EU countries must do away with the distorting influence of state intervention and step up efforts to implement internal energy market rules, which could save consumers an estimated €13 billion a year, says a report by the European Commission released Thursday (15 November).
The EU executive wants member countries to phase out regulated electricity and gas prices, which it says discourage companies from exploring cheaper, more efficient options and other companies from entering the market.
The resulting lack of competition prevents the consumer from getting the best deal, said the report. Subsidies on gas and electricity prices also generate debts, which then fall back on taxpayers, it said. The report found that a total of 18 EU countries currently regulated retail energy prices.
The Commission says that EU consumers could save billions if they switch to the cheapest tariff available, but only one third of customers actually compare tariffs.
The report urged member states to uphold the right of consumers to switch suppliers in three weeks without incurring financial costs, and for member states to carry through the roll out of smart meters.
Households in Belgium and the Netherlands have been testing a bargaining plan in which they collectively switch to the supplier that offers the best rates, EurActiv reported earlier this year.
There is some evidence the plan is catching on in other EU countries, with the BBC reporting last week that the UK group Consumer Focus has begun advocating collective switching.
The communication urged EU member states to expedite their transposition and implementation of the existing energy market rules, since the deadline had passed 20 months ago, in March 2011.
The EU executive said it would pursue infringement procedures against countries which have not implemented the third energy package, calling on member states to “vigorously” enforce competition rules to ensure a level playing field across the EU market.
In September, the Commission said it had opened such proceedings against the 18 countries which had not adopted the regulation.
Nine countries currently do not regulate retail energy prices, in line with the third energy package – Austria, the Czech Republic, Germany, Finland, Luxembourg, the Netherlands, Slovenia, Sweden, and the United Kingdom.
Countries failing to comply would be referred to the European Court of Justice, an EU official told EurActiv.
In September the Commission also announced it had opened an investigation into suspected anti-competitive market practices by Russian energy giant Gazprom.
The Commission aims to complete the single energy market by 2014 but has expressed worries that EU countries are not on track to meet the target.
Energy Commissioner Günther Oettinger told businessmen and diplomats 29 September: "I have to be quite open with you. I have some doubts as to whether the goal is achievable by that deadline."
Energy Commissioner Günther Oettinger said: "When it comes to gas and electricity, citizens and businesses are interested in two things – security of supply at any time and affordable price. We will best achieve this with a functioning European energy market."
Energy spokesman for the Greens in the European Parliament, Claude Turmes, said:
“With this communication, Commissioner Oettinger is trying to give a leg-up to the flagging nuclear industry and coal power, whilst undermining renewable energy.
“The Commission is again taking aim at national support systems, which have proved successful in promoting the uptake of renewable energy, claiming they are a threat to the internal energy market. This is totally wrongheaded. On the contrary, renewable energy investments bring new competitors into the EU market, whilst causing no risks to society.
“The Commission is losing all credibility as an actor concerned with fighting for a true internal energy market.”
"Regulated prices, fossil fuel and nuclear subsidies, market concentration and lack of market transparency are the main problems that need to be tackled urgently. The communication focuses too much on renewable energy support mechanisms and not enough on the most critical distortions", commented Paul Wilczek, senior regulatory affairs advisor for EWEA?, the wind power industry association.
"It's very disappointing to see the EU making such slow progress towards an internal energy market 20 years after the European single market was set up" added Wilczek.
“A well-functioning single European energy market is one of the key prerequisites to accomplishing a cost-effective transition to a low-carbon economy by 2050. But to this end, member states must implement existing energy market legislation much more rapidly and remove market distortions like regulated prices and caps”, reads a statement by Eurelectric?, the European electricity industry association.
Philippe de Buck, Director General of BusinessEurope, commented: “Energy is of paramount importance for the economy. This report shows that there is a clear need for enforcement of the European energy liberalisation package. The Commission should put its weight behind it.”
A statement by the business conglomerate read: “the prospect of a fully integrated and interconnected market is still some way down the road. A clear push on implementation of the European energy liberalisation package is needed.”
The Energy Partnership, a European renewable energy company assocation, said: “The Communication recognises that in spite of the ambitious commitments of the EU, we do not yet have a fully functioning energy market. The Energy Partnership agrees with the Communication that current weaknesses in policy and market design are preventing the investment in generation, transmission and infrastructure which are needed.”
Greenpeace EU energy policy adviser Frederic Thoma said: “The Commission recognises some of the obstacles standing in the way of a modern, integrated energy market in Europe. But it is trying to back too many horses in a race that can only be won by green energy.”
The Greenpeace statement added that the Commission communication “missed another opportunity to give a clear direction to a modernisation of the energy system based on renewable energy and energy efficiency, in line with European commitments to cut carbon emissions.”
John Harris, vice president and head of governmental affairs for Landis+Gyr, the energy products company, said: “The communication emphasises that it’s imperative for consumers to play a more active role in the market. There is no doubt that a smart system is vital for empowering consumers with the information they need… investing in energy infrastructure will also help Europe’s economy well into the future.”
To complete the internal energy market, a third package of gas and electricity directives was adopted in 2009, including 'unbundling' guidelines requiring energy transmission networks to run independently from the production and supply side.
A compromise allowed former state monopolies such as EDF or GDF in France and E.ON or RWE in Germany to retain ownership of their gas and electricity grids.
However, their management had to be passed to an independent subsidiary, the transmission system operator (TSO), which had "the power to independently adopt its annual investment plan and to raise money on the capital market, in particular through borrowing and capital increase".
- 2014: Deadline for implementation of EU single energy market.