Similar affects are expected in the UK when competition in electricity supplies is introduced in 1998. "In an analysis for the Institute for Public Policy Research of the economics of the electricity market, Professor Catherine Waddams Price warns that low-income households will face higher charges as competition is introduced and companies are forced to unwind hidden subsidies......As companies vie for the 'best' customers - the good payers - so the costs of supplying the rest have to be spread across a dwindling group." (Guardian 29.12.96).

The same result is expected from competition to supply gas: "..the Gas Consumers Council says British Gas has been 'very generous' in the past over supplies to the elderly and poor, especially in winter. Faced with stiff competition from new gas companies, it will toughen its stance on disconnections. The company cannot afford to be left with a rump of poor customers." (Guardian 29.12.96).

Similar effects have already been seen since privatisation as a result of the introduction of ‘pre-payment’ meters by the privatised electricity (and gas) companies. A survey by local authorities in south Wales in 1995 "found that more than half of households using pre-payment meters had 'self-disconnected' their supply of gas or electricity, which had been cut off because they had problems buying or finding the tokens to feed the meter........For many, this so-called voluntary interruption of their power or heating supply lasts a weekend or longer.......Two groups, it says, are most at risk - those households containing someone unable to work because of health difficulties and those families with a child aged under five in the household .......The companies benefit by charging up-front these customers, the poorest, for their vital energy supplies and escape the costs of having to chase these people for payment...." (Guardian 29.12.96).

There is a long tradition of energy trading between Scandinavian countries. Power has been supplied across borders in response, for example, to power shortages in Norway's wholly hydroelectric system.

Since the start of 1996 there has been an open market for trading electricity between Norway and Sweden. This market, however, has not been working perfectly, and official reports from both countries say that it has been easily manipulated: "the Swedish Competition Authority states circumspectly in its report on the market: 'In a number of cases in 1996 it has been asserted that large power producers in Sweden and Norway have 'manipulated' spot prices on the Swedish-Norwegian electricity trading market to their own advantage, for example by reducing the offer of electric power, which increases spot prices. The effect is that electricity trading companies that have little or no power from their own production and buy electricity on or parallel to the electricity trading market through futures contracts have increased costs for electricity purchase.' According to Steinar Undrum of the Norwegian Competition Authority, there are 'noticeable convergences' on the market that indicate possible manipulation, and the weekly market is regarded as easy to manipulate. In addition, he said that there are strong indications that suppliers in southern Norway and particularly in southwest Norway are discussing prices among themselves. During some hours, the price of electricity on the west coast has been Nkr0.5/kWh to Nkr0.60/kWh compared to Nkr0.30KWh elsewhere in Norway." (Power Europe FT Bus Rep 15 Nov 96)

Types of public-private partnership

A public enterprise which is partly owned by the private sector is can be defined as a 'public-private partnership' (PPP). These can be of four types:

The authority is the majority shareholder, alongside financial investors - this form provides a company which is clearly commercialised, but the public authority remains the dominant shareholder. These are most likely to result where the authority wants to obtain extra finance (for the enterprise or itself), but wishes to retain management control.

The authority is the majority shareholder, but the other shares are held by a company - the purpose of this kind of PPP is usually to introduce private sector management, and so the multinational will usually expect to have effective management control.

Only a minority of shares are held by the authority- this is likely to happen if the authority wants to maximise its income from the sale of shares, and any remaining public presence is for monitoring purposes. Many sales of shares in state companies are of this type. (In some cases a controlling 'golden share' may be retained by government)

Functional joint ventures between public and private bodies - these may be standing public bodies, like the electricity and gas distribution companies in Belgium and Netherlands, or ad hoc joint ventures between public and private companies.

Italy and Germany provide illustrations of these differences:

Genoa provides a good example of the various stages of transformation of a municipal undertaking first into an arm's length company, owned by the council, and then a sale of shares to private investors. The city council decided in 1995 to transform the utility into a joint stock company, and gave it the ambitious name of Azienda Mediteraneo del Gaz e Acqua (AMGA). In 1996 they decided to sell 49% of the shares in AMGA, which went to private and institutional investors (the largest UK institutional investment company, Mercury Asset Management, has acquired 11.6%). AMGA is not, therefore, a joint venture between Genoa and a multinational company. In Germany, Mannheim and Frankfurt are considering a similar kind of sale.

The city of Turin has recently decided to sell shares in its newly independent energy azienda (AEM Torino), and has specifically invited bids from companies rather than sold shares to investors. It will not necessarily be a private company, however: those which have expressed an interest include the state-owned Electricité de France, and AEM Milano, the municipal company of Milan, which is also selling shares - but to the public, not to partner companies.)

Examples of this type of venture in Germany include: Bremen, which has sold shares in the city's stadtwerke to three multinationals - Veba, Ruhrgas, and Powerfin (now part of Suez-Lyonnaise/Tractebel)., and Karlsruhe, which has sold 20% of its stadtwerke to Badenwerk (itself a municipally-owned company) and 10% to Ruhrgas. In Austria, Citykom, a municipal telecoms consortium, is seeking a similar kind of partnership by looking for a multinational partner.

