EU Energy Regulation, Competition, Pricing

Energy Single Market – competition, regulation and pricing for energy

The Commission Communication on a Europe2020 strategy encompasses the need for “A single market for the 21st century“, and it states that: “A stronger, deeper, extended single market is vital for growth and job creation“. However it also warns, that “current trends show signs of integration fatigue and disenchantment regarding the single market“. Nevertheless, the Commission in the Communication includes in its priorities to work to complete the internal market.

In a forward looking move, the EC President, José Manuel Barroso, in October 2009, tasked Mario Monti[1] with preparing a report on how to re-launch the EU’s single market. His report was published on 9 May 2010[2] and examines both gaps in the single market and ways to better enforce the laws underpinning it. Prof. Monti echoes concerns about the state of the internal market, listing 3 challenges to overcome, including the eroded political support for market integration in Europe. As expected Prof. Monti addresses both implementation and enforcement of the single market, making several concrete recommendations, including on the sensitive subject of greater coordination of taxation policies between Member states, including environmental taxation. The European Commission is expected to follow-up by presenting a Communication in June 2010 on the re-launch of the single market, laying the groundwork for a package on “tomorrow’s single market” on the occasion of the 20th anniversary of the single market in 2012. On the energy side, Prof. Monti highlights the need for a more interconnected European energy market.

In connection with the think thank report, Towards a European Energy Community, from “Notre Europe” in April 2010[3], Jacques Delors paints a similarly dark picture, underlining that “urgent action” is required to deal with challenges raised by the energy & climate crises, and to realise a transition to a low-carbon economy. The report proposed to “develop a real European Energy Community” through “a stronger and more coherent European energy regulatory space governed by credible institutions capable of delivering effective solutions on the basis of democratic legitimacy“. In this vision the EU should also be able to export regulatory norms to a global setting[4].

The completion of the internal markets of the EU continues to be a priority, and not least in the field of the internal markets for electricity and gas. It is clear that at this point in time there is no one quick fix to either the economic crisis or to ensure the future energy competitiveness of Europe. However, an underlying prerequisite is a functioning single energy market.

Regulation

Although the EU has legislated in the energy policy area for many years, starting from the ECSC, the concept of introducing an overarching European energy policy was only approved at the European Council Meeting 27 October 2005. A first element in the common energy policy is to establish a genuine internal market for the products and services of the energy sector[5]. The establishing of a single market involves removing barriers, establishing common rules, and opening up of the energy markets.

Current EU legislation

The main legislation in this area is on the gas and electricity market. The current central legislative package on gas and electricity (2nd energy package dating from 2003) was to be implemented in the EU by July 2004 for all non-household customers and as of July 2007 for all customers.

The agreement on the 3rd Energy Package reached in March 2009[6], following the Energy Policy Review[7], provides the EU with the required legislative and regulatory tools to move one step closer towards a European single energy market. Together with the 2nd EU Strategic Energy review, the 3rd Energy Package is intended to strengthen the EU’s energy market and competitiveness in energy policy[8] by further liberalizing the internal market, resolving structural failings, and enhancing competitiveness. The package in particular focused on the issues related to unbundling, regulatory oversight and cooperation, network cooperation, transparency and record keeping and finally, access to storage facilities and liquefied natural gas (LNG) terminals. In particular the Directives on electricity (2009/72/EC) and gas (2009/73/EC):

  • regulate transmission network ownership by ensuring separation of supply and production activities from network operation through three models of organisation: the full “ownership unbundling”, the independent system operator (ISO) or the independent transmission operator (ITO);
  • ensure more effective regulatory oversight via truly independent national energy regulators. In relation to this adoption of the package meant the establishing of an agency for the cooperation of energy regulators.
  • reinforce consumer protection, especially for vulnerable consumers.
  • regulate third party access to gas storage and liquefied natural gas (LNG) facilities, specifying rules on transparency and reporting on gas reserves;
    • promote regional solidarity by requiring Member States to cooperate in the event of severe disruptions of gas supply, by coordinating national emergency measures and developing gas interconnections.

