By Machteld van Oosten
The Dutch government presented an action plan on October 11 for restructuring the energy market in Holland.
One of the major changes envisaged is the complete separation of electricity transmission from other energy-related activities, such as generation and distribution. The government plans to introduce legislation prohibiting the simultaneous ownership of shares, whether directly or indirectly, in grid management companies on the one hand and companies active in the generation, supply or trading of electricity and gas on the other. This prohibition will not apply to current shareholders of regional energy companies. Mr. Brinkhorst, the minister of economic affairs, said he intends to present the bill to Parliament in 2005 and to have the action plan implemented by January 2007.
At present, the shares in regional energy companies are directly or indirectly held by provinces and municipalities. Following enactment of the Electricity Act in 1998 and the Gas Act in 2000, energy distribution companies that owned a grid were required to designate separate companies as grid managers. Most of the Dutch energy businesses are therefore structured in the form of a grid management company and a separate company to undertake other energy-related activities, with the shares in both companies being held by a holding company under a vertically-integrated structure. This structure is shown in the diagram to the right.
If the action plan is implemented, then this type of structure will no longer be permitted. The government aims to have complete independence of the grid management sector. It believes that this complete independence cannot be achieved if shares in a grid management company and in a company engaged in commercial activities are held by the same shareholders.
The expectation is that full independence of grid management will prevent interests in the grid from being overridden by commercial interests. The economic affairs minister sees an inherent conflict between the interest of consumers in a reliable and high-quality grid and the commercial interests of the integrated energy companies.
The minister also cited a survey commissioned by the Dutch Energy Authority (DTE) showing that the existence of distribution companies that are part of a vertical ownership structure (and hence part of a group that owns a grid) may lead to unfair competition between such companies and distribution companies that enter the market without ownership of a grid. Although legislation setting out stricter rules for the independence and supervision of grid managers recently came into force (the I&I Act), the economic affairs minister considers these rules inadequate to prevent undue influence by the parent company. In addition, the separation will, according to the minister, result in a more transparent company structure, making it easier for the DTE to supervise the energy market.
Provincial and municipal governments that currently hold shares in the regional energy companies will benefit from the separation, as it will allow them to withdraw from energy production and supply activities and free the financial resources tied up in this business. At present, these are effectively locked up because shareholders of energy companies that own a grid are not allowed to transfer their shares outside the circle of current shareholders. This does not apply in the case of companies without a grid. The government believes that the proposed separation of grid management activities is in the best interests of both the consumer and the current shareholders of integrated energy companies.