Commission ‘powerless’ in bid to spark energy market competition

By Anna McLauchlin

Date: 24/02/05

The European Commission is struggling to increase competition in Europe's energy markets, despite new threats issued this week.

One energy analyst from a European bank said that he expected little impact on energy markets from the Commission's announcement that it would begin a competition inquiry in May.

"We've been talking about liberalisation for five years now and it has still not happened," the analyst said. "We have seen very little impact since the announcement was made and I don't expect that to change," he added.

According to another analyst, the fragmented infrastructure is to blame for the lack of liberalisation rather than protectionist governments.

"As long as the network and transmission capacity makes it difficult to trade electricity across borders there won't be any impact," he said.

Energy prices, he added, had gone up in the last few years despite the beginning of liberalisation.

"The consumer has not paid the full price for the cost of maintaining the infrastructure that is needed, which was previously subsidised by governments," he said.

Eurelectric, the association of European electricity industry companies, said that high prices were also the result of high fuel prices and complying with the EU's emissions trading scheme.

"We hope any enquiry will look at the overall picture and take into account the need for enormous investment, security of supply and the contribution to major environmental policies," a spokesman said.

The electricity sector also claims that the natural gas industry, arguably even less open to competition than theirs, is putting pressure on prices.

"As big consumers of gas we are keen to see parallel competition in both sectors," the spokesman added.

Eurogas, the association representing the European natural gas industry, said that the industry supported competition and welcomed the chance to prove itself.

"There could be room for improvement and we hope the investigation will help give clear answers," said a spokeswoman.

Competition Commissioner Neelie Kroes announced at the beginning of February that she would launch a competition investigation into the energy sector as part of the revived Lisbon competitiveness strategy proposed by her predecessor Mario Monti.

Her director-general, Philip Lowe, said on 22 February that the inquiry would begin in May. He said that the Commission would propose solutions in conjunction with national administrations and competition authorities wherever it finds markets that are not sufficiently liberalised.

Eleven member states have still not transposed the directive on energy liberalisation into national law. The Commission will send a formal warning letter to those countries later in March, giving them two months to implement the rules or face the European Court of Justice.

Kroes and Energy Commissioner Andris Piebalgs will issue a report on how much gas and electricity markets have been opened up by the end of 2005.

Article suggests that recent efforts by the EU have not brought the desired progress in liberalisation of Europe's energy markets.