The new package adopted in June 2009 is to be implemented by 3 March 2011 in the Member States.

Relations with other policy areas

  • Market is characterized by high value contracts, which places the sector close to the general public procurement policy. Currently the level of cross-border public procurement is very low. The functioning of the internal market could further be enhanced by facilitating this. There is in the procurement rules possibilities for making environmental requirements part of the procurements, however, Prof. Monti in his report goes further indicating it could be considered to make certain policy objectives mandatory in the rules[9].
  • Though the EU does not have extensive competences in the field of taxation policy, taxation remains an efficient tool in energy policy. Taxes in the field of energy help to protect the environment, public health or to ensure a prudent and rational utilisation of natural resources. In this context, various regulations and minimum excise duties have been established for mineral oils, diesel, fuels and biofuels, usually setting minimum rates[10]. A review of the Energy Taxation Directive is forthcomming. A 1992 proposal for a carbon dioxide and energy tax was withdrawn, following a resistance in both Parliament and Council. Instead an EU emission trading scheme (ETS) was established as the main EU instrument for meeting its commitments of greenhouse gases reduction[11].
  • Competition policy is the key policy to tackle former public monopolies in the energy markets and is key to securing competition and integration of markets. This means first of all a clear distinction between the competitive (e.g. supply to customers) and non competitive parts (e.g. operating the networks) of the industry. As a consequence the operators of non competitive parts can be obliged not to abuse their dominant position and to allow third parties to have access to the infrastructure. In the same way barriers preventing alternative suppliers from delivering energy are removed. Antitrust/cartel procedures are as well used to gradually remove any restrictions on customers from changing their supplier. After several years of acquisitions and mergers, the EU is now dominated by a few cross border giants. Merger control will help that new competition is able to gain ground on liberalized markets and will not be distorted by a couple of cooperating competitors. Controlling State Aid to energy companies ensures that any aid is necessary and proportionate and supports the sector, not preferring certain players.
  • In principle the internal market regulation of the EU – including in particular provisions on free movement of goods and services, monopolies, and undertakings (firms, businesses), plus State aids – should form the basis for a integrated energy market[12].
  • Financing of energy infrastructure: The two main instruments on the financing on European energy structure are a) The Trans-European Networks (TEN-E) policy aiming to promote interconnection and the interoperability of national networks[13]; and b) the recent European Energy Programme for Recovery (EEPR)[14] (see later discussion on investments for details).
  • Consumer policy: Consumer policy will play a key role in shaping the future energy policy as regards to facilitating switching, increase transparency on prices and promote smart metering. According to a 2009 Eurobarometer survey only 7% of gas supply services consumers and 8% of electricity supply services consumers have changed providers (known as switching) in the past two years[15][16]. A recent EP report on Consumer protection[17] also notes the importance of facilitating switching and of effective enforcement and redress. Furthermore, following the second edition of the Consumer Market Scoreboard the European Commission decided to launch a further investigation in the retail electricity sector; where signs of malfunctioning were detected.

Current implementation

In 2005, the market opening of the EU energy internal market was estimated to reach 66% for electricity and 57% for gas. The current market opening varies between Member States from 100% to as low as 0%[18].

The Commission report from March 2010 on progress in creating the internal gas and electricity market[19] concludes that a correct transposition of the European electricity and gas legislation in all Member States has still not been completed. The key problem areas identified are:

  • lack of transparency
  • insufficient coordination efforts by transmission system operators (TSOs) to make maximum interconnection capacity available
  • absence of regional cooperation
  • lack of enforcement action by the competent authorities in Member States
  • lack of adequate dispute settlement procedure[20].

Few Member States fully implemented the 2nd energy package in time. As a result the Commission in April 2006 sent out 27 letters of formal notice and was in December the same year followed through with a first wave of infringement procedures against 16 Member States[21].

