The Nordic countries have already started introducing an internationally open market for electricity. From the beginning of 1996, electricity has been freely traded on a spot market covering both Sweden and Norway. This is being extended to include Finland. In addition, large customers have been able to negotiate contracts for supply of electricity, and this is being extended to domestic consumers as well.

The experience in these countries is of great interest for others, as the EU has now decided to impose a gradual introduction of this kind of competition across Europe. The experience of Sweden is of especial interest:

• firstly, it is at the centre of the market
• secondly, the government is trying to intervene in energy policy at the same time as liberalizing the market

This paper looks at four features of what has been happening:

• The companies - takeovers and integration
• Energy policy - more state intervention in Sweden
• Gas - the prospects
• Prices - the experience of competion

The introduction of trading has prompted a scramble of takeovers and mergers. This has had three results:

• Concentration of generating capacity in fewer companies
• Integration: the generators are taking over local distributors to guarantee sales
• Internationalisation: transnational companies - state-owned and private - have increased their share .

The companies and the trade unions also expect there to be a reduction in employment as the companies seek to realise the profits from these mergers.

Vattenfall and IVO are increasingly active outside the Nordic region as well.

The generators have also been buying regional distributors, in order to guarantee outlets for their power in the new competitive market. The five largest generators in Sweden already control 44% of distribution as well. In the process, distribution is also rationalised and made more profitable, with further cost reductions. Vattenfall, for example, has a declared strategy of buying distribution companies with a view to merging them into larger units. At the same time, the companies see a need to invest more in marketing and services in order to attract customers.

Companies from outside the region, in particular EdF and Preussenelektra (Veba) have also sought to buy into generating companies in order to participate in the first open market in Europe. This has resulted in complex patterns of ownership, with states, municipalities and private companies all : the Swedish generator Sydkraft, for example, is currently 27% owned by the German company Preussenelektra (part of the Veba group), 22% owned by the Norwegian state-owned electricity company Statkraft, and 19% owned by the Swedish municipality of Malmoe - a mixed company in every sense.

In February 1997 the Swedish government made a series of interventionist decisions in energy policy. Most of these decisions have a significant effect on the operations of Vattenfall.

• It decided to start closing some nuclear power stations. This is a political decision, which is opposed by many Swedes, and also opposed by the Swedish energy trade unions. At present, the country’s electricity is entirely produced by hydroelectric or nuclear sources, with no use of fossil fuel plants. Sydkraft, the company which runs the first power station to be closed, is being given some of Vattenfall’s generating capacity as compensation.

• The government has ordered a programme of research into alternative sources of energy, other than fossil fuels, to replace the nuclear capacity. Vattenfall will finance and carry out this research.

• All future international grid links between Sweden and other countries will be handled by the separate state grid company, Svenska Kraftnat. Until now, Vattenfall had managed many of these links.

• Finally, the government also announced that it would not be privatising Vattenfall.

• (However, in June 1998 the Swedish high court ruled that the government could not order Sydkraft, a private company, to close down its nuclear reactor in the public interest.)

Although Norway is one of the biggest producers of natural gas, owned by the state company Statoil, it consumes none itself At present, Sweden only imports Danish natural gas, and gas is not used much. There are no gas-fired electricity generating plants The nuclear closures make it likely that gas will increase its share of the Swedish energy market..

The companies which dominate the electricity sector also dominate the gas interests in Sweden. One is Sydkraft, whose subsidiary Sydgas distributes much of the gas in Sweden. The sole gas importer is Vattenfall Naturgas, which is now just 50% owned by Vattenfall. The other shares have been sold to Statoil (Norway’s state oil and gas company), DONG (the Danish gas company), Ruhrgas (the privately-owned German gas company) and Neste (of Finland). The company is carrying out a study into alternative sources of gas, and possible developments of gas sales in Sweden.

One company still not present in Sweden is the Russian gas company Gazprom. It has been unable to get agreement for a pipeline through Sweden, and is now planning a link from Finland under the Baltic to Germany.