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Brussels, 13th June 2005

Competition: Commission opens sector inquiry into gas and electricity

The European Commission has launched an inquiry into competition in gas and electricity markets. Well-functioning energy markets are crucial for the competitiveness of European industry and for delivering the consumer benefits expected from liberalisation in terms for example of choice of supplier and lower prices. The inquiry responds to concerns voiced by consumers and new market entrants about the development of wholesale markets and limited consumer choice. The inquiry will examine inter alia reasons for recent energy price rises. The inquiry complements on-going Commission monitoring of the implementation of EU energy legislation and a detailed report being undertaken on the energy market due at the end of 2005.

Competition Commissioner Neelie Kroes said “Energy is crucial to the EU’s competitiveness, sustainable jobs and the prosperity of all European citizens. Given recent price rises, we must be sure that gas and electricity markets are functioning properly. If we uncover evidence of competition law infringements we will take action to protect European consumers.”

Energy Commissioner Andris Piebalgs said “The Commission is determined to see that Member States follow through on their commitment to create competitive energy markets. That means not only full implementation of liberalisation Directives and construction of new interconnectors, but also pro-active application of competition law. This competition inquiry, which will complement the Commission’s parallel reporting on the development of the internal energy market, forms an important part of the Commission’s strategy to ensure that consumers and industry benefit from a really competitive European energy market.”

The inquiry will seek to identify possible distortions of competition that can be addressed by competition law. Enforcement action could follow, either by the Commission or by national competition authorities. The inquiry will also cast light on other market conditions that permit anti-competitive behaviour.

Both gas and electricity prices have risen during 2005 and forward prices indicate further price rises in the future, especially for gas. This threatens all customers, but in particular Europe’s energy-intensive industries. Cross-border flows seem insufficient to constrain price differences between most Member States, and integration between national markets has been slow in many regions. In addition, new market entry has been limited, and market concentration remains very high.

The inquiry will focus on the functioning of wholesale markets and how prices are formed. This also requires analysis of how national markets are integrating, and the functioning of cross-border interconnectors.

The inquiry will further examine barriers to entry: e.g. long-term agreements and access to gas customer markets. In both gas and electricity, the inquiry will look at relations between network operators and their affiliates.

To carry out the inquiry, the Commission can require companies and trade associations to supply information, documents or statements. During the inquiry, the Commission intends to maintain an open dialogue with all stake-holders, and will keep the sector informed about progress. An interim report on aspects linked to the internal market inquiry will be ready by end 2005 and the main results published in 2006.

More information on Commission’s sector inquiries are available at:

See also MEMO/05/203.

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