In June 2009 a new round of cases were initiated against 25 Member States for lack of compliance with applicable gas and electricity regulations (against 25 member States for electricity and against 21 Member States on gas) and cases of regulated prices (against 5 countries). Yet two further cases were launched in October 2009 on gas transit and storage[22] (see Annex 1 for an overview of the infringement cases).

Table 1 gives a more detailed overview of the current market status as regards cases of regulated prices, continued high levels of market concentration and the achieved levels of implementation of unbundling.

Table 1: Assessment of Member State status concerning regulated prices, market concentration and unbundling
Regulated prices Market concentration Implementation unbundling
House-holds Non-House-holds Gas Elec-tricity TSO/ Ownership(OU/total of TSO) DSO[23]/Legal(% of all DSO)
Gas Elec Gas Elec Retail Wholesale Wholesale Gas Elec Gas Elec
Austria + 0/7 0/3 40% 8%
Belgium ++ ++ ++ 0/1 0/1 100% 100%
Bulgaria X X X X ++ 0/1 0/1 0% ou+100%
Cyprus X X ++
Czech Republic ++ + 0/1 1/1 9% 100%
Denmark X X X X + ++ 1/1 1/1 100% 100%
Estonia X X X ++ 0/1 0/1 4% 3%
Finland 0/1 1/1 0% 56%
France X X X X ++ ++ ++ 0/2 0/1 13% 35%
Germany + + 1/18 0/4 21% 17%
Great Britain + 1/1 1/1 ou+100% 100%
Greece X X X X ++ ++ 0/1 0/1 0% 0%
Hungary X X X X + + 1/1 0/1 50% 100%
Ireland X X X X ++ + ++ 0/1 1/1 100% 0%
Italy X X X + + 1/3 1/8 44% ou+ 94%
Latvia X ++ ++ ++ 0/1 0/1 0% ou+100%
Lithuania X X X X ++ ++ + 0/1 0/1 0% 100%
Luxembourg + ++ 0/1 0/1 0% 13%
Malta X X
Poland X X X ++ ++ 1/1 1/1 100% 70%
Portugal X X X X ++ ++ 1/1 1/3 36% 100%
Romania X X X X + 1/1 1/1 100% 37%
Slovak Republic X X ++ ++ ++ 0/1 1/1 2% 100%
Slovenia ++ ++ 0/1 1/1 0% 100%
Spain ++ + + 1/8 1/1 100% 100%
Sweden 2/3 1/1 100% 100%
Source: Draft ITRE Study (chapter 1, with data from SEC(2010)251 and COM (2010)84).Note: Market concentration: HHI 750-1800 moderately (no marking); 1800 – 5000 highly (+) and 5000 and over (++) very highly concentrated markets.

Competition

After the first steps to liberalize energy markets competition was found slowly to take off. Markets remained largely national with little cross border trade. Market development was slow, prices remained high and consumer choice was limited. On this basis the Commission in 2005 launched a sector inquiry to identify the main barriers preventing more competition[24]. The main results[25] published in 2007 were as follows:

  • too much market concentration in most national markets;
  • lack of liquidity, preventing successful new entry;
  • too little integration between Member States’ markets;
  • absence of transparently available market information, leading to distrust in the pricing mechanisms;
  • an inadequate level of unbundling between network and supply interests which has negative repercussions on market functioning and investment incentives;
  • customers being tied to suppliers through long-term downstream contracts;
  • current balancing market and small balancing zones which favor incumbents.

As a consequence the 3rd energy package includes new guidelines on how Member States can grant state aid to support environmental objectives to the energy sector.

Also in the context of the revised Lisbon strategy, competition law was seen as a central element to promote network industries[26].

The Commission has used the full spectrum of competition rules very actively to ensure that energy companies and Member States are not in a position to hinder the process of opening and unifying energy markets. Activities cover individual cases in all areas of competition, such as:

  • Mergers[27]: The Commission controlled and finally approved the acquisition of sole control of Endesa by Enel[28].

