Early results of a Commission probe into the liberalised European gas and electricity markets have uncovered restrictive business practices and abuse of dominant positions. Remedies could be adopted as of mid 2006.
“European energy markets are not yet functioning on a competitive basis” and there are still “a number of serious malfunctions” in how gas and electricity is being sold to industrial consumers, the Commission said on Tuesday (15 November).
The comments came with the publication of the preliminary findings of a sector enquiry launched by the Commission in June after large industrial consumers of energy complained about ever-increasing prices and lack of competition in gas and electricity markets.
“If we uncover evidence of competition law infringements we will take action to protect European consumers,” said Competition Commissioner Neelie Kroes in June. In a statement on Tuesday (15 November), she reiterated her determination to use EU competition law to address the issue.
Early findings of the probe highlight that “gas and electricity markets in many member states continue to be concentrated, creating scope for incumbent operators to influence prices” and set them at artificially high levels.
The probe also notes an “inadequate level of unbundling of network and supply activities” for both gas and electricity. Barriers to the cross-border supply of energy also prevent the development of a truly integrated EU market, the Commission notes. Finally, there is a lack of price transparency which “aggravates the mistrust by industry and consumers” over how these are determined.
Report on the internal market for gas and electricity
The 2005 Commission report on the functioning of the internal market for gas and electricity was published together with the preliminary results of the enquiry.
The report “confirms that cross-border competition is not yet sufficiently developed to provide customers with a real alternative from the nationally-established suppliers”. The low level of cross-border trade and lack of price convergence are evidence for this, says the Commission.
Member state failure to implement the electricity directives “on time or with sufficient determination” is the most important cause for these shortcomings, says the Commission. In the case of electricity, insufficient interconnection between countries still prevents competition from developing, it notes.
However, the report does not yet draw conclusions regarding the need for additional regulatory measures at EU level as many member states have only recently adopted their national legislations. The Commission indicated it will carry out country-by-country analyses and possibly “redress remaining requirements” at the end of 2006. There will not be a third liberalisation directive for the moment.