Investigation on Spanish companies Gas Natural and ENDESA closed

United Kingdom

The Commission has closed its investigation into the long-term gas supply agreement between the Spanish gas company Gas Natural (a dominant company in the gas market) and the Spanish electricity generator ENDESA (the market leader in the electricity business in Spain). The parties have modified the terms of their agreement in line with the competition concerns expressed by the Commission.

The Commission concern in this case was to ensure that the gas supply contract did not allow the dominant gas supplier to impede the entry of new suppliers in the Spanish gas market, at the eve of the liberalisation of the European gas market. The original transaction enabled Gas Natural to secure an important gas contract in terms of quantities sold and duration in the fastest growing segment of the Spanish gas market: gas for electricity generation.

The Commission considered that the contract would have (i) raised barriers to entry into the liberalised Spanish gas market, (ii) led to segmentation of Spanish gas markets, and (iii) had the effect of discriminating against other Spanish gas purchasers in favour of ENDESA. The Commission informed the companies that the agreement could infringe Article 82 EC as it had the effect of reinforcing the already existing dominant position of Gas Natural in the Spanish gas market.

Gas Natural and ENDESA undertook to reduce the gas volumes covered by the contract and the duration of the supply contract. Further, Gas Natural will not require ENDESA (or any other electricity generator in future contracts) to use the gas for electricity generation purposes only, once supplies reach the normal deliveries level. Thus ENDESA becomes free to resell the gas. The Commission recognised that these amendments will have immediate positive effects for the liberalisation of the European electricity and gas markets.

Not all of ENDESA’s requirements will be covered by the present agreement. ENDESA will need to purchase more gas in the future, thus attracting new suppliers and bringing more competition to the Spanish market. Access of power generators to competitive natural gas as a substitute for coal is seen as decisive in the development of a competitive electricity market. ENDESA will be able to offer gas at spot market conditions in the gas market, while developing at the same time its new power generation park. In view of the commitments made by the parties, the Commission decided not to pursue its action against Gas Natural. (IP/00/297).