GDF and Suez[29] as well as E.on and MOL[30] (significant remedies in 2006);

EDP and GDP in Portugal (prohibited in 2004[31]);

  • Antitrust: The Commission imposed a fine of 1.1 Billion € against E.on, Gaz de France and Suez because of market allocation[32]. The companies did not sell any gas received via a certain pipeline to the consumers in the home State of one of the other companies.

RWE offered to sell its gas transmission network in the west of Germany to an independent operator which will have to be approved by the Commission to avoid ongoing proceedings concerning the abuse of a dominant position[33].

Distrigas, concerning its long-term gas supply contracts[34].

  • State aid: investigations regarding long-term energy supply contracts in Poland and Hungary (2005); procedures in Spain and France regarding regulated electricity tariffs (2005).

Current market integration – electricity

The level of liberalization in the European electricity market has increased in recent years; however, there is great variance between Member States. The concentration in national electricity wholesale markets is generally moderate to high[35].

Electricity market designs vary and there are a number of power exchanges in Europe at the moment. Wholesale electricity prices in Europe are therefore also not uniform. A major barrier to competition remains the unbundling of network companies (in particular DSOs). The level of physical market integration varies in terms of interconnection capacity and trading regimes, but remains overall below the EU objective of 10% of national markets[36].

As regards retail markets the overall integration and competition is still weak. As an indication it can be mentioned that annual customer switching rates (to other operator) varies between 0% and 20% in Member States.

Current market integration – gas

An important barrier to competition remains the presence of long term contracts in natural gas imports. Trade within the EU is dominated by over the counter deals on physical and virtual hubs, whilst exchange trade is very limited[37].

A helping element in the gas market is LNG that provides more flexible capacity, however, import capacity is still limited. The wholesale gas market needs to have the following elements to function in a fully integrated manner[38]:

  • A trading place (hub, physical or virtual)
  • sufficient market participants to provide liquidity
  • congestion-free transportation access, preferably from different sources and connections.

Investments

Investments in the energy area are characterised by long lead and lifetimes, complicated by rapid technological developments. The Second Strategic Energy Review[39] specified that priorities for gas and electricity infrastructure in the coming years should be to tackle cross-border bottlenecks, congestion and missing infrastructure bottlenecks.

On future investments, the OECD, in a recent study on expected costs of baseload electricity generation power plants that could be commissioned by 2015, arrives at the conclusion that the performance of capital-intensive, low-carbon technologies could be price competitive, but apart from local characteristics of the particular market this would depend on the low cost of financing. No technology (nuclear, coal, gas, hydro or wind) is overall better placed competitively. Interestingly the OECD now operates with CO2 prices in their forecasting[40]. The study indicates that investors’ choice of power generation technologies most likely will depend on the financing cost, fuel and carbon prices, as well as the specific energy policy context (i.e. both at EU and national level).

The TEN-E policy aims at promoting interconnection and the interoperability of national networks. Current implementing legislation (& guidelines from 2006) aim at especially gas and electricity projects. The available funding is however limited with an overall annual budget for TEN projects of €20-25 million[41]. The TEN-E guidelines are currently under review and are foreseen to be combined with a new EU Energy and Security and Infrastructure Instrument in the spring of 2011. Further the Commission Work Programme foresees an Energy Infrastructure package still this year with a 2020 to 2030 time horizon[42].

A separate important investment was provided through the European Energy Programme for Recovery (EEPR)[43], were gas and electricity infrastructure projects have been allocated around €2.4 bn, equivalent to 60% of the overall budget, and allows for greater funding share than the TEN-E.

Prof. Monti in his recent report makes the explicit recommendation that EU funding for energy infrastructure needs to be stepped up[44].

Regional Initiatives

Regional Initiatives (RI) were established in 2006 under ERGEG[45] outside the framework of the 2nd energy package. Currently there are 3 gas and 7 electricity regional initiatives[46]. The RIs were integrated in the 3rd energy package. The noted positive effects of the RIs include a tendency towards increased transparency, interoperability, cooperation and monitoring, and increase cross-border trading[47].

