Full competition in Europe’s energy market


Neelie Kroes,
European Commissioner
for Competition
Brussels, Belgium — (METERING.COM) — June 29, 2007 – On 1 July Europe’s energy market will be fully liberalized, and everyone in the region will be able to choose his energy supplier – but according to Competition Commissioner Neelie Kroes there are still some barriers to circumvent.

In a recent speech to the General Assembly of the International Federation of Industrial Energy Consumers, Commissioner Kroes said the European Commission’s assessment is that competition is not functioning properly in electricity and gas markets. She listed the three main structural reasons for this:

  1. National energy markets are too concentrated and lack liquidity.
  2. There is an absence of cross-border competition.
  3. There is insufficient unbundling of network and supply activities.

“All this means that European consumers – businesses and households – are not getting the secure, affordable and sustainable energy supplies they rightly expect.

“So why is there little meaningful competition in many Member States? In recently-liberalised energy markets, new players need access to energy supplies, to networks and to customers. By and large this isn’t happening – at least not to the extent it should be. This is largely explained by the absence of cross-border competition and insufficient unbundling of network and supply companies.”

“These are issues we need to resolve. Like you, I have a strong preference for ownership unbundling as the most effective solution. The Commission has called for separating once and for all the electricity and gas networks from commercial activities elsewhere in the energy value chain, and you have supported that call.

“But more still needs to be done to explain to others just why we reach this conclusion. This includes communicating to the public of course, but also to those in the European Parliament and the Council who will co-decide on the next liberalisation package.

“You understand the constant conflict of interest that the current system of ‘legal unbundling’ creates. The vertically integrated company knows that it should develop the networks and facilitate third party access, but it also knows that this would be bad for its supply business.

“This conflict of interest has suppressed investment in interconnection capacity and in network capacity, threatening both competition and security of supply.

“All advocates of ownership unbundling need to keep making the case for it. The European Council – which brings together the 27 Heads of State and Government – has already been convinced of the need for structural change. It has called for

  • further steps to ensure the effective separation of supply and production activities from the network,
  • guaranteed equal and open access to encourage new market entrants, and
  • independence of decisions on infrastructure investments.

“The European Council also rightly identified a need for further harmonisation of the powers and the strengthening of the independence of national energy regulators, as well as the introduction of new co-operation mechanisms for regulators and TSOs.

“Let me be clear: we need structural solutions to ensure that our energy markets deliver competitive prices. It is crucial that the third energy package creates all the right conditions for fully competitive energy markets.”

Commissioner Kroes noted that the need to protect consumers from abuses of market power was extremely important. “As you may know, DG Competition is working on several cases covering such potential abuse in the energy sector. I am determined that companies who abuse their market power must not get away with it, and putting this into practice in the energy sector is a key enforcement priority. And I am always grateful to receive information when such behaviour is suspected.”

She ended her speech by saying: “I am convinced that the combined efforts being pursued by many market actors, such as new entrants on energy markets, effectively unbundled TSOs, national regulators, traders, power exchanges, energy buyers like yourselves, and the European Union will improve the functioning of the energy markets, and thus lead us in the direction of competitive prices. Many positive signs are already emerging, leading to more liquid and interconnected markets.

“But more needs to be done. I would like to urge you to participate in the debate on the third energy package in the coming months, by pressing the case for rules that lead to better competition. You all have an interest in a positive outcome of the new legislation!”