Electricite de France (EdF) is a French wholly State-owned group. Its principal activity is the generation, transmission, distribution and supply of electricity in France. London Electricity (LE) distributes and supplies electricity in England and Wales, principally in the London area.

EdF also supplied a small part of United Kingdom (UK) demand for electricity, through the France/UK interconnector cable.

After investigation under the Merger Regulation the European Commission cleared the acquisition of LD by EdF.

Some details.

The reason for the clearing is that the Commission did not find that the operation materially affected competition. The parties' activities overlapped a very small extent in generation, EdF supplying less than 6% of the UK demand, via the interconnector, and LE accounted for less than 0,5% of demand. Other competitors such as National Power, Powergen and British Energy have substantially larger shares. The Commission took also into account the fact that certain regulatory measures had been agreed between the parties and the sectoral regulator for the UK's liberalised and privatised electricity industry, the Director General of Electricity Supply (DGES).

The Commission also examined the fact that vertical integration of the two firms might lead to adverse effects on competition, particularly for smaller customers in the London area, where LE was dominant. Larger customers have in the past been able to source their electricity needs from any of the various competing suppliers active in the market, instead of being tied to a single monopoly supplier for their region. This freedom is nearly applied now to all customers, and this freedom will be completed by June 1999.

The Commission also decided on request from the UK authorities for the case to be referred back to them for examination under national competition laws and for the recognition of certain public interest matters as "legitimate interests" not falling within the scope of European Community control under the Merger Regulation (see Article 21.3. of the regulation). These requests were made in the context of the system for the regulation of the electricity industry in the UK.

The UK authorities concern was that the DGES should remain able to take certain measures to ensure regulatory transparency and protect consumers and other small customers, in particular, from any adverse effects that might arise from the vertical integration between EdF and LE.

After examining the two requests, the Commission found that since the operation was not likely to lead to any adverse effects on competition, the criteria laid down in the Merger regulation for a case to be referred back to national authority was not met. The measures communicated to the Commission amounted to ongoing regulatory activity under the UK's existing system. Such activity was not precluded by the Regulation so it was not necessary for the Commission to recognise a "legitimate interest" in respect of them before they could be taken. Accordingly, the Commission declared the operation compatible with the common market.

This article is based and incorporates information provided by the European Commission (Press Releases) and is intended for general information. Specialist advice should be sought before acting on it.