B If this is his philosophy it is wrong

Energy news: How do you see the future of local businesses, which are often small, in the current context of oligopolisation

Gert Block: Network operations, local businesses have no problem, because the benefits of scale in this area are far lower in trade matters - from 150 000 clients, there are even disadvantages of scale. So they can continue to work, preferably in cooperation between them, without that mergers are necessary. The situation is different for commercial activities, which generally refers to a minimum size of 500 000 customers in order to develop a market and create a brand. But if local companies adossent to large groups, that is to say that they disappear from the market. However, they were instrumental at the opening of the markets. I am thinking in particular of the Belgium where the only counterweight to Electrabel came from local businesses. If all municipalities had at the time decided to sell their local companies to the highest bidder, we know who have purchased... and 100 in Belgium market have closed.

Can E.n.: But these local companies have a future as energy suppliers without revival in large groups

G.d.B.: Why not The problem is that everyone always assumes that it is impossible. Indeed, myself, I would have a priori the same idea... But I also have in mind the example - atypical, certainly - a small Belgian communal business which has 15,000 customers and which has doubled its sales, specifically through its local character apparently very attractive. For a large part of the customers, differentiation is based on quality. Therefore the proximity can be an asset for these companies. That said, it is true that a very large company can afford to make losses for several years, thereby eliminating competitors... to ensure that prices are rising. This is the game. The easiest for a local company would be perhaps to stop its activity. But the citizen exit not winning! The question is: will it create a European market with large and small businesses or with only an oligopoly To have a real market, it must be enough players. However, if local businesses disappear, there is no real market in Europe. The only hope to have one - even if it must pass through an intermediate stage with major regional markets - implies the existence of local businesses. It is not with five to ten major groups that will be a real market in Europe.

E.n.: If the philosophy of the Commission was to create the single market through a few large mergers

G.d.B: If this is his philosophy, it is wrong. Because it will not create competition with a few big players. It will not be a market for consolidation in the extreme that is realized. It has already become impossible, in practice, negotiate prices... And of course, the situation will not improve with a number of players still smaller than today ' today! The Commission to be honest in its intentions: is it of competitive stakeholders at the global level or energy market

E.n.: Would you say that there is already more than market

G.d.B.: To the extent that it is possible to arrive a day to a market - this what I have doubts-, I think that trying to instead to move to... a sector with aspects of market organization. Liberalisation brings some problems, including that the concentration of production. There is no real competition at this level. The number of producers is so limited that there is no great difference between suppliers in terms of price - in this regard, studies show that the price is not the crucial point for the client. He wants to, it is a good service (1). In fact, providers can sell electricity only with limited margins. And a large dominant integrated group that owns 95 of the production and carries out 60 of sales in a market is to determine the purchase price and the selling price of its competitor. In other words, it can choose to let it survive or kill him! Therefore, avoid at all costs the concentration continues. If you want a market, must be several producers, with a competition on prices.

E.n.: Do you still the possibility to establish this market

G.d.B.: This is not a market in the truest sense of the concept. But it can reach a certain regulation. If, however, are left to play the market, there is no market. There is a concentration, since this is the logic of the sector. Should therefore take measures as, for example, develop production capabilities available to third parties at prices that take real costs of production - and not at stock exchange prices inflated-, or outright split some societies. Or not to allow the formation of major European groups. The Commission and the competition authorities must take their responsibilities. The problem is also that each country wants its national champion...

E.n.: Do you consider the relatively active European Commission

G.d.B.: In any case I am surprised that she is not worried, because the analysis very fine that it has made in its investigation of the sector. The question is whether it has the means to intervene. It may suggest to the Member States to act in a way or another. So far, it has not done. For mergers, when it pronounces on the E.on/Endesa approximation, it within its competence. To see what measures - it is in any case won't happen by mild measures - she wants to take to try to make a market. What is certain, is that it will not say that she did not know...

E.n.: To return to local businesses, should you maintain a minimum public shareholding

G.d.B.: Networks, it is preferable that they remain - or become - 100 public. It especially to allow reasoning in the long term so that the investment needed for security of supply to be made. Because there is in all energy sectors where we tried to create markets that investment in networks fall. It is in that one begins to also observe in Europe: the regulators sometimes have short term views and seek to lower the maximum tariff for access to the network, playing on the profit margin and depreciation policies. If, for example, the real lifetime of an investment is 30 years, the regulator can decide in the next day extend it to 50 years. As a result, investments decreased by 20, 30, sometimes 40! Dozens of complaints are underway before the Belgian Council of State against such decisions of the regulator. Result, we see first price drop, and then, after 10 or 15 years, there is a blackout.

E.n.: Is it specific to the Belgium

G.d.B.: I have found also in the Netherlands, where periods of amortization rose from 30 to 50 years. But this was observed around the world. I am very worried. Because, if even the regulators think more long term, there is a problem! Need a reflex of long term for networks, whether for investment, quality of service or security. Should be so or impose reasonable depreciation and investment financing policies, and a regulation which is not concentrated only on costs but also on the quality of the networks. However, this last element is overlooked. I hope that politicians will take their responsibilities on time - i.e. before it is too late.

General Secretary, European Trade Union Confederation of communal public energy distributors (CEDEC)

1 Also see p.12.