Les projets de fusion nuisent à la politique européenne de libéralisation du marché de l'énergie[en] 

The liberalisation of the EU electricity and gas sector formally started with the market for industrial consumers opening up to competition on 1 July 2004. Since then, the Commission has voiced disappointment with the direction the liberalisation process has taken.

The ongoing wave of mergers in the European energy sector will reinforce the dominant market positions of a few large utilities, eventually undermining efforts to create a competitive single energy market envisioned by the European Commission, critics warned.

In a recent draft sector enquiry, the Commission criticised former state monopolies for keeping a stronghold on energy markets and exerting excessive control over prices (EurActiv, 17 Feb. 2006). Competition Commissioner Neelie Kroes criticised excessive market concentration in both electricity and gas, saying they reflect the "old market structure of national or regional monopolies".

The GdF-Suez merger will create the second largest European energy utility after EDF. The top ten EU energy utilities in terms of market capitalisation before the deal is as follows (in billion euros):

1. EDF (FR): 75.5
2. E.ON (DE): 66.7
3. Enel (IT): 43.5
4. Suez (FR): 38.9
5. RWE (DE) : 38.14
6. Endesa (ES) : 29.41
7. Gaz de France (FR): 27.25
8. Iberdrola (ES): 24.46
9. Electrabel (Suez subsidiary, BE): 22.5
10. Centrica (UK): 10.86

"The EU electricity and gas sector is already concentrated in a way that makes it easy for the dominant market players to squeeze billions out of their customers. Allowing a further round of mergers will definitely kill all competition in the market, with the ultimate loser being EU consumers," said Claude Turmes MEP of the Greens/EFA group in the European Parliament.

His view is echoed by an adviser on electricity markets at the International Energy Agency, Ulrik Stridbaek. "This does not go well with the spirit that is intended to drive the internal market forward," he said according to Reuters. "When the market is functioning poorly, these companies have a lot to gain from merging into large conglomerates but this is not good for the European energy consumer," he added.

The Commission has so far hidden behind EU merger rules to decline making any comment. Under EU competition law, a merger needs to be notified if one of the companies has over two thirds of its turnover outside its member state of origin, Commission spokesman Johannes Laitenberger indicated. "If the operation is notified to the Commission, it will be examined in its competition and open market details," Laitenberger said on 27 February.

In an interview with Corriere Della Serra, the French Commissioner in charge of transport, Jacques Barrot, said it is unlikely the Suez-GdF merger will be blocked by Brussels. However, he admitted that the merger goes against EU efforts to open up energy markets. "In the energy sector, we all say that we need more European integration and then the French government puts the emphasis on the logic of national champions".

His Italian colleague in charge of Justice, Franco Frattini agreed that the merger will not be blocked: "on the shape of it, the operation is not illegal", he told French radio Europe 1. Frattini also warned against possible "national retaliation" from Italy, as suggested with rumours of a possible merger between Enel and Eni to form a new Italian energy champion. "We need to be a little bit more European, a little bit less protectionist", Frattini said adding he prefers "European patriotism" over national patriotism.

However, supporters of concentration in the energy sector point out that only large utilities are able to shoulder the huge investments in electricity interconnections and natural gas terminals that EU market integration entails.

"The energy sector is very capitalistic. Companies need to be sufficiently important in size to put together the necessary investment in electricity or gas [infrastructure]", said Jean Syrota, President of ERG, the French independent administrative body in charge of regulating the French electricity and gas markets.

The European electricity industry union, Eurelectric, also believes there can be benefits to companies growing in size. "One of the key factors for progress in developing a European electricity market is quantitative and qualitatative market expansion, with the presence of players of European dimension," says the head of Eurelectric's communications unit, Chris Boothby. "It is of course essential to maintain a sound balance between consolidation of market players to achieve synergies, and the necessary degree of competition," he told EurActiv.

But large industrial energy consumers (cement, glass, metal, paper, lime, chlor-alkali) say lack of cross-border competition means there is "no real alternative from the nationally-established suppliers". "The electricity markets in many Member States continue to be highly concentrated and new entrants are discouraged," says the Alliance of Power Intensive Industries.