Commission to deliver verdict on EdF’s UK shopping spree

Date: 15/07/1999

By Tim Jones

EUROPEAN Commission anti-trust regulators will use all the firepower at their disposal to slow down Electricité de France's monopoly-protected acquisition spree in the UK, according to officials.

But as the deadline approaches next week for the Commission's Directorate-General for competition to approve EdF's controversial 245-million euro purchase of south-west England's supplier Sweb, sources warn that British policy-makers should not "expect miracles outside our powers".

EdF is using its London Electricity unit, which it bought for 2.9 billion euro in December from under the nose of nuclear generator British Energy, to buy Sweb from US firms Southern Company and PP&L Resources, and snap up 1.3 million customers and an extra 4.1% of England and Wales' supply market.

This has provoked howls of protest not only from British Energy itself, but also from the government and influential newspapers. EdF has a monopoly in the generation, transmission, distribution and supply of electricity in France and also exports power to the UK via a cross-Channel interconnector. British firms do not have the same rights to supply, generate or acquire assets in France.

Although Commission officials acknowledge that this seems unfair, they point out that the British government knew what it was doing when it signed up to a lopsided liberalisation of the EU electricity market.

The most regulators are prepared to do is assess the potential anti-competitive effects of the merger on the local market. "We have done this several times in markets which are regional in nature, such as Nordic television or Dutch TV advertising," said one official.

The combined London Electricity/Sweb supply businesses would be the largest in England and Wales measured by numbers of customers; snapping up 14% of the market. However, EdF would be number three in terms of sales volumes behind the East Midlands and Eastern suppliers, with 11.5% market share.

Competition officials have taken on board the observations of the UK's energy market regulator that the LE/Sweb merger would effectively remove London as a competitor within Sweb's area and vice versa - so shrinking England and Wales' competitive potential. It would also end the possibility of industrial customers in the south-west being supplied under LE's 'second-tier' licence rather than by Sweb.

Anti-trust investigators are also looking into the possibility that the increased 'vertical integration' of UK supply and generation - all five of the country's big generators now own supply companies - would narrow down the volume and variety of generation contracts on the market.

"This is as much as the Commission can do for now," said a source. "The state aid question is separate and will take much longer."

Competition Commissioner-designate Mario Monti will carry on an inquiry launched by his predecessor Karel van Miert into the wider question of whether EdF is diverting state aid into competitive commercial activity.

Suspicions have been raised by the willingness of EdF to outbid private sector companies for supply businesses which operate on wafer-thin margins. Domestic - usually US-owned - companies point out that EdF's Sweb bid represents 275 euro per customer; well above the 230 euro National Power recently spent on Midlands Electricity's supply arm.

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