Lobbying delays new head of energy regulator

One can only hope that the ruling coalition won’t allow a puppet of powerful energy firms to head the energy regulator.

foto: © ČESKÁ POZICE, Richard Cortés, iPhone 4GČeská pozice

For a third week the government didn’t manage to decide who will head the Energy Regulatory Office (ERÚ). The government’s hesitation is sending very bad signals to the market because it is fueling speculation that the new chairman of the powerful energy watchdog will be chosen under pressure from lobbyists.

As we reported previously, the mandate of Josef Fiřt, who has headed the ERÚ since 2004, expired on July 4, and he cannot be reappointed to the influential post. Without a new chairman, the ERÚ cannot take key decisions such as setting of maximum power prices and granting excemptions.

According to Czech Position’s information, the issue of appointing a new ERÚ chairman has been severely complicated by attempts by the largest energy companies on the Czech market—namely ČEZ, RWE Transgas, PPF Group and J&T—to influence the appointment. If Fiřt’s successor is not named this week the government will be severely pressed for time because Prime Minister, Petr Nečas (Civic Democrats, ODS), is due to begin a two-week holiday this coming weekend. And following his return the PM will have to deal with President Václav Klaus on the issue.             

Weak excuses  

To begin with the government didn’t have time to introduce conceptual changes to the ERÚ in the new energy law because it was dealing with the coalition crisis. It was then expected that the cabinet would agree on a new ERÚ chairman at its last session in June. The official reason for its failure to do so has been that it does not know under which law the new chairman should be nominated.One can only hope that the governing coalition won’t allow a puppet of a powerful energy company to be nominated to the post.

“The new ERÚ chairman has not been nominated because in parallel the new energy law is coming into effect and therefore to avoid confusion the government wants to be sure under which valid new [legal] provisions the post will be occupied,” Minister of Industry and Trade, Martin Kocourek (ODS) told Czech Position.

Under the currently valid provisions, the government nominates the head of the ERÚ for five years. The new energy law, which will probably come into effect on August 8, stipulates that the President of the Republic nominates an ERÚ chairman recommended by the government for a period of six years.

But the excuse of conflicting legislation doesn’t stand up: the government was fully aware that Josef Fiřt’s mandate ended on July 4. More probably, the failure to name a replacement is due to the big players on the energy market moving to ensure that none of their rivals manage to install “their candidate.”

One can only hope that the governing coalition won’t allow a puppet of a powerful energy company to be nominated to the post. This would result in the ERÚ defending the commercial interests of a specific company which would be totally unacceptable given that the regulator is supposed to be an independent organ. The ODS is divided over the choice of nominee to head the ERÚ, Public Affairs (VV)—the smallest of the three ruling coalition parties—is reportedly attempting to enter the negotiations, and TOP 09—the second coalition party—is playing the role of passive observer.                   

The candidates

Given the importance of the ERÚ it is essential that it is headed by someone who has excellent knowledge of the energy sector and who also has the respect of the major players on the market. If the government nominates a “young, prospective” candidate to the post, it would be clear to all that someone or an entity with considerable economic and political power secured the appointment.

Additionally, as the out-going chairman Fiřt has pointed out, the issues that the ERÚ deals with are highly complex and it would takeKlaus is now approaching the end of his second presidential term and therefore, from now on, all his major decisions will be made on the basis of his political intentions. quite some time for a newcomer to the office to learn the ropes of the organ’s functioning. Fiřt has therefore recommended the government choose a candidate from the ERÚ’s current management team to replace him. “If it will be necessary and I’m asked, I’m prepared to serve for some time more,” Fiřt recently announced.

Nevertheless, it appears the government is not interested in Fiřt’s offer and is looking for a new face. According to Czech Position’s sources, Fiřt has received several interesting offers from the private sector and is likely to take up an important post in the state-controlled electricity major ČEZ.

According to Czech Position’s information, around two weeks ago Minister for Trade and Industry Kocourek proposed Fiřt’s nomination, but the idea was rejected. Fiřt himself has suggested ERÚ deputy chairman Blahoslav Němeček would be a suitable candidate. Though relatively young, Němeček has considerable experience and specialized knowledge but the prospect of his nomination is not to the liking of all political factions and he doesn’t have sufficient political support. Candidates are therefore being sought outside of the current ERÚmanagement.

According to Czech Position’s sources, the government has agreed to set up an informal commission in which people close to the prime minister, minister Kocourek and President Klaus should agree on a candidate. In addition to the two men from the ERÚ, Fiřt and Němeček, two candidates from outside the ERÚ are also in the running to be selected. Speculation has emerged that one of those candidates will be former Transgas CEO Alena Vitásková, who has worked in the energy sector throughout her career. Then again it’s uncertain whether or not Vitásková has sufficient political support.

The president’s strategy

What’s the position of the deft strategist President Václav Klaus, who is probably the only person who fully realizes that whoever nominates the new ERÚ boss will also bear a large political responsibility? According to Czech Position’s sources, so far the president doesn’t have any particular preference, and if he does he’s keeping it secret. Klaus is undoubtedly aware that until the new energy law takes effect in early August he won’t have any formal say in the nomination. Therefore, if he were to put forward a candidate now, government members opposed to his candidate could pressure the leadership to quickly name a successor to Fiřt before the new law comes into effect.

As soon as the new energy law which stipulates that the president formally names the government’s nominee is enacted, the issue of appointing a new head of the ERÚ would also involve the presidential office and it’s quite possible that Klaus would not automatically sign off on the government’s nominee. Let’s not forget that Klaus is now approaching the end of his second presidential term and therefore, from now on, all his major decisions will be made on the basis of his political intentions. The government will do all it can to nominate a new ERÚ chairman before Petr Nečas goes on holiday. But time is tight: the government session on Wednesday will be the last opportunity.