Generally the RIs seems to progress and to contribute to the further market integration[48]. However, the RIs differ between electricity and gas, with the former being more advanced in the number of regions and in terms of level of flows. There are fewer exchanges in gas than in electricity and the national balancing markets are not interconnected. Apart from the differences between gas and electricity RIs, and regional differences, a future challenges for the RIs may be to adapt the bottom-up approach to the EU level regulation of the 3rd package.

Summarizing the activities to enhance competition in the sector, competition rules have been an actively used tool. Nevertheless, it must still be stated that some of the competition constraints discovered by the sector inquiry remain problematic. In parallel to the European level, national competition and energy regulators have stepped up their efforts in the investigation of mergers and antitrust violation.

Pricing

The EU energy policy’s impact on energy prices and competitiveness is complex, and is influenced by the developments in the global fuel market prices. At European level other important influencing factors will be regulation, possible taxation and investments[49].

Global prices have been influenced by the economic & financial crisis – with substantial fall in demand and oil prices. The economic and financial crisis over the last few years has had the immediate impact on consumption of gas and electricity with EU27 demand falling substantially, but now recovering[50].

Price trends

Between 2000 and 2007 electricity and gas other fuel prices increased at a rate of 6% per annum in the EU-27[51]. Changes in the oil price directly impact the gas wholesale prices, not least due to long term contracts linking the two. The oil price of the international market has been affected by the financial crisis. From peak prices of 92€/bbl in July 2008[52] the crude price traded for around half of this peak price in mid 2009. The electricity wholesale prices are further influenced by the gas wholesale prices. However, the Commission in its recent analysis concluded that end-user prices in gas and electricity have not fallen as much as lower oil prices would lead to expect, and suggest that this may in part be time to a time lag issue, but also to a trend of lower wholesale costs not being reflected fully in end-user prices.

The most recent retail figures (house-holds and industrial consumers) indicate a stagnation of average electricity prices, and a decrease of gas prices of 7-12% at the EU level. This aggregate figure, however, masks significant divergences between Member States (from a decrease of 37% to an increase of 40%)[53]. This is in line with the findings of a Eurobarometer survey[54] where 59% of electricity users and 64% of gas users reported an increase in prices.

As shown in the following four figures (1-4) significant gas and electricity price differences exist between Member States. The figures also indicate the impact of national VAT and other taxes on prices.

Figure 1:           Domestic gas prices in €/Gigajoules (Band D1, consumption below 20 GJ)

Source: Eurostat

Figure 2:           Industrial gas prices in €/Gigajoules (Band I3, consumption between 10000 and 100000 GJ)

Source: [Eurostat]

Figure 3:   Electricity prices for household domestic consumers (band Dc, annual consumption between 2500 and 5000 kWh) 2009

Source: Draft ITRE energy markets study, with data from Eurostat

Figure 4:       Electricity prices for industrial consumers (band Ic, annual consumption between 500 and 2000 MWh) 2009

Regulated prices

There are still Member States where open energy market pricing coexists with regulated prices. When the Commission in June 2009 launched its newest round of infringement proceedings it also sent formal letters of notice to 5 countries (see Annex I) for maintaining regulated prices in violation of EU rules[55], adding to already pending cases[56]. Some MS argue for regulated prices referring to the protection of vulnerable consumers[57].

End-user price regulation may distort the market in several ways[58]:

  • If regulated end-user prices are not in line with wholesale market conditions (prices), suppliers without significant low cost generation capacities or equivalent LTC will not be able to make competitive offers. With a limited number of suppliers, a wholesale market will not develop, and as a result, neither the wholesale nor retail markets will be competitive.
  • Regulated prices limit customers’ possibilities and incentives for switching supplier, hence limiting competition. If regulated prices give customers artificially low prices it removes the incentive to switch supplier.

