STROOM facilitates (partial) privatisation of Dutch TSO's

This is the second part in a series of six on the Dutch STROOM Bill (see for part one). STROOM enacts new provisions for the production, transportation, trade and supply of electricity and gas and was submitted to the Dutch House of Representatives on 4 May 2015. STROOM aims to create a new, clear and simple regulatory framework for the Dutch electricity and gas market, based on European law.

One of the aims of STROOM is to facilitate strategic cooperation between European Transmission System Operators (TSO's). International cooperation promotes security of supply and better synchronization of investments for gas and electricity infrastructure. The strengthening of international cooperation should also promote the transition to a more sustainable energy market in Europe.

To date the government has upheld the principle that the infrastructure of TenneT and Gasunie is a natural monopoly and is of crucial importance for the Dutch economy. TenneT and Gasunie are therefore both 100% state-owned. The State is not looking for pension funds or other private investors to invest.

In line with the current privatisation ban for network managers, the STROOM Bill requires that shares in Dutch TSO's (TenneT for electricity and Gas Transport Service or "GTS" for gas) should be held by public bodies; either the Dutch State, Provinces or Municipalities. The ownership of TSO's can also be held indirectly by public bodies. This is the case for GTS, which is owned by gas infrastructure company Gasunie N.V., which is a 100% state-owned company.

The STROOM Bill however introduces an exception to this rule and a strategic change. It allows the Dutch TSO's the possibility of a share swap with another foreign TSO under certain conditions. Firstly, the majority of the shares and the ultimate control should at all times remain with the Dutch State (directly or indirectly). Secondly, the cooperation should lead to cooperation of a Dutch TSO with a foreign independent and certified TSO, and last but not least, the share swap should promote the security of supply, affordability and sustainability of the transmission system.

These conditions are explained in more detail in the Memorandum on State Participations Policy (Nota Staatsdeelnemingenbeleid rijksoverheid 2013) and a letter of the Minister of Finance of 21 February 2014. A proposed cross participation will be reviewed for its strategic advantages. The contribution to the public interest will be verified and the business case should be good. The Dutch State has in the not too distant past invested EUR 8 billion in its gas infrastructure to create the so called Dutch Gas Roundabout. Now that gas production in the Groningen field is dwindling and Dutch gas reserves are getting depleted, asset utilisation of the Dutch Gas Roundabout is of increasing importance. The possibility created by STROOM to enter into closer cooperation with other TSO's also aims to get more gas flowing through Dutch infrastructure in an increasingly competitive market.