Competition Commissioner Neelie Kroes announced on Thursday (16 February) that she will launch a series of antitrust crackdowns on companies operating in the EU electricity and gas sectors.
"In the coming weeks and months the Commission will launch individual antitrust investigations," Kroes said at a public conference presenting the preliminary results of an enquiry in the liberalised energy sector.
Although she refused to name individual companies, she did point out that market liberalisation has so far been unsuccessful in tackling the "inefficient monopolised energy markets of the past".
All eyes are thus now turning to former state monopolies and incumbent groups which have succeeded in maintaining a stronghold on the market. France's EDF and Germany's E.on-Ruhrgas and RWE, are amongst the most widely cited likely targets.
Kroes further hinted at what the investigations might look in: "By way of example, these cases could cover vertical foreclosure caused by long-term downstream contracts, and the hoarding of capacity on pipelines, gas storage and interconnectors," Kroes said. "We will probably also take a closer look at the price-setting mechanisms on electricity wholesale markets, including power exchanges."
Mrs Kroes highlighted the following market flaws uncovered by the sector enquiry:
- Market concentration: reflecting the "old market structure of national or regional monopolies" giving for instance some electricity operators control over prices in the wholesale market. In the gas sector, "incumbents tend to control imports and/or domestic production," Kroes indicated.
- Vertical foreclosure: from integrated incumbents who operate simultaneously at network, wholesale, and distribution levels, thereby preventing new entrants from entering.
- Market integration: gas and electricity markets are still largely national.
- Transparency issues: characterised as "endemic" by Kroes, who considers access to information as "crucial for establishing a level playing field". She says market participants need "more information on technical availability of inter-connectors and transmission networks. They want to know more about generation, about balancing and reserve power, and about load."
- Price formation: Although Kroes recognises the many contributing causes for the "dramatic rise in prices for gas and electricity over recent months, she says "anti-competitive practice" may be one of them. "A well-functioning and transparent market mechanism for setting prices is essential," she said.
- "grandfathering rights": of incumbents, allowing them to reserve capacity on bottlenecks such as pipelines, are a further significant barrier to entry, Kroes said.
- Market bundling: of generation, supply, pipelines or grids, and distribution. "Owners and operators of critical networks often compete with companies that need to have access to these same networks. Can we expect such integrated companies to treat competitors in a fully fair manner? Their own self-interest would suggest not," said Kroes.
