News report on the Common Electric Power Market
News Report 1
The news article from the website of the Eurasian Economic Commission informs of the fact that the electric power committee has approved the Agreement on the establishment of Common Electric Power Market (‘Общий Электроэнергетический Рынок’) setting a deadline for the Agreement to come to force by 1 July 2019 (Eurasian Economic Commission, 2018). This treaty, according to the Commission, will, among other goals, aim to organize centralized bidding in electric power and trade under bilateral free trade agreements, and also allocating capacities of interstate transmission lines. (Eurasian Economic Commission, 2018)
The document of the agreement incorporates two previous treaties: the Concept (‘Концепеция’) of the Creation of Common Electric Power Market and the and the Program (‘Программа’) on Establishment of Common Electric Power Market. According to the Concept (Supreme Council of Eurasian Economic Union, 2015), the functions that the creation of the common market serves are twofold: 1) maintaining the balance of the economic interests of subjects of the market and 2) maintaining the balance of supply and demand on electric power based on competitive price-setting.
Despite the fact that the treaty cites the competitive price-setting in the mechanism, it later states also that “the price setting on the services of the subjects of natural monopolies will be realized according to national legislation” (Supreme Council of Eurasian Economic Union, 2015, p. 15). In comparison with the process of liberalization in the European Union, driven by the European Commission, which emphasized the need for the privatization of the state-owned energy companies (Jamasb & Pollitt, 2005, p. 16), neither the Concept nor the Program specifies in their steps for creation of the common market the need to privatize the state-owned industry. Given that countries of EAEU, including Kazakhstan, which faces downturn in its liberalization effort (Aldayarov, Dobozi, & Nikolakakis, 2017, p. 43), have challenges regarding the state influence in the market, yet the treaty does not address these issues.
The decisions of these governments to further integrate cannot be explained using solely either neofunctionalist of intergovernmentalist approach. From the neofunctionlist perspective, once national governments took the initial steps towards integration, the further processes put pressures on these governments to integrate further because spillovers create a need for deeper integration (Bache, George, & Bulmer, 2011, p. 9). In this particular instance, the national governments of Eurasian Economic Union have prior agreements in the context of Customs Union regarding the bilateral trade of electric power (Pastukhova & Westphal, 2016, p. 2); in order, for these prior agreements to work more effectively (via centralized bidding for example) these governments have the interest to integrate further.
On the other hand, intergovernmentalists’ key claim on nature of integration is that national governments control the pace and nature of integration (Bache et al., 2011, p. 12). In the Concept of the Creation of Common Electric Power Market, Belarus has expressed its special opinion, maintaining that “full-scale work of Common Electric Power Market on competitive grounds is envisaged after the creation of the common market of gas” (Supreme Council of Eurasian Economic Union, 2015, p. 20). This means, that despite the pressures and incentives for further integration, governments still control how that integration proceeds and at what timeline in accordance with their national priorities.
Word Count: 491 (excluding references)
References
Aldayarov, M., Dobozi, I., & Nikolakakis, T. (2017). Stuck in Transition: Reform Experiences and Challenges Ahead in the Kazakhstan Power Sector. World Bank Publications.
Bache, I., George, S., & Bulmer, S. (2011). Politics in the European Union. OUP Oxford.
Eurasian Economic Commission. (2018, January 31).
Консультативный комитет ЕЭК одобрил Соглашение об общем электроэнергетическом рынке Союза [Consultative committee of the EEC approved the Treaty on Common Electric Power Market of the Union]. Retrieved February 1, 2018, from http://www.eurasiancommission.org/ru/nae/news/Pages/31-01-2018-1.aspx
Jamasb, T., & Pollitt, M. (2005). Electricity Market Reform in the European Union: Review of Progress toward Liberalization & Integration. The Energy Journal, 26, 11–41.
Pastukhova, M., & Westphal, K. (2016). A common energy market in the Eurasian Economic Union: implications for the European Union and energy relations with Russia (Vol. 9/2016).
Supreme Council of Eurasian Economic Union. Концепция формирования общего электроэнергетического рынка Евразийского экономического союза [Concept of the formation of common electric power market of the Eurasian Economic Union], №12 § (2015).