Non-discriminatory Third Party Access to the Gas Transmission ...

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European countries there is no pipe-to-pipe/system-to-system competition 24 and suppliers are dependent on a single pipeline/system if they want to reach their customers. It follows from (a) and (b) that undertakings that want to be connected to the transmission have no other option than seeking access to an existing transmission system. Therefore the TSO on a given transport market can often be considered to be in control of a natural monopoly. 25 In addition, TSOs of electricity transmission are also considered to be in control of a natural monopoly. 26 To have a monopoly position is not condemned in itself. It is, under Article 13 (1b) TGD and Article 14 SGR the abuse of such a position by discriminating amongst system users, particularly in favour of its related undertakings that is prohibited. Competition law, in particular Article 102 (c) of The Treaty on the Functioning of the European Union 27 (TFEU), contains a similar prohibition as the non-discriminatory TPA rule in the TGD and the SGR. Similar to the non-discriminatory TPA rule, Article 102 TFEU does not condemn, as such, the existence of a monopoly/dominant position. It is the abuse of such a position by discriminating amongst system users, particularly in favour of its related undertakings that is prohibited. Both rules prohibit the use, or rather abuse, of this dominant position of which is to expel (potential) competitors out of the market or imposing excessive conditions on customers. To determine whether dominant firms are harming competition, a primarily effects-based approach is used; focusing on the economic impact of anti- 24 It means that there is only one pipeline or network available for a certain transportation way and therefore competition on a given transport market between TSOs does not exist. 25 The definition of a natural monopoly is that the cost function is subadditive. This means that ‘a single buyer is technically able to serve the entire market at lower total costs than any feasible combination of two or more suppliers’. Historically, the sectors most subject to natural monopolies have been the ‘the public utilities’, such as gas, electricity, water en telecommunications as well as various forms of transport. At the core of these industries are ‘indivisible’ assets such as pipes, cables, wires, satellites, rail and road links, waterways and so on. About this subject see: CREW, M. and PARKER, D. (2006) International Handbook on Economic Regulation. Massachusetts: Edward Elgar Publishing, p.41-47, KIP VISCUSI, W. (2005) Economics of Regulation and anti-trust. Cambridge: The MIT Press, Chapter 11: The theory of a Natural Monopoly, NEWBERY, D.M. (1999) Privatization, Restructuring, and Regulation of Network Utilities. Cambridge: The MIT Press, p. 189 and LYONS, B. (2009) European Competition Policy- TheEconomic Policy. Cambridge: Cambridge University Press, p.11. 26 Ibid. 27 Article 102 TFEU: Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States. Such abuse may, in particular, consist in: (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of consumers; (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. 6
competitive conduct on consumer welfare. 28 In this respect, the focus of the European Commission (Commission) is on protecting consumers and protecting the process of competition instead of on protecting individual competitors. 29 According to the Commission, the obligations to provide non-discriminatory access to gas infrastructure networks are based on principles underpinning the ‘essential facilities doctrine’ in Competition law. 30 Furthermore, it is generally accepted that essential facility cases are a ‘subset’ of the ‘refusal to deal’ and ‘applying dissimilar conditions to equivalent transactions’ categories under Article 102 TFEU. 31 It follows from the aforementioned that non-discriminatory TPA is a lex specialis of Article 102 TFEU as nondiscriminatory TPA is built on principles underpinning the ‘essential facilities doctrine’ and this doctrine is a ‘subset’ of the ‘refusal to deal’ and ‘applying dissimilar conditions’ categories under Article 102 TFEU. As the focus of this paper lies on the non-discriminatory TPA rules contained in the TGD and SGR, the Competition law rules are further left out of consideration. §2.2 TSOs are traditionally vertically integrated One of the central problems concerning non-discriminatory TPA in the energy markets (natural gas/electricity) is the traditional vertical integration of these industries. A vertically integrated gas/electricity undertaking is defined as: a natural gas/electricity undertaking or a group of undertakings of which the same person or the same persons are entitled, directly or indirectly, to exercise control and where the undertaking or the group of undertakings perform at least one of 28 EUROPEAN COMMISSION (2009) Guidance on the European Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings (2009/C 45/02). Brussels. 29 Ibid. 30 EUROPEAN COMMISSION (2007) Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the European gas and electricity sectors (SEC(2006) 1724). Brussels: DG Competition, at p.70. This doctrine provides that, under a number of conditions, companies having control of an ‘essential facility’ may be obliged to offer available capacity to interested third parties. The essential facilities concept originates from the United States and has developed to require a company with monopoly power to contract with a competitor where five conditions are met (1) an essential facility is controlled by a monopolist, (2) a competitor is unable practically or reasonably to duplicate the essential facility (3) the use of the facility is denied to a competitor (4) it is feasible for the facility to be provided (5) there is no legitimate business reason for refusing access to the facility. (Opinion of Mr Advocate General Jacobs delivered on 28 May 1998: Oscar Bronner (Case C-7/97) [1998], paragraph 34) According to the essential facilities doctrine a company which has a dominant position in the provision of facilities which are essential for the supply of goods or services on another market abuses its dominant position where, without objective justification, it refuses access to those facilities. ‘Up to now, the legal status of the doctrine is remarkably unclear and neither in the United States nor in the EU have the have the highest Courts been willing to pronounce on its validity as a basis for antitrust claims’. (STOYANOVA, M. (2008). Competition Problems in Liberalized Telecommunications. Alphen aan de Rijn: Kluwer Law International, p.89-91). 31 Ibid, at STOYANOVA, M. (2008), p.89-91. 7
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