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Competition: Commission energy sector inquiry confirms serious competition problems

European Commission - IP/07/26   10/01/2007

Other available languages: FR DE DA ES NL IT SV PT FI EL CS ET HU LT LV MT PL SK SL BG RO

IP/07/26

Brussels, 10th January 2007

Competition: Commission energy sector inquiry confirms serious competition problems

The European Commission has published its final report on the energy sector competition inquiry, concluding that consumers and businesses are losing out because of inefficient and expensive gas and electricity markets. Particular problems include high levels of market concentration; vertical integration of supply, generation and infrastructure leading to a lack of equal access to, and insufficient investment in infrastructure; and, possible collusion between incumbent operators to share markets. To tackle these problems, the Commission will pursue follow up action in individual cases under the competition rules (anti-trust, merger control and state aids) and act to improve the regulatory framework for energy liberalisation (see also IP/07/29). The Commission has already conducted a number of inspections in companies where these particular issues warrant investigation.

Competition Commissioner Neelie Kroes said: “This report will make uncomfortable reading for many energy companies. Underinvestment is rife, especially in networks, and customers are suffering as a result. On the basis of the solid facts contained in this report, the Commission will take further action under the competition rules and act to improve the regulatory framework with a view to ensuring that consumers benefit fully from liberalisation in terms of secure, competitively priced and sustainable energy.”

Competition enforcement

The Commission will make full use of its powers under antitrust rules (Articles 81, 82 and 86 of the EC Treaty), merger control rules (Regulation 139/2004) and state aid control (Articles 87 and 88 of the EC Treaty).

Market concentration is a major concern and careful scrutiny of future mergers is essential to ensure the situation does not get worse. As in previous cases (e.g. GdF/Suez - see IP/06/1558, E.ON/MOL - see IP/05/1658), the Commission will pay particular attention to:

  • divestitures, contract and/or gas release programmes
  • the impact of long-term upstream contracts on downstream concentration.

Articles 81 and 82 also permit the application of far-reaching structural measures as remedies to infringements.

Particularly when state subsidies contribute to maintaining concentrated markets and prevent market liberalisation from taking root, rigorous application of state aid control is called for.

The Commission will be vigilant concerning collusion between incumbents to share markets, which is one of the most serious threats to competition and therefore remains a priority for antitrust enforcement action. This reflects the overall priority of the Commission to fight attempts by undertakings to coordinate their behaviour in the marketplace rather than to compete.

Vertical integration between supply and generation and infrastructure businesses appears to worsen competition problems by creating unequal access to essential market information and by enabling incumbents to engage in strategic behaviour.

Lack of access to infrastructure such as transmission and distribution networks and/or storage facilities can lead to competition problems, particularly where cross-border access is concerned, thereby preventing market integration. Action in this field should include an analysis of long-term capacity reservations and their effects on downstream competition.

Lack of, or delayed, investment by transmission companies with vertically integrated supply companies, preventing market integration, is another serious source of concern. For example, Italy's national competition authority has found that a vertically integrated network operator deliberately stopped an investment project in order to benefit its supply branch by depriving competitors of access to more capacity.

Regulatory environment

Key issues relating to market structure and the regulatory environment will also have to be addressed in parallel to enforcement in individual cases. The sector inquiry has identified numerous general deficiencies in the regulatory framework for electricity and gas markets that have been taken into account by Commission's review of regulatory measures for the internal market in gas and electricity (see MEMO/07/9).

Background

The sector inquiry was launched in June 2005 (see IP/05/716 and MEMO/05/203). Initial results were presented in the form of an Issues Paper in November 2005 (see IP/05/1421 and MEMO/05/425). This was followed by a preliminary report in February 2006 which launched a public consultation (see IP/06/174 and MEMO/06/78).

In their submissions, stakeholders welcomed the report's objectivity and level of detail. Contributions came from energy companies, both incumbents and new entrants, from national regulators, competition authorities, consultancies, law firms, energy traders, grid operators, customers, industry associations and government agencies. Many called for reinforced regulatory measures. Only incumbent – vertically integrated - operators opposed further measures, notably ownership unbundling. Further information on the sector inquiry is available at:

http://ec.europa.eu/competition/antitrust/others/sector_inquiries/energy/

See also MEMO/07/15.


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