New wave of EU energy liberalisation heading for consumers

(BRUSSELS) - A new wave of energy market liberalisation sweeps across the European Union on Sunday when consumers across the 27-nation bloc will be allowed to choose their gas and electricity suppliers.

But although 11 years of market liberalisation are coming to a head, the European Commission and some member states remain frustrated that former state energy monopolies still enjoy a crushing grip in some markets.

"It is undeniable that great progress has been made," EU Energy Commissioner Andris Piebalgs said in a recent speech. "However, it is equally undeniable that many of our basic objectives have not yet been achieved."

"Markets remain stubbornly national in scope, cross-border trade is difficult and limited, and far too many customers have little or no real competitive choice of supplier," he added.

In theory, companies have been able to choose where they buy their gas and power from July 1, 2004, with households' turn coming only three years later on July 1, 2007.

Some pro-liberalisation countries opened their markets long before those dates while others have consistently dragged their feet, raising the ire of regulators in Brussels.

Ten of the EU's 27 member states have led the liberalisation vanguard ahead of the deadlines, with Britain setting the trend by opening its markets to competition as far back as 1990.

Given the different attitudes between the two pro- and anti-competition camps, the long road to full market liberalisation has been marked by frequent battles, which are far from over with the European Commission eager to take further steps to encourage competition.

The European Union's executive arm is due in the second half of the year to make proposals for a further round of measures aimed at fuelling more competition in the sector amid evidence that consumers in some countries are paying too much for gas and electricity.

Despite the demise of state monopolies in the gas and electricity sector, the Commission considers that their long domination of the market has left a legacy of market concentration in only a few hands.

The Commission's solution has been to push for so-called unbundling or separation of energy providers' generation and distribution business to weaken their grip on the market and improve competition.

However, some countries, led by France and Germany, have resisted the proposal, which in its most radical form could see some of the biggest companies in Europe broken up.

In the face of their opposition, Belgium, Britain, Finland, Spain, Sweden and Romania urged the Commission last week to push ahead with its proposal "with strong provisions on ownership unbundling at transmission level."

"We have not found any of the arguments in favour of alternative models for separating production and supply from transmission convincing," they said in a joint letter obtained by AFP.

"On the contrary, the alternative models will not eliminate the built-in conflicts of interest within companies that own infrastructure and at the same time have commercial interests in production and supply," they added.

In addition to unbundling, the Commission's proposals due later this year are likely to include plans for beefing up energy regulators' roles, improving cooperation between network operators and increasing investment.