By Virginia Ginnane
Privatisation, the drop in gas and oil prices and environmental accountability have been the drivers in what has amounted to a revolution in most of the energy sectors.
In gas, the industry has seen a shift over the past 20 years from the North Sea to a focus on regulatory compliance since privatisation. The trend now is to open up markets to further competition.
The Reform of Gas Trading Arrangements (Reta) has now established on-screen, on-day trading, which "allows all the participants to offer and bid, adding fluidity and liquidity to the market", explains Clare Hatcher, a consultant to Clyde & Co.
Dramatic falls in gas prices have destabilised an industry once accustomed to 10, 20 or 30-year contracts. Disputes arising from the losses have kept energy litigators busy but they have also led to one or two-year gas purchasing contracts, changing the work of lawyers. "More and more, we're moving towards commodity transactions," says Denton Hall energy expert Charles Wood.
Meanwhile, a year-long government moratorium on consents to build gas-fired power stations, seen as a political move to placate the coal industry, has kept several large projects on hold. And those companies that do own power stations will require authorisation from the Environment Agency to operate them after 31 Oct, under the new Integrated Pollution Prevention and Control Directive, adopted in the UK in July this year.
The continental European market is also heading for a shake-up, thanks to EU directives on the liberalisation of gas and electricity.
However, the flag for privatisation is currently flying in the Middle East, where the restructuring of utilities is taking up the caseload slack caused by the downturn in Asia.
Back home, electricity is going through its own metamorphosis. To boost competition in electricity trading, the Government proposes to replace the wholesale pool for the sale of electricity, in which many players contracted for one price, with a new arrangement in which players "will be able to contract bi-laterally with who they want at any price they choose", explains Wood, who is heading the team acting for the regulator Ofer.
Sweeping away the foundation of the electricity market, with a target of autumn 2000, is making people nervous. "Many people are concerned and sceptical about whether that's going to be achievable. It's a very hot topic," says Allen & Overy partner Ian Elder.
In oil "there is a great deal of competition, too little demand and too much supply within the retail sector", says Mike Renger of Nabarro Nathanson's northern energy group. The knock-on effect is the sale of retail service stations and industry consolidation.
The coal industry has been marked by closures over the past year. Owners intending to abandon mines must now notify the Environment Agency and disclose pumping records. And, from 31 Dec, any owners of abandoned mines who allow mine water to discharge into a water course with resulting pollution will no longer be able to plead the 150-year-old statutory defence of being an owner of an abandoned mine.
In the nuclear industry, international debate centres on how to deal with nuclear waste. A House of Lords select committee has recommended that the favoured option would be an underground repository.
However, the disposal of general waste is subject to, among other regulations, the Landfill Directive, adopted in the UK last April. The directive designates landfill to be the least-preferred waste disposal option, putting pressure on developing other forms of waste disposal, such as waste-to-energy plants.
Accordingly, environment minister Michael Meacher indicated in July that there may be a requirement for 220 of these plants (and their attendant planning challenges). Meacher also advised the British Wind Energy Association last month that the Government was committed to a target of providing 10% of electricity needs from renewable resources by the end of 2010.
The announcement should lead to greater certainty in the market. "Everyone has taken heart from Michael Meacher's speech and the Government's commitment to renewables," concludes Sarah Holmes of Bond Pearce in Plymouth.
Overall, the dynamism in energy demands growth. Domestic changes across the sectors mean more work for energy lawyers. Internationally, UK privatisation is the prototype and UK lawyers are the specialists. As the world restructures, the UK will be called on to assist.