Brussels, 10.01.2005 (Agence Europe) - In its annual report on the functioning of the internal market in electricity and gas, the European Commission says that 'only greater integration of national markets can bring the required improvements to competition in the Energy internal market' and urges Member States' governments to step up efforts to implement the market opening measures in the gas and electricity directives. The Commission notes that one main obstacle to the successful implementation of a competitive market is insufficient integration between national markets. In a number of cases insufficient interconnection infrastructure exists between Member States and congestion is still not being handled satisfactorily.
Despite good performance in the EU, as noted in a 2003 report on increased productivity in the gas, electricity and water industries, the Commission comments in a press released published on 5 January 2005 that some Member States 'still have work to do before the new Directives are fully operational. 18 out of 25 Member States failed to respect the deadlines for implementation of the Directives (July 2004). As a consequence, a number of infringement procedures were launched in October 2004.' 'In most countries more than 25% of large customers have changed supplier since the process of market opening started but switching rates never reach 50%. Furthermore, switching is made often only to another domestic supplier. In fact, foreign suppliers' share in national markets is, in most cases, less than 20%,' comments the Commission, seeing this as reflecting failure to fully integrate national energy markets into the common market. The Commission argues that first and foremost, the rules governing cross-border electricity sales need to be updated to ensure maximum use of existing infrastructure. A similar system needs to be established for gas sales, but new investment in infrastructure will be required here. Secondly, the Commission notes that in too many Member States, the gas and electricity markets are dominated by one or two big businesses and despite perceptible improvements in separating off network managers and access by third parties, a number of areas of concern remain. The Commission argues that full separating off of distribution will be required in order to ensure prices represent industry costs and the scrapping of subsidies. The Commission also argues that the continuation of regulated prices for end users alongside a competitive market is a huge handicap to the internal market.
In its benchmarking report on implementing the common market in gas and electricity, the Commission notes:
1) Obstacles to competition remain in Member States' domestic electricity markets. Few obstacles remain in Sweden, Finland, Denmark and the UK, where over 50% of big clients have changed customer, there has not been a separation in law in Germany, Luxembourg and Austria, where the percentage of clients changing supplier ranges from 10% to 35%. The European Commission highlights bad market structure and lack of integration in France, Belgium, Greece, Italy, Spain, the Netherlands, Lithuania, Ireland, Slovenia, the Czech Republic, Slovakia and Latvia, where the percentage of clients changing supplier ranges from 0% to 25%. These are the countries with the greatest obstacles to competition, and regulated price systems for end users. The Commission notes that little market opening has been achieved for electricity in Malta or Cyprus.
Despite the implementation of basic rules for access to the market for regulated operators, the separation of networks and a level of integration of domestic markets into bigger market groups, the Commission says that concentration is still the biggest obstacles to more intense competition and fears that this situation may lead consumers to lose faith and call for stricter regulation. The Commission argues that independent network managers and an increase in interconnection capacity are vital components in the development of a competitive electricity market, and urges Member States to implement a more pro-active competition policy at national level and ensure greater transparency among stakeholders in the wholesale electricity markets. It also recommends greater co-operation between domestic electricity regulators, competition authorities and the Commission itself, to ensure improvements are made in the industry.
2) Serious levels of rigidity remain on the gas market, generally due to a persistent lack of integration between national gas markets. The Commission points out that in the absence of cross-border competition, operators can easily protect their market position and in many Member States it is difficult to change gas supplier because there are inadequate storage and balancing systems and high distribution costs.
3) Secure EU electricity supply is adequate overall. In Italy and Spain, the countries which experienced the greatest difficulties in 2003, the situation has greatly improved through the bringing on line of new generation capacity, while in Scandinavia, the situation remains delicate. The EU is still lagging behind its target of 10% generation capacity (set at the European Council in Barcelona) and the Commission urges Member States to step up their efforts to develop interconnection to allow efficient use of existing generation capacity and relieve bottle necks on the transmission grid. In terms of assuring adequate supply of gas, the Commission notes that the EU's import capacities are ample for meeting EU demand.
4) When it comes to consumer protection, it is important for the opening of the internal EU energy market, due to be fully implemented by July 2007, to give all clients the option of choosing between cheaper gas and electricity suppliers and ensure households and SMEs have the same level of service for gas and electricity. The Commission notes that it is also important for the same level of price and contract transparency to apply, irrespective of the supplier chosen. The Commission points out that its major concern in this area is that public service requirements may lead to an unfair playing field by providing suppliers with equal access to clients.
5) The Commission argues that it is vital to continue to provide incentives to promote the use of renewable energy sources, reduce greenhouse gas emissions and manage demand, while ensuring it is compatible with the European Union's sustainable development and environmental concerns for the common market in energy.