Commission cracks down at slow liberalisation of EU energy market

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The European Commission has taken legal action against 17 member states for dragging their feet in applying EU electricity and gas market liberalisation legislation into national law.

Most EU countries have not yet fully opened their electricity and gas markets to competition, effectively blocking new business from entering the market and bring prices down, the Commission warned on Tuesday (4 April).

Austria, Belgium, the Czech Republic, Germany, Estonia, Spain, Finland, France, Greece, Ireland, Italy, Lithuania, Latvia, Poland, Sweden, Slovakia and the United Kingdom were all sent so-called “letters of formal notice”, the first step in the legal procedure (link: detailed country overview). 

Governments have two months to respond after which the Commission may consider further steps that could eventually lead to fines being slapped. The Commission indicated that the main problems encountered are:

  • price discrimination to the benefit of historical customers;
  • lack of legal unbundling and insufficient managerial separation between electricity and gas transmission and distribution system operators to ensure that they are independent of each other;
  • preferential access to networks for historical customers and insufficiently transparent tariffs
  • lack of free choice of supplier
  • insufficient independence or competence granted to national regulators, in particular to set tariffs for accessing the networks

The Commission said it believed the creation of a truly liberalised energy market was "a key factor to reduce energy prices" and improve the EU's security of supply and competitiveness in world markets.

"In the Commission's view, the sustainable, competitive and secure supply of energy will not be possible without open, competitive energy markets that enable European companies to compete Europe-wide rather than just being national champions," it said.

The European Wind Energy Association (EWEA) said it strongly supports the actions taken by the European Commission today. "Effective competition in the conventional power market is a precondition for creating a level playing-field and, eventually, an undistorted and well-functioning market for renewable electricity", it said.

Environmental organisations including Greenpeace and the WWF have already signaled their support for energy market liberalisation, saying it could help reduce emissions of carbon dioxide held responsible for global warming.

"A real common EU energy policy driven by transparent harmonisation of the markets and effective liberalisation of the power and gas sectors can help to both combat climate change and ensure security of energy supply," the WWF commented after the EU summit of 24 March.

According to EURELECTRIC, it is vital that Member States implement swiftly and fully the provisions of the relevant Directives and Regulations - inter alia the unbundling provisions and those ensuring neutrality of networks being of key importance - in order to ensure a level playing field for competition in the European energy markets. 

EU directives to open up Europe's electricity and gas markets were adopted in 2003, and, at least in theory, industrial consumers have been able to freely choose their supplier since July 2004. 

However, the Commission has criticised governments for keeping their markets secluded, hitting out at recent moves to protect national energy "champions" from takeover bids by European rivals.

The preliminary findings of a competition enquiry into the energy sector, presented in February, uncovered some "serious malfunctions" in the liberalised market for gas and electricity (EURACTIV 16 Feb. 2006).

In March this year, EU heads of states agreed on a new "Energy Policy for Europe" which has market liberalisation among its chief objectives (EURACTIV 24 March 2006).

  • notified countries have two months to reply to the "letter of formal notice" (1st stage in the legal proceeding)
  • in the light of responses, the Commission may then chose to send them a "reasoned opinion" (2nd stage in the legal proceeding)
  • if countries still fail to comply, the Commission may decide to bring the matter before the European Court of Justice in Luxembourg and ask for penalties to be paid

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