EU launches electricity supplier probe

The EU has launched an inquiry to determine whether 11 member states are paying illegal subsidies to electricity suppliers by granting them support to prevent blackouts.

The probe is part of the EU's attempt to forge a single European energy market - the so-called energy union - and it will investigate whether countries are unduly favouring homegrown utilities and technologies, rather than building cross-border interconnections.

The commission's investigation will focus on "capacity mechanisms" or government-backed support schemes that ensure demand for power can be satisfied at any time.

Brussels said it was worried that these programmes could prop up incumbents or "hinder electricity from flowing between one EU country and another", so undermining the values of the single market.

The competition authorities will send out questionnaires to governments and companies in Belgium, Croatia, Denmark, France, Germany, Ireland, Italy, Poland, Portugal, Spain and Sweden.

Margrethe Vestager, competition commissioner, has prioritised a shake-up of Europe's energy sector and Wednesday's probe comes only a week after she launched a case against Gazprom, the Russian state-controlled export monopoly that provides almost a third of Europe's gas.

"This sector inquiry sends a clear signal to member states to respect EU state aid rules when implementing capacity mechanisms, and contributes to the commission's goal to build a true energy union in Europe," said Ms Vestager.

While the commission stressed the importance of capacity mechanisms to keep the lights on, critics of the energy schemes say that their improper use can lead to jumps in wholesale prices and subsidise fossil fuel companies.

Tara Connolly, EU energy policy adviser at Greenpeace, said: "Instead of throwing polluting power companies a lifeline, Europe should be phasing out coal and replacing it with renewable energy and energy efficiency."

Accelerating the free flow of electricity around Europe is one of the thorniest challenges for the European Commission and the continent is riddled with "choke-points".

One of the most notorious lies across the Pyrenees, where the French nuclear industry has been hostile towards a flow of intermittent renewables streaming across the border from Spain.

Poland, which relies on coal, has joined eastern European neighbours in complaining about disruptions caused by renewable flows running into their countries from Germany. To protect strains on its grid, Poland installed "phase shifters" but green groups accused it of building a firewall to protect coal-fired power generation.

EU competition officials stressed that their probe should not be seen as an attempt to intervene in sovereign national choices of fuel mix but would examine whether countries were deliberately overlooking more economic options in defiance of competition rules.

The commission has already ruled that Britain's capacity mechanism does not breach state aid rules.

While the energy union is intended to support the European single market by helping prices converge across the bloc, one of the greatest obstacles has been the determination of governments to keep control over energy taxes that partly explain the divergence in prices.

"In some cases it might be more efficient to invest in improving electricity grid connections between EU countries than to build new power stations," said Ms Vestager.

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