The process of the Internal Market for Electricity and Gas is reaching its final stages. The Electricity Directive is adopted and the Council has reached a common position on the Gas Directive which will not be changed much by the European Parliament.

It is time for EPSU to consider how to follow the process of actual implementation and what needs to be argued for at European level.

The attached position has been written for that purpose.

Main points:

• EPSU to raise the issues of public service obligations, employment, harmonisation of social protection at a high level and democratic regulation with the Commission, Parliament and with the Energy Consultative Committee;
• Standing Committee Public Utilities to define concrete public service obligations and a position paper on democratic regulation;
• EPSU to raise issues of monitoring of the Internal Market for Electricity and Gas and the involvement of the trade unions;
• EPSU to continue the process of Social Dialogue with the relevant sectoral organisations.

The position on the follow up to the Internal Market is to be forwarded to:

European Parliament

European Commission

Other interested parties

The European Federation of Public Services Unions (EPSU) has formulated its demands for a European Energy Policy in its position paper Basic Points for a European Energy Policy (1995). The Basic Points reflect the views of more than 170 trade unions in public services as diverse as health and social services, local, regional and central government, and utilities in the water, waste and energy sectors. Over 10 million workers are organised through EPSU in the European Union, in the European Economic Area and in Central and Eastern Europe. EPSU is a member of the ETUC.

EPSU estimates there are close to a million workers in the gas and electricity sector in Europe. These workers deliver services to the public in often difficult and dangerous circumstances. They work in small and large systems, in generation, transport and distribution, in technical and administrative services, in private and public (municipal, regional, state) companies.

EPSU has argued that the Commission proposals for the Internal Market for Electricity were not necessary as there was a working structure that contributed to growth, employment and welfare during many years. The Commission should have formulated proposals to strengthen the co-operation between the Member States.

Our comments on the Electricity Directive were based on our general policy framework. EPSU argued for:

Measures to safeguard employment in the industry. Research by EPSU, EuroStat, Public Services Privatisation Research Unit (UK) and Cambridge Econometrics showed that employment was reduced with over 200.000 jobs between 1990-1996. The Commission Employment in Europe 1997 report shows a decline of 3-4% per year. This is one of the highest sectoral employment declines in Europe. EuroStat figures show that women are even more affected than men;

Provisions in the directive which ensure the maintenance of the high social and health and safety standards in the industry and harmonise these to the highest level;

Respect for environmental standards and the possibilities to promote a sustainable energy policy through the development of renewable energy resources, energy efficiency and energy savings;

Fair and balanced energy systems which respect established structures in the Member States;

Public service obligations ensuring secure and continuous supply of energy, and affordable prices for example.

The Gas Directive is not adopted yet. Based on past experience and especially the way the European People’s Party operated, changes to the Council compromise are very unlikely. Nonetheless, EPSU makes the following comments:

EPSU believes it is very telling that the Preamble to the Directive (the "Whereas") neither refers to improving the living and working conditions of Europe’s citizens nor to creating jobs. The Commission and Council have lost track of what their work should contribute to by concentrating on deregulation and liberalisation of the gas markets. Employment and social considerations should have been an integral part of the Directive.

EPSU notes that long-term take-or-pay contracts are the corner stone of guaranteeing security of supply. Thus they ensure employment and allow for integration of environmental considerations in the energy policies of the European Union and Member States. Changing the contracts already concluded will have grave negative consequences on the stability of the economy and therefore on employment.

When considering future contracts and possible derogations, the Commission and Member State concerned have a joint role. This process should also involve other groups concerned such as customers and workers. The Council and Commission should consider the possibilities of a public hearing when derogations are sought.

In general, EPSU believes that derogations for future long term take-or-pay contracts should be granted when based on the criteria of security of supply, employment and environment.

The Commission has remained silent on the employment effects of the deregulation of the gas market. This is in sharp contrast to the target of fighting unemployment and ensuring employment creating measures are part of all Commission policies.

EPSU has noted that in a situation of declining employment, women are more affected than men. EuroStat figures indicate that employment of women as percentage of total employment in the electricity and gas sector went down from 19.6% in 1993 to 18.6% in 1995.

There might be many reasons for this. One of the main reasons is that the intent of the directive is to increase competition between companies. Many companies and governments are anticipating this. Governments adapt legislation allowing for more competition, companies restructure, merge and rationalise to become more competitive. The negative effects of this process impact more strongly on women.

Women are predominantly employed in the clerical, administrative and financial services of companies in the sector.

EPSU has reason to believe that the Commission has not explored how the Directive will affect women in the sector. This is a violation of its own policies.

We also refer to the Commission policy paper: `Incorporating equal opportunities for women and men into all Community policies and activities'. COM(96) 67 final of 21.2.1996.

There are no reasons why the opening of the gas market should proceed quicker and to a greater extent than for the electricity sector. EPSU has argued for sufficiently long transition periods to allow systems and companies to adapt to the new situation imposed by the Directive. This is confirmed by a rescent report by Price Waterhouse on the electricity companies. Many companies feel they have had insufficient time to prepare. The proportion of electricity executives who report that their company is well prepared for deregulation has fallen from 35% two years ago to 26% now (FT.2.3.98)

Faced with a highly competitive environment, companies preferred to change from coal-fired power plants to gas-fired plants (combined cycle gas turbine plants (CCGT) from 0.2% of electricity produced in 1992 to 21% in 1996. Investment periods are shorter, gas is cheaper per unit, has environmental advantages and there is plentiful supply in the short term. This has had significant negative consequence on:

employment. Typical CCGTs employ only around 30 staff and there have been massive job losses;

energy policy in the UK. The UK energy policy is determined by market forces and does not allow for balanced developments, threatening other goals of an energy policy such as contributing to employment, sustainable development and a proper mix of energy sources

