While the first meeting did not produce any official conclusions, it did highlight a number of important issues that will be developed further in the follow-up meetings. The agenda was organised around five main issues covering key aspects of the regulation of the internal gas market: organisation of access; access to the system, including conditions and pricing principles, the relationship between Member States and EU regulation and competition policy; storage (under which conditions may access to storage be considered necessary for an efficient access to the network?) and harmonisation and security of supply. A major concern is how to avoid the development of 15 separate liberalised markets rather than a single market in gas. The dangers of the Directive's emphasis upon subsidiarity were emphasised by the consumer groups as was the need for harmonisation. What does `cross-border' mean in a single market? Inevitably, the high degree of cross-border trade in the EU gas business was mentioned - more than 50% of all gas trade is cross-border - but this is in practice the result of commercial co-operation between the incumbent gas players. Such transactions can be seen as instances of companies helping each other to protect their domestic monopolies rather than real trade.

The session on organisation of access raised a number of complex issues such as whether the Directive gave incumbents any incentive to promote competition, whether regulation of conduct was likely to be effective instead of structural regulation, whether negotiated or regulated TPA was likely to be more effective and how changes in the structure of the energy market might affect the operation of the Directive (mergers in the electricity sector leading to five dominant players and a convergence between gas and electricity making the aim of a competitive market hard to realise). Some saw the outcome of all this as a growth in regulation by detail and a need for co-ordination with the competition authorities at national and EC level. The very limited attempt by the Directive to tackle structural issues, restricted to its modest provisions on unbundling, was likely to lead regulators to become ever more active and find themselves "pushing water uphill". However, the point was also made that too much weight should not be given to the differences in applying the gas and electricity directives with respect to access and unbundling: nTPA being favoured in gas and rTPA in electricity, and a more limited form of unbundling in gas. The convergence factor and the need for transfer pricing were likely to limit the significance of these differences.

On the subject of access conditions and pipelines, there were several national presentations given, setting out experiences in the Netherlands, the UK and Spain. However interesting the papers were, they conveyed a national orientation to the Directive's implementation and underscored a concern of some parties that there would be a compartmentalisation of experiences. The problem is that at this stage there is little available by way of models to guide countries that seek to define key terms in the Directive such as the `main commercial conditions'.

Probably the most interesting issues were raised in the session on regulation at the Member State and EU levels, and especially the role of Articles 81 and 82 of the competition law. The speaker from the Competition Directorate (formerly DG IV) produced a sharp analysis of the gas market in the context of the Directive and of its co-ordination with the Energy Directorate. The Competition Directorate has been paying close attention to developments in the energy markets, scrutinising the gas markets as a result of its enquiries into the proposed mergers between Exxon and Mobil, and BP-Amoco and ARCO.

He noted first of all that in the gas market there were factors which were not favourable to the creation of a competitive market. The number of suppliers is limited and there are hardly any new market entrants. Moreover, the incumbent companies are reluctant to start selling outside their own traditional sales areas. However, these special characteristics of the sector should not be allowed to act as obstacles to competition and this meant support for new market entrants through third party access.

The Competition Directorate will, he continued, focus its efforts upon cases leading to foreclosure of national markets and on monitoring access to cross-border pipelines: that is, cases dealing with either interconnectors or access requests of customers qualified as eligible under the Directive. A related issue is how much should access cost and here the guiding rule is that a transmission company should not charge higher transmission prices to third parties than to related companies or business units. Finally, he identified access to scarce capacity as an important issue. In the event of congestion, such capacity had to be allocated in an objective and transparent manner.

In dealing with any of the above issues, the Commission will focus upon cases that have a particular Community interest and raise a new legal problem or prevent market access to operators located in other Member States but will leave to the national authorities those issues where sector-specific regulation provides much more detailed rules or goes beyond the requirements of competition law. A close co-operation between national authorities and the Commission was expected, with national authorities invited to consult with the Commission on cases where EC Competition rules may apply. He concluded that "in order to avoid contradicting decisions and to ensure consistent application of the legislation, a close co-operation between Commission and national authorities is indispensable".

