The European Commission has set out guidelines for investors on the unbundling of electricity and gas grids, setting out when investors can own grid assets as well as interests in gas or power supply, generation or production activities.
Under the EU's third package of energy market reforms, which came into force in March 2011, national regulators have to certify the extent to which TSOs are unbundled and which of three permitted unbundling models they have used to avoid potential conflicts of interest.
But this has raised questions for many financial investors, for example pension funds, who want to buy into EU power and gas grid activities but have wider energy business interests either in Europe or elsewhere in the world.
"The Commission found in the context of the certification procedure for TSOs that in certain situations...it was evident from the facts of the concrete case that the simultaneous participation in transmission activities on the one hand, and in generation, production and/or supply activities on the other hand, did not give rise to any potential conflict of interest or incentive to exploit it," the EC said in a staff working document dated May 8 and now available on its website.
It said this was, for example the case where a shareholder owned a stake in an EU grid business as well as power generation activities in Australia or the US.
CASE-BY-CASE
The EC said regulators needed to look at the facts on a case-by-case basis and highlighted five cases where national regulators had scrutinized the impact of cross-ownership.
The UK's National Grid owns the main power and gas transmission grids in the UK but also owns power generation in the US. The EC agreed with national regulator Ofgem that this was not a concern for unbundling certification since it was impossible for the UK business to give any advantage to generators in the US.
In the case of Swedish gas TSO Swedegas the EC also supported the national regulator's view that its parent's ownership of a waste disposal business in Denmark that had a small power generation business on the side did not prevent TSO certification as it was "impossible to use the gas transmission activities of Swedegas in a manner so as to favor the electricity generating interests of waste disposal company in Denmark."
POWER-GAS CROSS OWNERSHIP
The EU's unbundling rules cover include cross ownership across both power and gas grids, given that a company that owns a power grid could potentially favor power plants that use gas supplied by its subsidiaries. However the EC said in some cases, like the case of Spain's gas TSO Enagas a conflict of interest was not obvious.
Enagas and power TSO Red Electrica are both part owned by state holding company SEPI, which also owns a stake in coal-fired power generator Hunosa whose power gets priority dispatch under a specific regulatory framework. The EC agreed with the Spanish regulator that SEPI was not able to influence the activities of either TSO in Hunosa's favor.
The EC also supported German regulator Bundesnetzagentur's conclusion that IFM Global Infrastructure Fund's ownership of power TSO 50 Hertz was not in conflict with its ownership of Polish heat and power generator Dalkia Polska.
"Decisions concerning the operation of the different plants of Dalkia Polska are taken on the basis of the heating needs of the consumers connected to the district heating network and not on the basis of needs of electricity generation. In practice, Dalkia Polska is a price taker on the Polish electricity market and does not have any influence on the electricity price," the German regulator concluded.
Finally, the EC looked at ownership of southern Italian gas TSO SGI by financial investor Eiser, which also owns stakes in solar power generation companies in Spain and energy from waste companies in the UK and Italy.
It said the Spanish solar plants were too small and far away from Italy to gain any benefit from cross-ownership.
Similarly it found that the energy from waste business in the UK was too small and remote from the southern Italian gas grid to benefit from any special treatment, and even the Italian energy from waste business could not benefit from Eiser's ownership of SGI because it did not use gas as a feedstock, its power is sold at regulated prices or with priority dispatch, and it is located in the north of Italy, not on SGI's grid.
But in that case, and in others, the EC urged the Italian regulator AEEG to monitor the situation closely.
"In some cases it may not be straightforward to establish whether or not a conflict of interest exists in case a shareholder with a participation in generation, production and/or supply activities has invested in a TSO. Notably in those situations an in-depth analysis on a case-by-case basis will be required by the national regulatory authority.
