Brussels, 16/02/2006 (Agence Europe) - The most recent results of the Commission's sectoral investigation launched last June to examine the effectiveness of competition on the gas and electricity market, published in a report adopted on Thursday, confirm serious problems previously revealed in an interim report made public last November. These include market concentration, vertical integration, lack of transparency and a crisis of consumer confidence over mechanisms for setting energy prices (EUROPE 9068). Presenting the results of the investigation, European Commissioner for Competition, Neelie Kroes, said that there was no doubt that progress had been made since the beginning of liberalisation of the energy sector but recognised that there were serious concerns about the development of the wholesale gas and electricity markets, high prices and the limited consumer choice. Kroes acknowledged that a year away from total opening up of the market for private customers, planned for 1 July 2007, for both industrial and domestic clients can choose their energy provider, the situation was “quite morose”.
The most recent results of the sector inquiry confirms 1) the existence of a high level of concentration of the pre-liberalisation period, creating scope for incumbent operators to raise prices, laying down the law on the national markets by controlling the networks; 2) Consumers are denied choice due to the difficulties for new suppliers to enter the markets. Insufficient separation of infrastructure and supply functions prevents new entrants from reaching the final consumer; 3) There is no significant cross-border competition. New entrants in gas are unable to secure transit capacity on key routes and integration in electricity is hampered by insufficient inter-connector capacity and long-term capacity reservations; 4) lack of transparency means new entrants cannot get the information they need to compete effectively which benefits incumbents and undermines new entrants; 5) lack of consumer confidence in specific price setting mechanisms on the wholesale energy markets is creating a crisis.
Ms Kroes has therefore promised to take action, “We will act decisively to remedy the serious malfunctions identified on the energy market in order to uphold the interests of European consumers and industry and to help Europe become more competitive.” The Commission will be launching inquiries in the weeks and months to come “against individual companies” over restrictive trade practices and abuse of dominant position in violation of Community competition rules. This will involve closing-off electricity and gas markets by long-term downstream contracts; restricted access to capacity on gas pipelines, gas storage and on gas and electricity interconnectors between Member States.
There are a number of other issues of concern where further analysis is necessary before any conclusions can be reached but where action under the anti-trust rules may be necessary, such as: the setting of prices on electricity wholesale markets, including power exchanges, various practices which inhibit customers from switching suppliers; the competitive assessment of the gas/oil price linkage in many contracts. The Commission also intends strengthening transparency obligations on incumbent operators, be it under competition law or by regulation and take action against the remaining “grandfathering rights” (capacity rights stemming from pre-liberalisation monopoly contracts). Whilst progress has been made in fixing common rules regarding the interconnectors between national grids, much more needs to be done. The Commission notes that “purely voluntary cooperation schemes of regulators are unlikely to provide the necessary investment certainty and regulatory protection that is needed to develop international pipelines and interconnectors and to keep them open”. The Commission also underlines that in a number of Member States, the powers of national regulators need to be increased, in areas such as the surveillance of the conditions concerning Third Party Access for competitors and of prices for such access. Finally, the Commission underlines the need for the provisions of the second electricity and gas Directives on unbundling to be fully implemented. The Commission warns that if real progress in this respect does not develop and a true level playing field result, “further measures such as full structural unbundling” could be envisaged