Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/695139
12 | 17TH - 23RD JUNE 2016 | UTILITY WEEK Policy & Regulation Referendum special report "Leave or stay, the UK is connected to Europe when it comes to energy" T he UK leads EU energy liberalisation. While EU requirements have driven amendments to our domestic energy laws, the basic structure that is in place now is a home-grown affair that has provided the template for, rather than being led by, the process of EU liberalisation. As such, the effect of a Brexit on the regulatory regime governing the UK energy sector would likely be relatively minimal, at least in the short term. Of course, when our regulatory regime was first developed, Great Britain was much more of an energy island than it is now. Not only are we physically inter- connected to mainland Europe, there are also well-established trading operations across the continent involving physical and virtual products. As with any other commod- ity, the sale or trade of gas and electricity into Europe must be carried out under EU rules. If the energy industry wished to carry on as it is now aer a Brexit, it is difficult to see how EU rules could be avoided. We do not yet know what the UK's relationship with Europe would look like were the Leave vote to prevail. However, no matter how absolute the separation, the idea that we would be completely free to do as we please in areas such as state aid if this were to happen is at best an oversimplification. When it comes to exports and imports, and certainly for piped gas and power, there is no immediately obvi- ous alternative market to the EU that we could trade with. Even if we were to abandon all compliance with EU rules (and thereby any trade with the EU), the UK is a signatory to the World Trade Organisation (WTO) which has its own prohibitions on government subsidies that adversely affect the trading interests of the other 160- odd WTO members. Investors will still want to be sure that the WTO rules are not being breached, particularly because, at least according to some commentators, they are less lenient than those of the EU. Lis Blunsdon, of counsel in the energy and infrastructure practice at international law firm Orrick Opinion Lis Blunsdon, of counsel, Orrick "It's independence versus the economic gains of co-operation." Michael Grubb, professor of international energy and climate change policy, University College London W hen the UK joined the then EEC in 1973, it was dubbed the "dirty man of Europe" because of it was the only country in western Europe that failed to control pol- lution from cars, power stations and farming, tried to undermine European pesticide controls, and evaded nitrate regulations and bathing water directives. Fast forward 43 years and the UK is leading in areas of environmental protection, water quality and tackling climate change. The membership of the EEC and then the EU has been a major part of this, with legisla- tion, directives and fines from Brussels pushing the British government to tackle what was a perennial pollution problem. Green Party MP Caroline Lucas praises the efforts of the EU to help clean up Britain, and Europe, saying it "has a strong track record of tangible environ- mental improvement". This record includes the introduction of the Water Frame- work Directive (WFD), the Bath- ing Water Directive, Urban Waste Water Treatment Directive, and the Drinking Water Directive among others. The Bathing Water Directive, for example, has helped see Brit- ain improve its wastewater treat- ment processes. In 1990 before the directive was introduced, less than one-third of bathing waters met the standards. This now stands at over 95 per cent. Many within the sector view a exit from the EU as a threat to the good work that has been achieved in partnership with Europe. Friends of the Earth states that leaving the EU in favour of a position in the European Economic Area (EEA) means that key elements of the WFD and the Bathing Water Directive would no longer apply. Nexus Water chief executive goes further, saying that the government would be unlikely to give these issues the same focus with no "ongoing impetus from the EU" and that as a result the UK may see standards fall. Also defending the role the EU has had in improving UK water quality is Hugo Tagholm, chief executive of Surfers Against Sewage. He says: "In 2016, Euro- pean legislation continues to underpin the next phase of our water quality campaigns to stop marine sewage disposal What Brexit means for water European environmental and water directives have played a pivotal part in the development of today's water sector. "If the energy industry wished to carry on as it is now after a Brexit, it is difficult to see how EU rules could be avoided"