New EU energy chief shifts focus to building common power market Miguel Arias Cañete, the EU energy commissioner Brussels will press European countries to harmonise their widely divergent tax rates on electricity as a step towards building a single energy market. In his first interview since taking over as the EU's energy commissioner, Miguel Arias Cañete argued that smoothing regulatory disparities across the 28-member bloc - and not just laying billions of euros of pipes and pylons - was essential to make progress on a long-sought policy goal. Completing the internal energy market is not just a matter of building interconnections and infrastructure, it also needs new rules. When I say rules - very specifically - we are having problems with network tariffs," Mr Arias Cañete told the Financial Times. The composition of tariffs should be transparent and based on common rules. We have a very complex system of tariffs at the moment. The construction of an "energy union" is one of the EU's top priorities for the next five years. In theory, a common internal energy market would unite Europe's inefficient patchwork of competing national energy grids and make prices converge. The hope is that this would address two of the EU's biggest strategic weaknesses: dependence on imports from Russia and uncompetitive power prices in relation to the US. The consultancy Strategy& estimates Europe could save €40bn a year by 2030 if it integrates its energy networks. After years of frustration and false starts, one of the new commission's vice-presidents, Maros Sefcovic, has been tapped to accelerate the project, and is expected to launch a detailed investment plan early next year. Mr Arias Cañete, who will be charged with implementing the plan, admitted that an energy union would not be "a fast-track kind of thing." One of the biggest - and frequently overlooked - obstacles to sharing power across borders is the sharp disparity in prices and market rules across the EU. While electricity costs about €30 per 100 kilowatt hour in Denmark and Germany, for example, it costs about €9 in Bulgaria. This stems, in part, from differing national tax laws. In Denmark, 57 per cent of the final price of power is made up of taxes; in Germany, 49 per cent is based on levies. In Malta and Britain, the proportion is only 5 per cent. The discrepancies are similar in the gas market. Asked why EU countries would agree to harmonise their energy tax regimes - something many may view as an encroachment on their sovereignty - Mr Arias Cañete cited the urgency to respond to Europe's flagging competitiveness. We have to make the economic case as we are fighting in a global market with more expensive energy prices than our competitors . . . We have gas prices for industry three or four times those of the United States; we have retail electricity prices double the United States," he said. In spite of Mr Arias Cañete's emphasis on taxes and regulations, heavy investment in infrastructure remains a challenge. One of the EU's most glaring inefficiencies is that it cannot harness surplus electricity - particularly from renewables - and export it from Spain, Italy, Scandinavia and the Balkans to parts of the continent where it is needed. Surplus power from Spanish wind turbines or Nordic hydropower, for example, is often wasted or unused because it cannot be transmitted to areas of high demand. The commission admits the €5.8bn in EU funds dedicated to connecting power networks represents barely 3 per cent of what is needed. Mr Arias Cañete said the success of the energy union would therefore require private investment. To whet investors" appetite, Brussels would have to help develop a new form of financing package in its energy union plan. Huge amounts of money are needed. I think the traditional system of lending will not work," he said. We need something new. The most controversial aspect of the EU's energy union may be a plan for eastern European companies to band together to negotiate gas prices jointly when buying from Russia. Mr Arias Cañete's predecessor, Günther Oettinger, was sceptical about "common gas purchasing" and worried that it could contravene the bloc's competition law. However, Mr Arias Cañete said Brussels would not drop the gas purchasing plan as companies needed "leverage" in negotiations with Russia. Moscow currently charges far higher prices to Baltic states with no energy sources other than Russia than to the Czech Republic, which buys a third of its gas from Norway. Mr Arias Cañete said that he would work with Margrethe Vestager, the competition commissioner, to draw up a system for companies to co-operate in ensuring a level playing field in talks with Russia. We are not discussing the idea of the commission buying on behalf of nation states. Not at all," he said. The question is whether we could generate interest among private companies to consider the possibility of working together.