Energy: Electrabel versus Minister of Economy in Belgium.

There is at this moment a war between the Belgian government, i.e. Mr Vande Lanotte (Vice Prime Minister and Minister of Economy) en Electrabel. Here I write what I understand of the dispute because it involves quite a lot.

Electrabel, a company ones owned by the government but now part of Suez-GDF, makes and delivers electricity to companies and the general public. For historical reasons (Electrabel was the only company in Belgium to make electricity owning all infrastructure), the company is still the largest company in Belgium to make electricity and uses a number of methods, including nuclear energy while the decisions are now made in France. Since the law of 31 December 2003 it knows that the nuclear energy in Belgium will be reduced from 2015 onwards until the last nuclear reactor is closed by 2025 (see website), thus it had a minimum of 12 years to invest in alternative energy. However, over these years the company invested insufficiently in new and clean energy because it hoped that, as usually in the past, the government would change its decision. But the government didn't really change its decision and it allowed only a few extra years. Unfortunately, there are now some problems with the buildings and thus a number of reactors needed to be closed. When I am cynical, this is perfect for the company because now the company can threaten there will be power cuts in the near future (winter), forcing the government to think again of keeping the other reactors open for a longer period. Furthermore, Electrabel also has to pay a nuclear tax to allow the government to invest in other types of energy and of course Electrabel doesn't like to pay this tax.

Minister Vande Lanotte finds Electrabel too expensive. He blocked the increase of the prices a few months ago and Electrabel refused to accept this and increased its prices. As a result it lost many customers because the company forgot Belgium has since a few years competition between energy companies and thus people can move to cheaper alternatives. As a result, to prevent the loss of even more customers, Electrabel had to obey to the law and reverse their decision to increase the electricity price. Of course, one can understand companies have to make profits but they should use their profits to invest in cheaper and cleaner energy, not only to pay their investors. Further, Mr Vande Lanotte demands the company pays the nuclear taxes.

This weekend, the CEO of Electrabel, Mrs Sophie Dutordoir, gave an interview in Belgian newspapers, claiming Mr Vande Lanotte is against the company because that will boost his popularity during elections. She also claims that competition didn't lead to cheaper energy prices, although she doesn't say the company had to reduce its prices to prevent the loss of customers. She also suggests to stop paying the nuclear taxes so the company can use that money to reduce the price for the customers. Mr Vande Lanotte refuses, although it is very clever of Mrs Dutordoir because now she can claim Mr Vande Lanotte is against the reduction of the price for Electrabel customers. Mr Vande Lanotte claims the company needs to pay its taxes AND reduce its bills. I agree on this for two reasons:
  1. Companies should pay their taxes as everyone else. Then these taxes can be used by governments to support research in new energies that are better for the environment. This would result in work for a number of people, thus reduce unemployment;
  2. If Electrabel does not have to pay the nuclear bill but the money is used to reduce the prices for their customers, what with the other companies who can't use a reduction to reduce the prices for their clients? This may be good for customers but only for a short time. It would mean unfair competition and companies may loose customers to Electrabel and may even go bankrupt. When only Electrabel is left, they can ask whatever for the electricity they provide or threaten to stop the delivery. And in the period that the prices are reduced, the income from taxes on these prices will be reduced. Thus no nuclear tax and less income from taxes, causing difficulties for governments who need money to reduce their deficits and invest in employment. Then other taxes may have to increase and thus the reduction for ordinary people would be lost.
The communication of Mrs Dutordoir to the Belgian people is thus very clever as indeed many people will ask why a reduction of their energy bill is prevented by the Minister, and thus Mr Vande Lanotte may loose on this instead of win unless he communicates very well his decision. Also the threat there may be no electricity for some people, certainly with the problems with the nuclear reactors (although Electrabel promises its own customers will continue to receive electricity and Mrs Dutordoir claims in her interview she understands Electrabel is not always the cheapest but customers have the added advantage of being sure they will receive electricity (extract from De Standaard "... en ze beseft dat Electrabel niet altijd de goedkoopste is. 'Maar men vergelijkt appelen met peren en men verliest de kwaliteit en de bevoorradingsgarantie waar Electrabel borg voor staat.'"), may force people back to Electrabel. And this will be a disaster as there should never be only one company making and providing electricity on the free markets because there should be competition to have reduced prices. Or if there is only one company, it has to be state owned as then politicians will demand electricity for all their potential voters. Or the government or one company produces the electricity and sells it to providers without selling the electricity themselves, and thus they will treat all their clients as equals although other companies or even customers should be allowed to make their own electricity if their want so. I am in favour of competition.

But I think energy should not be too cheap because then people overuse and that is bad for the environment. I think it is a good system that a certain amount of energy is free so that people can warm themselves (basic need). Above that, people should pay and thus those who use more will pay more. This will force people to find ways to reduce their energy usage (e.g. TV is not a basic need).

Also, energy should be taxed a certain percentage of the bill as is done. But instead of giving reductions or subsidies for the use of cleaner energy that makes governments poorer so they have to raise other taxes to compensate (although temporary exceptions are possible such as in the past when everyone got a reduction on a few energy saving lights so people would know them as they were forced to replace the older versions), the government could add extra tax on polluting energies (as for example in the case of the nuclear tax). People would still have the choice but it would stimulate the public to buy cleaner energy as this will be cheaper because the bills on older energies would increase because of the added tax. In the end the older energy could be stopped as most people would have switched. But it would also stimulate companies to invest in cleaner energy to keep their customers because other companies that invest in more efficient and cleaner energies would be able to provide cheaper energy.

As there are no reductions on energy taxes and instead even increases on poluting energies, the government has money to help companies or universities to invest in research into cleaner energy whenever they have a good project (and thus this would be a kind of subsidie but not to keep poluting companies alive). Of course, the research into energy saving should also be on reducing energy waste from older installations because people can't buy each year something better. It would also stop the drain of money from countries because money would be invested in local energy and companies and no longer in buying oil.

And of course, there will always be a minimum price that can't go lower in order for companies to make profits and allow investments. And of course, some companies will be more expensive because their services will be better. Free market means people pay for the sum of the product and the services and when the product is similar (e.g. electricity), people pay in essence for the services they get. But the rules should be equal for all companies.


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