| Author (Person) | Taylor, Simon |
|---|---|
| Series Title | European Voice |
| Series Details | Vol.12, No.12, 30.3.06 |
| Publication Date | 30/03/2006 |
| Content Type | News |
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EU Competition Commissioner Neelie Kroes has both diagnosed the major problem in the Union's energy sector and offered a remedy. The inquiry into the energy sector completed by Kroes's staff in February showed clearly that, despite the raft of legislation adopted by EU member states in 2003-04 to liberalise the Union's gas and electricity markets, a host of obstacles holding back effective competition remain. These include high levels of concentration in wholesale markets, allowing incumbent operators to keep prices high, and a lack of choice for consumers because of the difficulties that new suppliers face in entering markets. Instead of market-opening leading to sufficient competition to keep prices down and end the stranglehold of major national utilities in their domestic markets, there are fears that the current ongoing wave of cross-border acquisition and consolidation, driven by the 2007 deadline for opening the household supply market, may simply cement the big players' dominance on a European scale. E.ON, Germany's biggest power firm, has accumulated a cash pile (net profits rose 71% to EUR 7.4 billion in 2005) to fund a EUR 29.1bn bid for Spanish electricity supplier Endesa. The takeover is being held up by the government in Madrid, ostensibly to keep the company Spanish. Gaz de France, France's gas supplier, currently involved in merger talks with French utility Suez, recently announced a 28% increase in revenue in 2005 and raised its dividend by nearly 50%. Luxembourg Green MEP Claude Turmes warned recently that the current wave of planned consolidation could lead to "national energy monoliths to the detriment of the EU economy and consumers across Europe". The EU electricity and gas sectors are already concentrated in a way that makes it easy for the dominant market players to squeeze billions out of their customers, he maintains. "Allowing a further round of mergers will definitely kill all competition in the market, with the ultimate losers being EU consumers," said Turmes. Kroes offered her solution at a conference in Brussels on 9 March. "Bundling of generation, supply, pipelines, grids and distribution seems to be at the heart of the current market failure," she said. "I find full structural unbundling quite tempting." But there is scepticism that Kroes will actually follow through with her rhetorical threats. "It's one thing to talk and another to act on unbundling," said Michael Tscherny, partner at the GPlus Europe public affairs consultancy. While the Commission could push for a new liberalisation directive, making unbundling compulsory, he believes that this is unlikely, not least because it would probably be opposed by some member states. In any case, it would take years to agree and implement by which time energy giants would have cemented their market positions. Tscherny argued that the most likely way of using unbundling as a means of securing greater competition would be in dealing with a specific merger case where Kroes could require unbundling or other structural measure (such as forcing a company to auction part of its generation capacity to another company) as a specific remedy. This happened when EdF took a stake in Germany's Energie Baden-W�rttemberg AG, Germany's third biggest energy producer, in 2002. This could be a possibility in the E.ON-Endesa merger, which is bound to be referred to the Commission for approval, he suggested. Claude Turmes's answer is for stronger energy sector regulation at European rather than national level to ensure that pan-European interests take precedence over narrowly national priorities. But at last week's summit meeting there was strong opposition to a single EU regulator although leaders agreed on the need for better co-ordination. Whichever option is pursued, it is clear that any course of action could face strong political opposition from a powerful member state such as France or Germany. The problems that Kroes's sectoral investigation revealed are there for a reason and there are no overwhelming grounds for optimism that the non-existent political will to remove obstacles to a competitive, integrated pan-European energy market will suddenly materialise in the coming years. Given the importance of the price of energy for all types of economic activity, one can only hope that Turmes's prediction of "national monoliths" fleecing consumers across the single market with impunity is an exaggeration. Major analysis feature looking at the outcome of the European Commission's inquiry into competition in the electricity and gas markets in the European Union. |
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| Source Link | http://www.european-voice.com/ |
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| Subject Categories | Energy, Internal Markets |
| Countries / Regions | Europe |
