Ladies and gentlemen,
I am honoured to be here today with you, the key actors on energy issues, at this important and timely event.
Energy issues are high on the European Commission’s agenda. Under the guidance of Vice-President Šefčovic, myself and the colleagues in the project team on the Energy Union are working hard to turn the New Deal for Energy Consumers into reality.
We have now a unique opportunity to set in place an Energy Union that works in the interests consumers.
The next two days are dedicated to your expert discussions on fine-tuning our vision for the Energy Union. I will look with interest to your conclusions this week and your engagement throughout the year.
But now allow me to share with you my views on the key parameters for placing energy consumers at the centre of the Energy Union.
Before identifying the measures for making the Energy Union a reality for consumers, let’s just remind ourselves what is the current reality.
State of play on energy consumers
We live in the 21st century and socio-economic, environmental and geo-political factors have significantly transformed the energy sector in Europe, in particular over the past decade. However, retail energy markets have not kept up to this transformation. Obstacles prevent consumers –whether it's households, businesses or industry –from benefitting from the ongoing energy transition.
Individual consumers are in a particularly challenging situation. Let me give you a few facts and figures:
- consumers spend on average 6.4% of their total consumption on electricity, gas, heating and cooling – up by 15% compared to five years ago.
- 10% of consumers cannot afford to pay their bills;
- more than half of EU consumers do not compare energy offers;
- only 40% of consumers strongly agree that their energy bills are easy to understand; however, when their understanding is tested, they fail to find the key elements on the bill.
- and when consumers wish to switch provider, the cost is unclear and sometimes includes unexpected fees.
In a nutshell, some of the biggest obstacles to energy consumers are:
- lack of appropriate information on costs and consumption, limited transparency in offers and reduced uptake of smart technologies;
- the increasing proportion of network charges in the final household electricity bill;
- insufficient competition in many retail markets and narrow consumer choices;
- lack of reward for active participation and limited possibilities for energy self-generation and consumption.
These obstacles do not only prevent energy consumers from being active market players; they also prevent the energy market overall from adjusting to more sustainable consumption trends, diversity of energy sources and scaling up more economically efficient solutions.
Four key parameters for empowering consumers
Against this state of play, I am convinced that we share a common goal: energy services that are not only simple, affordable and fair for all consumers, but also driven by active consumer empowerment.
I believe there are four key parameters that need to be addressed if we are to achieve this goal.
1. Energy poverty and vulnerability
The first parameter is the need for all of us to work together to concretely improve the situation of energy poor and vulnerable consumers.
We already have rules on this in the third energy package.
Today we are publishing the results of the most recent consumer vulnerability study. It looks into the drivers of vulnerability and proposes an evidence-based approach to consumer vulnerability. A clear conclusion is that we have to explore more effective solutions to ensure support for vulnerable consumers, while continuing to improve our evidence and data to come to a better EU-wide understanding of consumer vulnerability.
Member States are key in finding long term, but also customised solutions that reflect and react to national contexts, often combined with social policy measures in their area of competence.
To be concrete: we could protect people from disconnection. About 20% of Member States use disconnection protection as their main policy measure to protect vulnerable consumers.
We could ensure that funding schemes are easy available to all vulnerable consumers to invest in energy-efficiency improvements, especially in buildings. Around 40% of energy used in the EU is consumed in buildings, of which 80% is used for heating and cooling.
We could ensure that more households have individual meters, ideally smart meters, so consumers receive accurate bills. In our electricity market functioning study, 11% of survey respondents said that they had a problem with the estimate of their electricity consumption. 8% had a problem with their bills.
Through easy to understand and transparent information consumers can manage their consumption levels and switch supplier if they want to.
The transition to smart markets and grids implies of course costs. While we should all be ready to contribute, it will be important that costs are fairly spread among households, to avoid making consumers poorer or more vulnerable.
2. A New Market Design for more competition
Second, the new energy market design should allow more competition.
The package should simplify, clarify and consolidate consumer rights which are often too difficult for consumers to understand and for regulators to enforce.
At the same time, the new market design rules should increase competition by making it easier for the more efficient suppliers to enter neighbouring markets and sell energy directly to retail consumers.
Some technical and infrastructure measures will be necessary to transform markets to this extent. But it is important to launch the process now. The 2nd consumer market study on the functioning of retail electricity markets will inform our proposal.
For a better energy deal for European consumers, we need more competition in retail markets, but we also need to make it easier for consumers to understand their consumption patterns.
Consumers should be able to easily compare energy offers, including trustworthy green offers and to switch supplier without lengthy delays and costs.
In this respect, energy bills on paper, online, electronic et cetera still remain the key information channels for consumers.
The vulnerability study found that only 22% of people chose the optimal offer in a behavioural experiment. More than half of survey respondents in the EU never compare energy offers.
The rights of energy consumers for trustworthy, clear and comparable bills and offers are split between several Directives. There are issues with the coherence and implementation of these provisions. Also, the terms used in the different instruments and their scope are not always clear.
It is therefore time to do away with “bad” bills and to design legislation that fully allows consumers to both understand and enjoy their rights by playing an active role in the Energy Union.
3. Data management and data protection
The digital era is indisputably visible also in the energy sector. It is why as a third parameter, we must ensure strong protection of people's personal data on energy consumption.
The December agreement on the Commission's EU data protection reform will help us to make sure that both citizens and businesses benefit from clear rules, including in the energy sector.
These new data protection rules will be fit for the digital age, protect consumers, and encourage innovation in digital energy products - from smart grids and meters to data management and home automation platforms.
Smart metering should integrate the right functionalities and provide the tools to consumers and service providers to take advantage of new services. The Commission has worked with industry and data protection authorities to develop and test a Data Protection Impact Assessment Template for smart grids, and is currently identifying Best Available Techniques for security and privacy in line with the smart metering functionalities.
The results of this exercise will inform our follow-up, including a possible need to adapt rules on energy data protection.
Lastly, but not the least, the forth parameter to look at for a new deal for consumers is that there are solid rules in place for those who want to enter energy markets as generators of energy – the prosumers.
Self-generation is a win-win situation: consumers reduce their bills while they contribute to the grid and diversity of the market.
Keeping in mind our CO2 emissions and renewables targets, we should remove the current barriers for prosumers and encourage their active participation to fulfilling these targets.
Ladies and Gentlemen, to sum up: we want to make the New Deal a reality for all energy consumers, but addressing the key parameters of this deal requires everybody’s contribution. Public authorities, regulators, energy suppliers, entrepreneurs, consumer organisations, academia - I wish you all a successful event and I am looking forward to your input.
This Forum is now a key platform for exchanging expertise and in time it can also contribute to supporting enforcement at all levels.
Thank you for your cooperation.