Procurement procedures: exception for the energy sector - International Law Office

Public procurement concerning the production and sale of electricity is regulated by Directive 2004/17/EC. The directive coordinates procurement procedures for entities operating in the water, energy, transport and postal services sectors. Article 30 of the directive contains an exclusionary provision for sectors covered by the directive which are directly exposed to competition, on approval of the European Free Trade Association Surveillance Authority.

On January 24 2012 several Norwegian power producers submitted a request to the authority for the application of Article 30. The applicants had obtained a mandatory opinion from the Norwegian Competition Authority in March 2011, which concluded that their activities were directly exposed to competition in a market with no restrictions regarding access.

The authority analysed:

• the three main producers' market share;
• the degree of concentration in the market; and
• the degree of market liquidity.

The authority pointed out that the links between Norway and other price areas ensure that investment in the electricity sector inside the Norwegian territory cannot be made without taking into account other producers in the wider Nordic market where a market-based pricing system operates, and where there exists a low spread between the buying price from the transmission system operator and the selling price. According to the authority, this indicates direct exposure to competition. Therefore, the authority concluded that there is a constant competitive pressure from the common Nordic electricity market for the production and sale of electricity in Norway.

Consequently, on May 22 2012 the authority adopted a decision exempting the production and wholesale of electricity in Norway from the application of Directive 2004/17/EC.

The decision does not concern the transmission, distribution and retail supply of electricity in Norway. Even though these types of contract need not comply with the strict procedures laid out in the Norwegian Utilities Directive, procurement should still be based on the general principles of good business practice (eg, predictability, transparency, no discrimination and competitiveness).

For further information on this topic please contact Hege Smith Heiberg or Aksel S Tannum at Advokatfirmaet Haavind AS by telephone (+47 22 43 30 00), fax (+47 22 43 30 01) or email (h.smith.heiberg@haavind.no or a.tannum@haavind.no).