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Long-term Energy Supply Contracts in European Competition Policy: Fuzzy not Crazy

Author

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  • Adrien de Hauteclocque
  • Jean-Michel Glachant

Abstract

Long-term supply contracts often have ambiguous effects on the competitive structure, investment and consumer welfare in the long term. In a context of market building, these effects are likely to be worsened and thus even harder to assess. Since liberalization and especially since the release of the Energy Sector Enquiry in early 2007, the portfolio of long-term supply contracts of the former incumbents have become a priority for review by the European Commission and the national competition authorities. It is widely believed that European Competition authorities take a dogmatic view on these contracts and systemically emphasize the risk of foreclosure over their positive effects on investment and operation. This paper depicts the methodology that has emerged in the recent line of cases and argues that this interpretation is largely misguided. It shows that a multiple-step approach is used to reduce regulation costs and balance anti-competitive effects with potential efficiency gains. However, if an economic approach is now clearly implemented, competition policy is constrained by the procedural aspect of the legal process and the remedies imposed remain open for discussion.

Suggested Citation

  • Adrien de Hauteclocque & Jean-Michel Glachant, 2008. "Long-term Energy Supply Contracts in European Competition Policy: Fuzzy not Crazy," Working Papers 0816, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  • Handle: RePEc:mee:wpaper:0816
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    Cited by:

    1. Boussena, S. & Locatelli, C., 2013. "Energy institutional and organisational changes in EU and Russia: Revisiting gas relations," Energy Policy, Elsevier, vol. 55(C), pages 180-189.
    2. Oggioni, Giorgia & Smeers, Yves, 2012. "Evaluating the application of different pricing regimes and low carbon investments in the European electricity market," Energy Economics, Elsevier, vol. 34(5), pages 1356-1369.
    3. Sadek Boussena & Catherine Locatelli, 2011. "La sécurité, question clé des relations gazières entre l'UE et la Russie," Post-Print halshs-00625223, HAL.
    4. de Hauteclocque, Adrien & Rious, Vincent, 2011. "Reconsidering the European regulation of merchant transmission investment in light of the third energy package: The role of dominant generators," Energy Policy, Elsevier, vol. 39(11), pages 7068-7077.
    5. Adrien de Hauteclocque & Vincent Rious, 2009. "Reconsidering the Regulation of Merchant Transmission Investment in the Light of the Third Energy Package: The Role of Dominant Generators," RSCAS Working Papers 2009/59, European University Institute.
    6. Guy Meunier, 2011. "Imperfect Competition and Long-term Contracts in Electricity Markets: Some Lessons from Theoretical Models," Chapters,in: Competition, Contracts and Electricity Markets, chapter 6 Edward Elgar Publishing.
    7. Brodrechtova, Yvonne, 2015. "Economic valuation of long-term timber contracts: Empirical evidence from Germany," Forest Policy and Economics, Elsevier, vol. 55(C), pages 1-9.

    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations

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