Now that the electricity directive is adopted and the gas directive is almost adopted, EPSU wishes to see:

A sufficiently long transition phase which allows energy systems and companies to adapt. This is confirmed by a recent report by Price Waterhouse which claims that electricity companies are not ready for the EU deregulation. (FT.2.3.98);

Monitoring of the transition to a deregulated and liberalised market so that adverse effects on workers, prices and consumers as well as distortions in competition can quickly be detected and addressed;

Clear and transparent definition of the public service obligation at a European level. This definition should have meaning to individual citizens;

Action of the Commission to fulfill its promises with regard to harmonisation of environmental standards, fiscal rules and social protection for workers at a high level;

Discussions between employers and trade unions in the electricity sector to contribute to the monitoring of the changes and to guarantee competition in the sector is based on quality of services and not on cutting of work force and pay and conditions.

We note with satisfaction that both texts of the Council refer to public service obligations. The Directives, however, do not go far enough.

Against the background of the new article 7D in the Treaty there is now an obligation for Member States to take care that services of a general economic interest operate on the basis of principles and conditions which enable them to fulfil their missions. Specific principles are equality of treatment, quality and continuity of services.

EPSU notes national developments such as in the UK and Belgium (see boxes) and believes the Commission and Council should be more clear on what the public service mission can mean to citizens. Does the public service article in the draft directives guarantee citizens a warm house for example ? What do security, equality of treatment, regularity, quality and price mean for individual citizens ?

EPSU believes the Commission and Council should ensure that the definition of public service obligation ensures that a situation of fuel poverty does not arise (see box). Monitoring of the effects of the liberalisation of the gas markets should involve workers and citizens.

Competition in the domestic gas supply was introduced into the South West pilot area (Cornwall, Devon and Somerset) from April 1996. Also, low income consumers in this area are switching gas suppliers to obtain cheaper gas following this change. In-depth interviews with 96 low-income households in this region show that there are still barriers preventing some of the most vulnerable households from obtaining the cheapest gas supply.

National Right to Fuel Campaign, the Centre for Sustainable Energy and the Plymouth Energy Advice Centre published a study Better the Devil you know ? This study shows that there is evidence of "cherry picking" by tariff. Low income households can pay up to 41% more than richer households for their gas as tariffs are more expensive for so-called pre-payment meters than for Direct Debit billing, a method used by richer incomes and preferred by the companies. Low income households find pre-payment meters a useful aid to budgeting on a limited income. For companies it means that they do not have to disconnect users because of arrears. The poor do it themselves.

Member States which impose public service obligations in the general economic interest should be allowed to do so based on equality of treatment considerations.

The Belgian government has decided that the minimum standard of electricity current to be provided to households is 6 Ampère, even if citizens can not pay their bill. There will not be disconnections.

EPSU believes that the European Parliament and the Council should commit themselves in May 1998 to the development of clear and transparent definition of public service obligations which have meaning to Europe’s citizens. One way of doing so can be via a European Charter on Public Services.

EPSU notes with concern that the Directive does not allow for a process of democratic accountability and control in which citizens are involved. This is a far cry from the system applied by one of the main competitors of the European Union, the United States of America in which so-called public utilities commissions have a regulatory role.

It is also far removed from the mechanisms of control available under the Directive on the freedom of access to information on the environment (90/313/EEC)

Democratic regulation is based on:

Right of citizens to information

Right of citizens to participate in the regulatory process

The United States system of regulation operates on the basis that what the government or in its place the regulator can see, the public can see as well. Commercial secrets of utilities delivering a service to the public do not exist. The United States Supreme Court has ruled that "society has a strong interest in the free flow of commercial information." The result of open information is a safer, more reliable system with lower prices.

This system contrasts sharply with systems shrouded in secrecy such as the UK one.

EPSU has supported the idea of a national Electricity or Gas Council in which trade unions and consumers play a role, which balances the influence of government and companies and which is introduced at the same time as the Internal Market. This has been rejected by the Council.

EPSU also notes that the gas and electricity companies are preparing for a situation of more competition. They do this in mainly two ways:

diversification of their interests into telecommunications, waste, water for example;

through mergers and acquisitions.

Non - European companies (mainly American and Gazprom) are playing an increasingly larger role on the European markets. In the case of American companies they are seeking rates of return on investment which are unthinkable in the US environment because of strict regulation.

Since four years EPSU and the Public Services Privatisation Research Unit in the United Kingdom have followed these developments for the last 4 years and have established a large data base on energy companies. It is of concern that companies can profit from different regulatory systems in Member States at the detriment of the interests of the public.

EPSU suggests that the European Parliament adopts a policy statement which sets out how it thinks to bring regulatory systems in line with one of its main competitors and ensures democratic accountability and control of companies operating in the Internal Market.

EPSU believes that the Parliament should make the harmonisation of the regulatory systems in a democratic way one of the first issues to consider after adopting a Directive on the Internal Market.

The Directives do not refer to the involvement of the social partners in the sector on the monitoring of the Directive. EPSU believes the Commission shall consult with the social partners in the sector regarding the monitoring of the transition to the internal market, effects on employment and harmonisation requirements necessary for the effective operation of the internal market. A joint report by Commission and sectoral social partners can be forwarded to the European Parliament and Council.

The European Energy Consultative Committee is not balanced enough to take the interests of the social partners into account based on an equal footing. EPSU has argued for a Joint Committees based on equal numbers of representatives of the social partners.

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