Further, it may be a concern that the non-integration of environmental externalities in pricing, resulting in inefficient allocation of resources.

Future of taxation

As mentioned earlier, Prof. Monti has recently again pointed to possible future energy taxation measures. The current policy debate started in 2007 with the Commission Green Paper[59] launched a debate on how taxes, tradable emission rights and other instruments can be better used to fulfil the EU environmental and energy objectives. The Green Paper included the pivotal question on how to make the energy taxation directive more supportive of the EU environmental and energy policies. In its conclusions of 14 March 2008, the European Council stated that a review of the Energy Taxation Directive is needed to make it fitted more with the EU energy and climate’s objectives. It also invited the Commission to publish its proposals on reduced VAT rates. Nevertheless, no agreement has been reached to date in the area of reduced VAT rates in energy. On the other hand a revision of the Energy Taxation Directive is in the Commission 2010 work programme and is to complement the EU-ETS by taxing energy products based on their energy content and CO2 performance[60].

On the 24th of April 2008, the European Parliament adopted an own initiative report on the Green Paper on market-based instruments (MBI). The Parliament urged the Commission to adopt a clear strategy on MBI to price environmental damages. It also asked for the suppression of environmentally Harmful Subsidies, who undermines the polluter pays principle, and suggested new measures such as a carbon tax and a kerosene tax and NOx emissions charges for airplanes. On the ETS, Parliament requested a progressive tightening cap with quantitative limits and qualitative requirements and to base the EU-ETS on auctioning. It concluded by calling for the study of future use of green “growth” indicators.

Future developments of prices – a delinkage to ensure stability?

Future delinking of electricity prices from prices of other energy sources may be helped through a well integrated market, increased flexibility through use of other energy sources, and better management of capacity, storage and demand. Energy and environmental policies increasingly also influence price levels – for instance regarding CO2 and the EU-ETS.

Future gas prices are also affected by CO2 prices. Pipeline gas is linked to oil prices, but this link may be decreased through an uptake of LNG, the exploitation of unconventional gas sources and the development of new technologies. As competition in the various energy fields is awakening, the price linkage of gas to the oil price becomes less self evident[61].

Future discussions

The liberalization and regulation of the energy markets in Europe has been a gradual process[62]. For a future competitive energy community the EU must continue its efforts to build on areas of competitive strengths in energy field, whilst pursuing the established goals. In doing so it will be important to ensure a fair and competitive environment that fosters competition – ensuring a single European market will be key in this.

  • How may implementation, uniform transposition and enforcement of the EU energy legislation (2nd and 3rd package) be better ensured in the future?
  • Will the current (and new) regulatory package suffice to overcome current competition problems (including the need for increased investments in infrastructure capacity, price volatility, varied taxation levels etc.)?
  • To what extent are (and should be) the launched infringement procedures and new package linked – will they further or hinder each other?
  • Does the current level of competition grant a sufficiently level playing field, so that in future ‘only’ competition rules should guide the area, or on the contrary should the hitherto active use of competition rules be replaced?
  • Notre Europe has suggested that a new Treaty would be the best legal route to a European Energy Community, but is this politically a viable option the coming years?
  • Short of a new Energy Treaty or a further Treaty change, what could/should be done within the existing legal framework – i.e. what is needed to achieve a single market in energy?

Citations –  The overview text and information in this overview is sourced from the following documents prepared by the European Parliament in preparation for the Joint Parliamentary Meeting:

  1. Press Release of the European Parliament of 31st May 2010, REF 20100531IPR75273
  2. European Parliament prepared background notes on working group topics:
    1. ITRE_JPM_WG I
    2. ITRE_JPM_WG II
    3. ITRE_JPM_WG III
    4. Joint Parliamentary Meeting Draft Programme, Towards a European Energy Community for the 21st Century?

[1] Internal Market Commissioner 1995-99 and Competition Commissioner 1999-2004.

