In a speech delivered at the Chambers of Commerce and Industry in Nicosia, the visiting Commissioner said she shared Cyprus` concerns about the high costs of producing electricity using oil as a fuel, especially when there are cheaper and greener alternatives.
“One of the facts we have to face is that high oil prices are not going away and the European Commission is determined to help member states adapt to this new price environment,” Kroes said.
“But I cannot agree that monopolies are the best way, or even a legal way, to reduce the price of energy.”
She said in the past and today, monopolies have led only to less choice and higher prices.
“Whether it is through higher prices for final consumers, or higher taxes to subsidise an industry or company that otherwise wouldn’t exist, no one wins from a lack of competition,” she added.
In the ongoing saga of Liquid Natural Gas (LNG) for Cyprus, last December parliament passed an amendment to legislation that resulted in barring the Energy Regulator from the right to issue private licences for natural gas supplies.
The law suspended the ability of the Cyprus Energy Regulatory Authority to issue licensing for private companies to trade in LNG until an exclusive supplier was established on the island.
And because the government is in consultations with the Electricity Authority of Cyprus (EAC) on the issue, parliament’s move would effectively create a buyer’s monopoly whereby only one company (DEFA – owned by the government and the EAC) would be entitled to buy LNG for the island’s needs.
“Even for small countries such as Cyprus there are many alternatives to both oil and natural gas,” said Kroes.
She said the new Environmental Aid guidelines and the new General Block Exemption Regulation encouraged exploration of all opportunities.
For some environmental projects it is now possible to get back the full cost back from government if it is targeted correctly.
“In many cases the Cypriot Government will not even have to notify the Commission about this aid,” she added.
At the same time, Kroes congratulated Cyprus for its State Aid control policy, which she said had shown a remarkable downturn since the island joined the EU in 2004.
She said state aid in Cyprus was now better targeted to the objectives of the Lisbon agenda promoting jobs and growth, rather than individual companies or industries.
“We welcome this path forward,” she said, adding that sometimes governments can’t resist the political temptation to use state aid as a quick fix for a bigger problem.
“That sort of protectionism might offer pain relief but it doesn’t offer a cure or any guarantee of future economic or political health,” Kroes warned.
“We don’t think competition is an ideology, an end in itself – it only has meaning if it is actually helping people.”
She added however that without a level playing field and strong enforcement, competition policy meant nothing.
“It is not a fun game if there are special rules and prices for certain people, and harder rules and higher prices for others. I am that referee in that game,” Kroes said.
The Commissioner will today meet Finance Minister Charilaos Stavrakis, Foreign Minister Marcos Kyprianou and other officials, including the Cypriot Commissioner for the Protection of Competition Costakis Christoforou.
It is not certain that she will meet President Demetris Christofias who is holding talks today with Turkish Cypriot leader Mehmet Ali Talat.
Meetings with Turkish Cypriot officials are not on the EU Commissioner’s agenda.
By Jean Christou, Cyprus Mail, July 25, 2008
