Maynard Keynes
Why did British Electricity Prices Fall after 1998? Joanne Evans Richard Green Abstract: In an attempt to reduce high electricity prices in England and Wales the government has reduced concentration among generators and introduced New Electricity Trading Arrangements (NETA). Econometric analysis on monthly data from April 1996 to September 2002 implies support for two conflicting hypotheses. On a static view, increases in competition and the capacity margin were chiefly responsible for the fall in prices. If generators had been tacitly colluding before NETA, however, the impending change in market rules might have changed their behaviour a few months before the abolition of the Pool. That view implies that NETA reduced prices.
Abstract: In an attempt to reduce high electricity prices in England and Wales the government has reduced concentration among generators and introduced New Electricity Trading Arrangements (NETA). Econometric analysis on monthly data from April 1996 to September 2002 implies support for two conflicting hypotheses. On a static view, increases in competition and the capacity margin were chiefly responsible for the fall in prices. If generators had been tacitly colluding before NETA, however, the impending change in market rules might have changed their behaviour a few months before the abolition of the Pool. That view implies that NETA reduced prices.