The session on storage emphasised the changing role of its utilisation in liberalised markets. Experience shows that the use of storage increases with liberalisation, as in the UK. Currently, the way that storage in the EU is designed is not suitable to a single market. Many differences exist between the Member States but flexibility in access to storage facilities is crucial for TPA to be successful. If an eligible customer as a new player has no access to storage facilities, should it be made available to it? The example of the UK's auctioning of capacity was mentioned and so was the idea that the storage facility operator "use it or lose it". A presentation by BG Storage raised the issue that optimal use of storage facilities may be limited because of technical configurations if the demand placed upon them is to differ significantly from that which they were designed for. In the UK adaptations seem to have been made to deal with this technical consideration. As yet it is unclear whether this will be an issue that creates problems elsewhere. A separate issue concerned the purpose of the storage facility in relation to possible access. In some countries this seems likely to become a sensitive policy issue. In the view of some Forum participants, purpose has to be considered alongside a possible request for access, with the French government delegate noting the importance of strategic storage.

On the final subject of harmonisation and security of supply, the Commission noted that the latter is to be addressed in a Commission Communication in the very near future. The draft report on harmonisation requirements is also scheduled for later this year. In this context, the results of a study by PLE on inter-operability of gas networks in EU countries were summarised and circulated for further discussion. With third party access, international gas trade is expected to increase in the future and new structures for gas trade can be expected to evolve. However, different network specifications may restrict this and so the question arises of what harmonisation requirements there are for gas networks, gas composition. Among the study's conclusions is a statement that even when the technical basis for harmonisation (ongoing in the CEN) is provided, a further harmonisation is required for the legal framework of metering and accounting in individual countries. It also identifies additional requirements for regulation, and proposes an authority to take over the function of co-ordinator of pipeline investments of different companies to avoid over-capacities, and to define and supervise binding security requirements.

So, what conclusions can be drawn from the first meeting of gas regulators and interested parties? Firstly, that there is an appreciation that efforts  must be made to avoid any clashes between the rules in the Gas Directive and the primary legislation based upon Treaty provisions, especially the competition provisions in Articles 81 and 82. From at least as early as 1991, the Commission's strategy has been to strive for a consensus, albeit because of the reluctance of many Member States to countenance a bolder approach. The fact of the matter is, that the primary legislation will override contradictory provisions in the Directive in the event of a dispute and that national courts are able to apply such law which has direct effect. While the Gas Directive is being transposed and implemented in the Member States, there is a risk of conflict between the provisions in the Directive and the provisions in the Treaty, should a frustrated company decide to take action against an incumbent gas company. Such conflict is more likely to arise at the national level in the first instance.

Secondly, the Gas Directive even when fully transposed into Member State law is only a starting point. It gives a signal to industry and to customers that change is taking place in the established structure. It contains loopholes in the sense that horizontal integration between energy utilities is not addressed and above all, cross-border trade in gas is scarcely mentioned in the text.

Thirdly, the extensive participation showed a real willingness on all sides to engage in debate on the issues. It was for example, very notable that France actively participated in the debates. Perhaps this also reflects the much faster progress on a gas law draft in contrast to the slow approach that has characterised the draft electricity law. With an eye to the French Presidency in the second half of 2000, the intention is to have the Gas Directive implemented by or before the August 2000 deadline.

An proper assessment of the value of the Forum to the Commission will only be possible after three or four meetings. The first meeting took place against a background of legislative activity among the Member States to transpose the Gas Directive into national law, a fact which probably contributed to the slow progress in completing the draft of the first harmonisation report. However, the idea driving it is basically a sound one, to establish a forum for debate on neutral ground meeting at regular intervals and contributing to a process that is still largely consensus driven. Important influences upon subsequent meetings will be the progress (or otherwise) of the sister Forum for Electricity Regulators, which started its meetings in spring 1998, and the results of the gas tarification study that the Commission has recently initiated, which will focus on the issue of cross-border trade.