EC criticises energy market

18 January 2007
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18 January 2007 | Paul Snell

European energy markets "don't function properly" and businesses are "missing out on lower prices", according to a damning EC report.

But the findings published last week stop short of naming and shaming individual firms responsible for the problems, a move many had expected.

In a speech marking the report's launch, Neelie Kroes, European commissioner for competition policy, said: "Energy markets are not functioning properly. We are still far from having a single competitive and well functioning European energy market. As a result Europe's firms are still not benefiting in terms of lower prices and a better choice of services."

In the final report of the EC's energy sector competition inquiry, which began in 2005, Kroes outlines factors holding back competition in the sector. It says many energy companies still maintain monopolies of supply in their countries. This allows them to impose high prices and protect their own market position.

The report is also critical that new suppliers find it difficult to enter the market, because the same firms often control production and distribution. A solution would be for companies to provide more infrastructure to increase capacity. Kroes said, however, that less than 20 per cent of revenue was being reinvested in expansion.

The lack of transparency, regarding availability, storage and prices, is also criticised. The report says that improving the availability of information would reduce the risk for new suppliers entering the market.

The EC failed, however, to outline clear plans to address these problems. While it said it was "essential" to apply EC competition law, this was not the only solution. It also proposed greater regulatory measures to improve competition, but did not set out a timetable or detailed plans.

Energy consultant Chris Lewis told SM it was a shame that companies had not been named for their part in the problems. He added: "It will be even more disappointing if this does not happen in the next few months."

Other buyers were sceptical over how much the report would achieve. Martin Rawlings, managing director of Energytrak, said: "While the plans are laudable, I think they may have bitten off more than they can chew. There might be a lot of excuses from a lot of countries as to why they cannot do it."

The report was launched alongside the EC's publication of its energy policy for Europe. The policy also said that "urgent measures" were needed to achieve sustainability, competitiveness and security in energy supply.


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