Van der Hoeven forces energy companies to unbundle
Energy companies with a network operating subsidiary and a trading or production arm will no longer be allowed to operate as one singular company. This is according to Dutch Economics Affairs Minister van de Hoeven in a letter to both Houses of the Dutch Parliament. This group prohibition, preventing network operators and producers/traders from being part of the same company, will take effect on 1 August 2007. Once the article is enacted as part of the law, the companies will have two-and-a-half years to implement the independent network management.
Minister Van der Hoeven has based her decision on what she has identified as a trend that has become apparent since the Upper House carried the Doek/Sylvester c.s motion. in November 2006, linking the enactment of the group prohibition in the Independent Network Operation Act to a threat to the public and independent network management. The Minister highlighted the fact that companies are definitely developing an international strategy in terms of their commercial activities, and the networks are an integral part of this. When company operations are integrated in this way, the management of the network becomes subject to broader strategic and commercial considerations. As a result, the interests of public and independent network operations can conflict with other interests. Because of the nature of the group structure, the debts of group companies can impact on the network operator's dividend flow. There will therefore be a possible risk to the networks themselves. The Minister wishes to act now to combat any negative impact from commercial activities on network operations, with the motto: Prevention is better than cure.
In her letter to the Parliament, she also pointed out that she regards the network operator first and foremost as a public business and the revenue obtained from the networks as public resources. In the current situation, it is impossible to ascertain whether profits from network operations will be used for the benefit of the public or for commercial purposes. In the present structure it is impossible to determine weather profits made in network management are allocated to public services or contribute to commercial activities.
Along with her letter, the Minister also sent the Royal Decree which means the enactment of the amendment to the act on the group prohibition is now pending in both Houses of the Dutch Parliament. The reports issued by regulatory body NMA/Dte (Office of Energy Regulation), which formed part of the Minister's decision, were also sent. In its report on public and independent network operations, the regulatory body does state that the companies are complying with legal requirements in principle. Within the present framework there is a risk that the holding might not be able to meet its financial obligations when the network management wants to invest.
The group prohibition, once in effect, will guarantee the operational independence of the network management. The need to monitor the possible flow of network profits to other units in the holding will no longer exists and this facilitates supervision.
In its report on the energy company Delta's Indaver deal, the NMa asserts that the takeover does not currently present a threat to public and independent network operations. The regulatory body does highlight the fact that Delta's network operator is dependent on the holding company for investments in the network. Any further takeovers of companies with commercial activities could result in a threat to network operations.
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