[2] A new Strategy for the Single Market, Mario Monti, 9.5.2010

[3]Towards a European Energy Community: A Policy Proposal” Prefaced by Jacques Delors, Notre Europe, 01/04/2010, Notre Europe was created in 2006 by Jacques Delors, and aims to “think a united Europe”. Initiated by Jacques Delors, the report is based on the work of the Task Force of high-level European experts established by Notre Europe to study the feasibility of a European Energy Community. See also www.energypolicyblog.com “Moving towards a Real European energy Community”.

[4] http://www.energypolicyblog.com/2010/04/01/moving-towards-a-real-european-energy-community/

[5] The European Commission proposed creation of an internal market for electricity and gas in the second half of the 1980s. In a first phase, in the early 1990s measures were taken to ensure transparency of prices to consumers and to facilitate gas and electricity transit between major Community grids. In the next phase, from 1993, production and transportation systems were opened up somewhat to new entrants along with unbundling of vertically integrated undertakings in electricity. In the next phase from 1996 the gradual opening of markets became a requirement, see Energy Trade in Europe: Competition and Regulation in view of the EU Enlargement, September 2002, http://pdc.ceu.hu/archive/00001458/01/boromisa-paper02.pdf.

[6] Contains 5 legal acts: Directive 2007/72/EC, Directive 2009/73/EC, EC Regulation No. 713/2009, EC Regulation No. 714/2009, EC Regulation no 715/2009.

[7] An Energy Policy for Europe, COM(2007)1 final of10.1.2007.

[8] draft Cion

[9] A new Strategy for the Single Market, Mario Monti, 9.5.2010, p. 78.

[10] Since 2003, the following instruments have been used:

  • Council Directive 92/81/EEC on the harmonization of the structures of excise duties on mineral oils;
  • Council Directive 2003/96/EC (Energy Taxation Directive) introducing a new EU system for taxation of energy products widening the scope of the EU minimum rate system, regarding all energy products, chiefly coal, gas and electricity. The Directive entered into force on 1st January 2004. A proposal was first made in 1997 and required substantial reworking before adoption of the final measure. Revision foreseen in 2010.
  • Council Directive 2003/92/EC amending Directive 77/388/EEC on the rules on the place of supply of gas and electricity.

[11] The original proposal was COM(92) 0226, the adopted ETS measure was Directive 2003/87/EC. The emission trading scheme was extended and strengthened through the adoption of a revised directive April 2009 (Directive 2009/29/EC).

[12] TFEU, Part III, Title I, II and IV and on state aid Title VII, Chapter 1, Section 2.

[13] Governed by TFEU Art. 170-172.

[14] Regulation (EC) 663/2009.

[15] Flash EB No 243 – Consumers’ view on switching service providers, January 2009.

[16] About 1/3 of consumers did not even try to switch providers in the same period. The main reasons for low switching appears to be (perceived) difficulty of comparing offers (28% of consumers found it very or fairly difficult to compare the offers of energy service providers) and the absence of alternative providers or the perception of this absence (19% reported that there is no alternative provider). There seems to be a need to provide consumer information on the availability of alternative providers and the process of switching, especially since switching turns out to be easier than initially expected by consumers.

[17] http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+REPORT+A7-2010-0024+0+DOC+XML+V0//EN&language=EN .

[18] SEC(2010)251, p.5.

[19] COM(2010)84 of 11.3.2010.

[20] COM(2010)84 of 11.3.2010.

[21] The cases related to the 2003 gas and electricity directives, for details see Memo/06/481, 1212.06. See also COM(2006)841.

[22] COM(2010)84 + IP/09/1035 “Commission acts to ensure effective and competitive energy market across Europe”. The two additional cases were against Belgium on gas prices and on storage for another member state.

[23] DSO = Distribution System Operator.

[24] The inquiry was based upon Art. 17 of Regulation 1/2003 EC on the implementation of rules of competition.

[25] Full results in DG Competition report on energy sector inquiry (SEC(2006) 1724, 10 January 2007).

