a Business Spectator publication

Hopes fade for EU internal energy market by 2014

By Charlie Dunmore

BRUSSELS (Reuters) - The European Union's top energy official said on Thursday he was unsure if the bloc would meet a 2014 deadline for creating a single EU-wide market for gas and electricity.

"I do have some doubts as to whether this goal is achievable by that deadline," EU Energy Commissioner Guenther Oettinger said at a conference in Brussels.

EU rules to liberalize energy markets were agreed in 2009, and are designed to increase competition and drive down prices for consumers by forcing giant utilities to open their gas and electricity distribution networks to new operators.

The European Commission said on Thursday it had started legal proceedings against 18 EU governments for missing a March 3 deadline for adopting the EU liberalization rules in national law.

Countries facing legal action include Britain, France and Spain.

Another senior EU official said market liberalization rules had to be backed by investment in new energy distribution capacity in order to achieve a true internal market.

"Regulation and infrastructure development must go hand-in-hand," said Philip Lowe, director general of the Commission's energy department.

"If you're trying to create an open, integrated, competitive market, a certain number of things are possible without physical interconnection. Nevertheless, physical interconnection must underpin what regulations you want to apply."

INFRASTRUCTURE PLAN

The Commission is due to propose new EU-wide rules later this month to improve the planning and funding of energy infrastructure, having estimated that 1 trillion euros ($1.36 trillion) of investment is needed over the next decade.

One of the priorities of the proposals will be to link the gas and electricity networks of the EU's 27 countries, so that no single state can be starved of energy. This happened to several countries when imports of Russian gas via Ukraine were cut in January 2009.

The EU currently relies on Russia for about 40 percent of its total gas imports, but Lowe said any future disruption to EU imports of Russian gas was unlikely to affect as many countries as it had in 2009, when gas supplies to 10 EU states were hit.

"We were happy to come to the conclusion earlier this month that, thanks to the regulations already put in place ... only one country could be significantly affected by any disruption of supplies," Lowe said.

He did not name the country at risk. Bulgaria has the greatest reliance on imported Russian gas of any EU state.

On Tuesday, the Commission announced an investigation into suspected anti-competitive practices in the supply of natural gas in central and eastern Europe, involving Russian gas giant Gazprom and a number of its EU customers.

($1 = 0.735 Euros)

(Editing by Anthony Barker)