EC competition officials hint that they would be happy if ČEZ sold just one hard coal fired power plant built under First Secretary Gustáv Husák.






For three years, the European Commission has been investigating how ČEZ might have abused its power in the Czech electricity generation market. In our view the Commission rightly defined the relevant market for ČEZ as Czech, and concluded that ČEZ was a dominant producer which abused its market power.

It comes as a nasty surprise therefore that the Commission may now not be intending to impose an appropriate remedy to the infringement the Commission itself correctly identified.

EC competition officials are now dropping hints that they would be satisfied if ČEZ were to divest just its hard coal fired power plant in Dětmarovice, built in the early 1970s.

If this is indeed to be the outcome of the European Commission’s lengthy probe, it is not just Czech Coal that should appeal against the decision: All Czech consumers of electricity should challenge such a trivial result.

Offloading Dětmarovice alone will not reduce ČEZ’s market dominance in any way whatsoever, and offloading it to EPH may even aggravate the problem.

As readers are well aware, ČEZ’s long term strategy is to focus on low-carbon, highly efficient power plants. It wants to get rid of old power plants like Dětmarovice. The divestment of such plants fulfills a management commitment to shareholders. But it hardly fulfills the conditions of ČEZ's commitment to the Commission to reduce its market power.

The European Commission must surely be aware of the great differences between ČEZ’s coal-fired fleet. It must know that Dětmarovice is one of the least significant power plants in the country. Thanks to its high production costs, Dětmarovice is off the so-called ‘merit curve’ most of the year, which explains the power plant’s low load factor.

Lignite, not hard coal, is the fuel of the marginal power plant (that is the last power plant to satisfy an extra MWh of demand), which means that selling hard coal fired power plants like Dětmarovice does nothing to alleviate competition concerns. The overwhelming majority of lignite power plants will remain in the possession of ČEZ.

I fear that a combination of an army of antitrust lawyers (ČEZ hired the US law firm Cleary Gottlieb, which employs 80 lawyers in Brussels alone) and a lack of hard proof (you will recall that ČEZ was tipped-off about the exact timing of the Commission’s raid in November 2009) is discouraging the Commission. Perhaps it wants to focus its efforts on hooking a bigger catch, such as Gazprom. Now that would be an irony. ČEZ saved by Gazprom! President Klaus would be tickled pink.

Whatever the reason, no one in the Czech Republic will believe that the divestment of just one hard coal fired power plant built in 1971, when Alexander Dubček was in exile in Ankara and Gustáv Husák was First Secretary of the Communist Party, is a remedy to a competition problem on the Czech electricity generation market in 2012. No one, that is, apart from ČEZ’s press department and the great majority of local consultants and politicians, many of whom depend upon ČEZ for a living.

And does the European Commission intend to add insult to injury by allowing EPH, the very firm it fined EUR 2.5 million a few months ago for tampering with emails during the Commission’s antitrust raid in search of evidence of cartel practices, to acquire Dětmarovice?

If so, we must conclude that the European Commission has lost all serious interest in Czech consumers of electricity.