[26] “The interaction between regulation and competition law in network industries”, Dekeyser, 2008

[27] Legal basis: EC Merger Regulation No. 139/2004.

[28] COMP/M.5495 – ENEL/Endesa, decision of 7 April 2009.

[29] COMP/M.4180 – Gaz de France/Suez, decision of 14 November 2006.

[30] COMP/M.3696 – E.ON/MOL, decision of 21 December 2005.

[31] COMP/M.3440 – EDP/ENI/GDP, decision of 9 December 2004.

[32] Legal basis Art 81 EC Treaty (now Art 101 TFEU), see Case COMP 39.401 – E.ON/GDF of 8 July 2009.

[33] Legal basis Art. 82 EC Treaty (now Art. 102 TFEU), see case COMP/39.402 – Gasmarktabschottung durch RWE.

[34] COMP/B-1/37.966, decision of 11 October 2007.

[35] Draft ITRE study on EU Energy Markets in Gas and Electricity – state of Play of Implementation and Transposition, European Parliament 2010, European Parliament, May 2010.

[36] Op cit., draft ITRE study on EU Energy Markets.

[37] Op cit, draft final study on EU Energy Markets.

[38] Draft ITRE study on EU Energy Markets in Gas and Electricity – state of Play of Implementation and Transposition, European Parliament 2010, European Parliament, May 2010.

[39] COM(2008)781 of November 2008.

[40] at a carbon price of 30 USD per tonne CO2, Projected Costs of Generating Electricity – 2010 Edition, OECD, March 2010., (at a carbon price of 30 USD per tonne CO2).

[41] The budget for 2007-2013 was set at €155 million.

[42] http://ec.europa.eu/atwork/programmes/docs/cwp2010_annex_en.pdf , point 19.

[43] Regulation (EC) 663/2009.

[44] A new Strategy for the Single Market, Mario Monti, 9.5.2010, p. 49.

[45] ERGEG was set up by the Commission (Decision 2003/796/EC) as its advisory body on internal energy market issues to assist the Commission in consolidating a single EU market for electricity and gas. ERGEG’s members are the heads of the national energy regulatory authorities in the EU’s 27 Member States.

[46] Electricity: Baltic, Central-East, Central-South, Central-West, North, South-West, France-UK-Ireland; Gas: North-West, South and South-South East.

[47] Notre Europe, p.33.

[48] see falso “The interaction between regulation and competition law in network industries”, Dekeyser, 2008

[49] draft Cion

[50] COM(2010)84.

[51] Consumers in Europe, Eurostat, 2009.

[52] COM(2010)84 of 11.3.2010, Brent crude prices.

[53] SEC(2010)251.

[54] Flash EB No 243 – Consumers’ view on switching service providers, January 2009.

[55] The European antitrust review 2010, Section 3: EU industry sectors, Energy. http://www.globalcompetitionreview.com/reviews/19/sections/68/chapters/745/energy/

[56] COM(2010)84.

[57] Towards a European Energy community: A Policy Proposal, Notre Europe, April 2010, p. 41.

[58] ERGEG 2007, Draft ITRE study on EU Energy Markets in Gas and Electricity – state of Play of Implementation and Transposition, European Parliament 2010, European Parliament, May 2010.

[59] COM(2007)140.

[60] The reduced VAT rates that were eventually adopted concentrated on labour intensive services, Directive 2009/47/EC. See Commision Work Programme 2010 for the new proposal on the Energy Taxation Directive.

[61] For example on 24 March 2010 the German Federal Court of Justice ruled it to be a disproportionate disadvantage for customers if the strict linkage of the gas price to the oil price allowed the provider not only to compensate price increases but to also generate additional profit out of it, see decisions Bundesgerichtshof, VIII ZR 178/08 as well as VIII ZR 304/08.

[62] Energy Trade in Europe: Competition and Regulation in view of the EU Enlargement, September 2002, http://pdc.ceu.hu/archive/00001458/01/boromisa-paper02.pdf.

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