U.K. energy market most competitive in Europe


John Hutton,
Secretary of State
for Business, Enterprise
& Regulatory Reform
London, U.K. — (METERING.COM) — January 31, 2008 – The U.K.’s energy market remains the most competitive in the European Union and G7, according to a new review of energy market competitiveness in these markets by Oxford Economic Research Associates (Oxera).
The assessment, which was for the year 2005, found that the U.K. topped the ranks in both the electricity and gas markets as well as overall – a position it has held since the research was started in 2001. In second place was Sweden, followed by Finland, Spain and Germany, while of the countries assessed Ireland and Portugal were ranked the lowest.

The assessment is based on a number of indicators in the upstream, wholesale and downstream markets, including network related activities.

In the electricity market the U.K. was found to rank highly in the upstream and wholesale segments. However, in the downstream supply area – in which the indicators are based on degree of vertical integration between generators and suppliers and switching rates – the Nordic countries Denmark, Finland and Sweden were found to be more competitive. In the gas market the U.K. ranked highest in all segments.

A preliminary analysis for 2006 suggests that the rankings remain unchanged for that year, and the report quotes the regulator Ofgem, as saying that competition in the U.K. is working well with gas and electricity customers switching more regularly now than in the last four years, with competition between the leading suppliers intensifying. While also price discrepancies between the six major suppliers have diminished, there are, however, concerns about the scale and speed of price reductions in light of lower wholesale costs.

Looking further ahead, however, the U.K.’s position appears to be under threat by Sweden by around 2011, particularly if there is an increase in market competition through mergers in the U.K.

Eleven countries are currently assessed in these analyses, having sufficiently deregulated their markets, but a further eight EU members are expected to qualify for the 2007 assessment.

Commenting on the research of the U.K. Department for Business Enterprise and Regulatory Reform (BERR) Business secretary John Hutton said: “Creating an open and competitive energy market has meant that U.K. consumers have consistently benefited from amongst the lowest energy prices in Europe.”

Adding that the U.K. market structure should be replicated throughout the rest of Europe, he said: “Liberalized energy markets – such as the one we have in the U.K. – could save EU consumers tens of billions of euros a year.”