Power Engineering - Commission cracks down at slow liberalization of EU energy market

7 April 2006 - The European Commission has taken legal action against 17 member states for dragging their feet in applying EU electricity and gas market liberalisation legislation into national law.

EU directives to open up Europe's electricity and gas markets were adopted in 2003, and, at least in theory, industrial consumers have been able to freely choose their supplier since July 2004.

However, the Commission has criticised governments for keeping their markets secluded, hitting out at recent moves to protect national energy "champions" from takeover bids by European rivals.

The preliminary findings of a competition enquiry into the energy sector, presented in February, uncovered some "serious malfunctions" in the liberalized market for gas and electricity. In March this year, EU heads of states agreed on a new "Energy Policy for Europe" which has market liberalisation among its chief objectives.

Most EU countries have not yet fully opened their electricity and gas markets to competition, effectively blocking new business from entering the market and bring prices down, the Commission warned on Tuesday.

Austria, Belgium, the Czech Republic, Germany, Estonia, Spain, Finland, France, Greece, Ireland, Italy, Lithuania, Latvia, Poland, Sweden, Slovakia and the United Kingdom were all sent so-called "letters of formal notice", the first step in the legal procedure.

Governments have two months to respond after which the Commission may consider further steps that could eventually lead to fines being slapped. The Commission indicated that the main problems encountered are:

• price discrimination to the benefit of historical customers;
• lack of legal unbundling and insufficient managerial separation between electricity and gas transmission and distribution system operators to ensure that they are independent of each other;
• preferential access to networks for historical customers and insufficiently transparent tariffs
• lack of free choice of supplier
• insufficient independence or competence granted to national regulators, in particular to set tariffs for accessing the networks

The Commission said it believed the creation of a truly liberalized energy market was "a key factor to reduce energy prices" and improve the EU's security of supply and competitiveness in world markets.

"In the Commission's view, the sustainable, competitive and secure supply of energy will not be possible without open, competitive energy markets that enable European companies to compete Europe-wide rather than just being national champions," it said.

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