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Competition: Commission sector inquiry reveals serious problems in energy markets
Commission Européenne - MEMO/05/425 15/11/2005
Brussels, 15 November 2005
Responses from the energy industry and customers confirm that European energy markets are not yet functioning on a competitive basis, according to the preliminary results of the Commission’s sector inquiry into the European gas and electricity markets. Competition Commissioner Neelie Kroes has informed the Commission about these results (see IP/05/1421) and will present them to the EU’s Council of Energy Ministers on 1st December. The Commission will continue its inquiry and will also identify adequate remedies. Such remedies may include action against operators under the EC Treaty’s bans on restrictive business practices and abuse of dominant market positions, a revision of EU merger rules’ provision that large concentrations where all the parties have more than two thirds of their EU turnover within a single Member State are dealt with by that Member State’s authorities and not the Commission, and action under the EC Treaty’s state aid rules against subsidies that distort competition.
The preliminary findings of the sector inquiry confirm and complement the results of the Commission’s report on the implementation of the European energy market, which the Commission adopted today (see MEMO/05/427).
Five areas of market malfunctioning have been identified at this stage by the responses to the sector inquiry. First, gas and electricity markets in many Member States continue to be concentrated, creating scope for incumbent operators to influence prices. Second, many wholesale markets are not liquid either because of long term contracts (gas) or because companies are active both in production and in the retail market limiting the need to use wholesale markets (electricity). There is also an inadequate level of unbundling of network and supply activities. Third, barriers to the cross border supply of gas and electricity prevent the development of integrated EU energy markets. Fourth, a lack of transparency on the markets benefits incumbents and undermines the position of new entrants. Lack of transparency also aggravates the mistrust by industry and consumers in the specific price formation mechanisms on energy wholesale markets.
The key issues identified by responses to the sector inquiry are:
The sector inquiry
was launched on 13 June 2005 (see IP/05/716)
following a number of complaints by market participants about high prices and
market malfunctioning. The Commission sent 3000 questionnaires to market
participants concerned, making this one of the most thorough investigations the
Commission has undertaken under its competition powers. As a next step,
Commissioner Kroes will present the findings to the Energy Council on 1 December
2005. A public presentation of the preliminary report is planned for February
2006 followed by a 2 months consultation period. The inquiry will be completed
in the second half of 2006.