Market opening in Europe is not delivering for energy consumers


Lord Mogg,
Chair, ERGEG
Brussels, Belgium — (METERING.COM) — December 19, 2008 – Despite full market opening in Europe by July 1, 2007, competition in retail gas and electricity markets is almost non-existent, a new review by the European Regulators Group for Electricity and Gas (ERGEG) has found.

The review, giving a status review on progress towards a well functioning European Union energy market, finds that a number of factors are responsible. Among these are narrow geographical markets with highly concentrated retail and wholesale markets, a failure by member states to properly implement the unbundling requirements, the persistence of artificially low regulated prices, and some member states’ apparent lack of political commitment to regulatory independence or to European energy market integration.

All this leads to an unacceptable lack of choice for households and commercial customers in the EU 27 countries, says the review, adding that the first priority of EU energy regulators is to ensure that energy consumers get the best possible deal in terms of price, choice and quality.

The review says the reports of the national regulatory authorities show a very heterogeneous picture of the different retail markets for gas and electricity across the EU, indicating lack of market integration but also supporting the conclusion that liberalization has not fully delivered to date. National implementation of the existing Directives is so diverse that markets are covering a broad range of market structures, from competitive to monopolistic.

Insufficient unbundling is viewed as a big obstacle for competition and security of supply. There have been no major changes with regard to the unbundling of electricity transmission system operators, and few reported improvements in the unbundling of integrated gas companies. At the distribution level, despite some progress, “functional” unbundling remains an issue as some integrated companies have not established fully functioning distribution system operators capable of carrying out their business autonomously (e.g. lack of internal staff, own dedicated assets, etc.). Distributor system operator unbundling is key for retail market competition as the operator must be a “market facilitator” providing non-discriminatory services to all energy suppliers.

Political interference in energy regulator’s work was reported by some regulators as a significant concern. Rising energy prices have tempted some countries to use political control over prices as a remedy for presumed insufficient competition. However, such political interference impacts not just on the independence of regulators, but is harmful to the development of a competitive energy market.

In 2009 ERGEG has decided to make the consumer the energy regulators’ top priority during the year.

“The EU energy consumer is best served through a competitive, single EU energy market,” said ERGEG Chair, Lord Mogg. “This is why, in 2009, the EU energy regulators continue to drive regional market integration, and pave the way for a speedy implementation of the 3rd energy package proposals.”

Other activities to be initiated during 2009, according to ERGEG’s 2009 work program, are the preparation of a status review and recommendations on the regulatory aspects of smart metering and a position paper on smart grids.