The energy multinational RWE is an example of a company in which German local authorities hold a substantial proportion of the shares. They have enjoyed special voting rights which gives them control of 57% of the votes. This has not prevented RWE from being one of the largest companies in Europe, although from 1998 the company is proposing to change the voting arrangement so that the municipalities control only about 30%, commensurate with their shareholdings. This would put in on a par with the other large German group VIAG, 25% of whose shares are owned by the regional government of Bavaria.

The city of Rome converted its water company, Romagna Acque, into a limited company, which then formed a complex joint venture with the Italian state-owned company Eniaqua and the French multinational Generale des Eaux. Another variation has been adopted in Gorizia (north-east Italy), where the municipality has restructured its utilities under a single company, Azienda Multiservizi Goriziana (Amg), and made it a joint venture with the investment company Gepi. Gepi has invested 10billion lire, 12% of AMG's capital: the municipality still holds 88% of the shares.

In some cases authorities do not retain any effective shareholding. The city of Berlin has sold all its shares it its electricity utility Bewag, to three multinationals - Veba, Viag and Southern Company - and plans to sell its remaining 51% stake in the gas utility Gasag, and is also considering the sale of its water company Berliner Wasserbetriebe. The reason for doing so is to reduce the city's huge debts. The city of Rome has sold 75% of the shares in its municipal dairy, the Centrale del Latte, to the Cirio food group; 20% of the shares are available to local farmers, and the city retains only 5%. (Roma is also planning to incorporate its energy utility ACEA, and then sell 49% of the shares).

Many governments in the EU have recently been selling shares in their telecomms companies. The results range from a proportion of shares being held by the public, with the state retaining the majority (France); through the state retaining only a minority, with the majority owned by the public (Spain) or multinationals (Italy); to the 100% sale of shares to the public (UK).

The Italian state electricity company, ENEL, formed three joint ventures in 1997: with two USA companies - Enron and Entergy - and with Suez-Lyonnaise des Eaux. The purpose of these was to explore expansion opportunities outside Italy, to overcome the restrictions placed on ENEL's international activities. In Spain, the publicly-owned water company Canal Isabel II, has formed a joint venture, Interagua, with the multinational Aguas de Barcelona. Interagua bought 51% in Granada water company in 1997, creating a further layer of joint venture.

In most cases in central Europe the multinational has effective control of the management board of the company, whatever the balance of shareholding.

Hungary and the Czech republic have different company laws, but in both countries the key body which controls a company is the management board. The supervisory board provided for in Hungary, and the audit board in the Czech republic, are both bodies which meet rarely and have limited powers of supervision, as their name implies.

In three out of four of the Hungarian companies, and five out of six of the Czech companies, the multinational has effective control of the management board.

In two of the Hungarian cases, this control is specified in the concession contracts, despite the fact that the municpalities own the majority of the shares. In Pecs, the contract specifies that Lyonnaise des Eaux has exclusive, 100% control of the management of the company (although it has only 49% of the shares). In Budapest, the contract states that the Lyonnaise des Eaux/RWE joint venture is responsible for the operation of the company, and it has a permanent majority - 4 out of 7 seats - on the board of management (although it has only 25% of the shares).

In the case of Szeged, the company has reportedly remained unregistered (as at April 1997), and so has no properly constituted management board at all. This leaves all the power in the hands of the general manager, who is an appointee and employee of Generale des Eaux.

The exception in Hungary is in Kaposvar, where Lyonnaise des Eaux own 35% of the water company, with the rest of the shares being owned by local private investors. Lyonnaise does not control the management of the company – its senior executive in Hungary describes it as "a minority investor without decisive influence", and said that the company would be more profitable if Lyonnaise get control. This is also the only case where there are no shares owned by the municipality.

In the Czech republic, the case of Plzen is straightforward, as the whole board is appointed by Generale des Eaux, which owns 98.3%. In Karlovy Vary Lyonnaise has a 3/2 majority on the board, even though the shareholdings of the multinational and the municipalities are roughly equal at just under 50%. In Brno, where the municipality has 51% of the shares, it has 3 seats on the board compared with two for Lyonnaise. The sixth member of the board – and its chairman – is the company’s general manager. In Ostrava the representation is equal at 3-3.

In North Bohemia, the multinational is in a minority in relation to local investors. Hyder (formerly Welsh Water) owns 35.6% of SCVK, 45% is owned by private investors, and 19% by the municipalities. The management board of SCVK includes two nominees of Hyder, three of other private investors, two general mangers ex officio – and none from the municipality. It was explained that the municipalities’ 19% stake is just short of the shareholding required to get an automatic seat on the board. The formal position of the multinational is less than was implied in the beginning, when its shareholding was also said to "include an agreement for Welsh Water to join SCVK in operation and management of the Bohemia concession" (FT Bus Rep April 1995). However, the local investors are reported to accept the advice of Hyder on professional matters.

The one company where the multinational has failed to secure equality or dominance is in South Bohemia, where Anglian have only two seats out of seven, while the municipalities possess four. This will certainly change, as Anglian are reported to be pulling out from South Bohemia.

The general manager, or chief executive, is the most important management position in all these companies. Usually, the general manager is appointed by the board, which means the appointment reflects the dominant power on the board – which, in nearly all cases, is the multinational. In some cases the multinational exerts extra influence on the appointment.