Energy companies rescued from mandatory unbundling by legislative initiative of Socialist Party?

14 October 2016

Sophie Dingenen, Michelle de Rijke, Sharon van de Kerkhof

On 28 September a legislative initiative was submitted by a member of the Socialist Party, Mr. Smaling, to abolish the group prohibition for regional network operators. The current group prohibition, which came into force in 2008, requires Dutch regional network operators to unbundle their grid companies from their production, trade and supply companies.  

In December 2015, the draft Electricity and Gas Act ("STROOM") was rejected by the Dutch Senate ("Eerste Kamer"). One of the topics of this draft, the continuation of the existing statutory group prohibition, caused a heavy political discussion. The majority of the Senate filed a motion to suspend the group prohibition until a comparable requirement will be enforced in other EU Member States. Such suspension would immediately have led to a postponement of the unbundling of DELTA and Eneco. As the Minister disregarded the motion, STROOM in its entirety was rejected by the Senate and thus the existing group prohibition remained in force. To date, none of the EU Member States have implemented a comparable group prohibition into law. If the submitted draft bill will be enacted, the required unbundling will be abolished for the regional network operators until (neighboring) EU Member States also incorporate a mandatory unbundling obligation into law. 

In 2008, two of the Dutch incumbent energy companies, NUON and Essent, unbundled their businesses as required by the Act. DELTA and Eneco however refused to unbundle their network and filed jointly a court case. The energy companies argued during the proceedings that the prohibition violates European principles of free movement of capital and freedom of establishment. On the 23rd of June 2015 the Supreme Court ruled that the Unbundling Act does not breach the European fundamental freedoms. However, the appeal regarding the ownership unbundling under the First Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) is still pending before the Court of Appeal.

As yet, the Netherlands Authority for Consumers and Markets ("ACM") decided that DELTA must unbundle its grid activities before 1 July 2017 and Eneco before 1 February 2017. In the upcoming months it must become clear whether the Socialist Party has indeed rescued the regional network operators from the legal obligation to unbundle their activities.

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