Slovakia and Estonia handed final warning on Third Energy Package

By bne IntelliNews February 28, 2012

Tim Gosling in Prague -

Slovakia and Estonia are amongst eight EU states that have been sent final warnings by the European Commission over their failure to inform it of their progress in implementing the EU's third energy package directives. The move appear to put the spotlight back onto Russia's opposition to unbundling in the EU gas sector.

"As to date Bulgaria, Cyprus, Spain, Luxembourg, the Netherlands, Romania and Slovakia have not informed the Commission of any transposition measures for the two directives and Estonia has not done so as regards the gas directive," the Commission said in a press release. The Electricity and Gas Directives of the Third Energy Package were meant to be transposed by member states by March 3, 2011.

According to the statement, "the Third Energy Package includes key provisions for a proper functioning of the energy markets,." The trickiest of these provisions in many CEE countries is the demand to unbundle of supply and distribution networks, due to pressure from Russia, which dominates energy supply in the region.

Whilst Slovakia's gas pipeline operator SPP does not currently feature Russia's Gazprom amongst its shareholders, speculation suggests that the Russian company could buy out the 49% stake held by Germany's E.ON and France's GDF Suez. SPP and GDF Suez were amongst a select group of major European customers granted price discounts by Gazprom in February.

At the same time, E.ON and GDF are also both involved in the Nord Stream pipeline, which carries Russian gas under the Baltic to Germany. Moscow has particularly criticized the Third Energy Package in the context of the billions it has invested in building Nord Stream - and the billions it plans to spend on South Stream - claiming it equates to highway robbery.

Meanwhile, E.ON also holds a stake in Estonia's Eesti Gaas. Gazprom is the largest shareholder in the Estonian company, and has been aided by E.ON in resisting efforts by the government in Tallinn to introduce legislation to separate ownership of gas sales and transmission by 2015. Prime Minister Andrus Ansip has even suggested that the country could re-nationalize Eesti Gaas in order to push the legislation through.

Lithuania, where the shareholder structure of pipeline operator Lietuvos Dujos also includes the Russian and German companies, has pushed through legislation implementing the most far-reaching unbundling option after a fight with the private shareholders. Vilnius has accelerated its efforts to break its almost total dependence on Russian energy in recent months.

Other elements of the Third Energy Package include rules strengthening the independence and powers of national regulators and rules on the improvement of the functioning of retail markets to the benefit of consumers. The Commission now reports that it has sent reasoned opinions - essentially a second and final written warning - to the national governments involved. They have two months to respond. Should they continue to fail to comply, the Commission said it may refer the cases to the EU Court of Justice.

The Commission added that some other states have only notified partial transposition of the directives, and that it is analyzing those measures. However, it "will decide in the coming months on appropriate further steps."

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