A false start for deregulation
June 1st 2007
The EU's electricity and gas directive in 2003 called for all countries to deregulate
their gas and electricity markets and open them to competition by 1 July 2007.
However, implementation has been reluctant. Record-high energy prices for last
year suggest that fewer, but more powerful, players continue to dominant and
consolidate their position in the energy arena. Claire Jackson investigates
The so-called 'liberalisation'of the European energy market was initiated in 1988, when the wheels of deregulation first began moving.
Since then, fluctuating fuel prices, increasing awareness of climate change and the growing dependence on imports have put energy high on the EU agenda.
The current Directive has its roots in previous legislation from 19 December 1996. This obliged the Member States to open up at least 35% of their market to competition as of 2003, by making the major industrial consumer eligible to choose their electricity supplier. The second directive, adopted on 26 June 2003, confirmed this, laying down a definitive time frame for the full opening of the internal electricity market. All consumers, except residential customers,would become eligible by 1 July 2004, regardless of the volume of their consumption. The final consolidation was due to become effective no later than 1 July 2007.
However, as Dominic Whittome, European policy advisor to the Major Energy Users'Council (MEUC) says,"It is clear to the industry, and buyers especially, that this deadline will come and go like the others before it."
It would appear recent legislation carries little weight, leaving the deregulated energy market a utopia beyond current reach.Market prices continue to rise, and although impacted by fuel costs and CO2 allowance charges, the increase is disproportionately high.
The ultimate aim of EU deregulation is to allow consumers free choice of suppliers throughout Europe. This is of vital importance to the UK as its energy market is linked economically and physically to the continent.
"I don't believe it (deregulation) is going to happen, progress is slow," says Cathy McClay, head of commodity research at British Energy. "Implementation has tended to get lost in country issues, with the emphasis being on internal concerns, rather than looking at the bigger picture.
"There are still a few big companies across Europe, the market is ruled by a minority of key players. Importantly, governments are not necessarily buying into deregulation, without their support it's difficult to see deregulation happening."
In Spring 2006 the EU sent formal notices to 17 of the member states in which it criticised the countries for not fulfiling their obligations according to the directive. The conditions for a uniform European market are still not in place.
Networks are fundamentally national, despite the unbundling of storage facilities and pipe and wire networks in Britain, not all large vertically integrated energy companies in all member states have been broken up. Competition is unable to flourish and as a result, Europe has become divided into a number of different price areas.
As early as 1955, the first EC
treaties called for the liberalisation of the energy market, in the first flush of post-war promises, the need for a clear policy was evident.However today, it seems that grandiose schemes for a single gas and power market are slipping out of sight.
As another wave of liberation directives get closer to their sell-bydate, they leave further disillusion and an ever-fragmented market in their wake.
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