Effective consumer empowerment & protection in liberalised electricity & gas markets in Europe

1. Effective consumer empowerment & protection in liberalised electricity & gas markets in Europe Kyriakos Gialoglou, European Commission, Consumer Affairs Congreso Energia y Derechos de los Consumidores, Valencia, 24 – 25/11/2009

2. Contents of presentation • Why an EU (energy) consumer Service? • Evidence-based policy and tools • How to empower consumers in open (energy) markets? Principles & tools • Consumer legislation relevant to energy • Consumer protection in new EU legislation • Spain and electricity and gas markets • Discussion: market competition and affordability

3. Why a Commission Service for Consumers? • Single Market Review • Reconnecting with citizens • Evidence-based & outcome-oriented policies • General market monitoring exercise • EU Consumer Policy Strategy 2007-2013 • Better monitoring consumer markets and national consumer policies  Consumer Markets Scoreboard • To empower EU consumers, with real choices, accurate information, market transparency, effective protection and solid rights; • To enhance EU consumers‘ welfare, in terms of price, choice, quality, diversity, affordability and safety; • To protect consumers effectively, by ensuring protection against risks and threats that cannot be left to individuals to deal with.

4. Consumer Markets Scoreboard • Screening consumer markets • 5 Top level indicators: complaints, prices, satisfaction, switching and safety Identify malfunctioning markets for further in-depth analysis • Integration of retail internal market • Fragmentation, Cross border issues • Cross border sales, information, complaints, disputes, enforcement, consumers and retailers attitudes towards cross border purchases • Benchmarking the national environment • Performance of national policies / instruments • Enforcement & empowerment

5. 2nd Consumer Markets Scoreboard • Markets that are not functioning well: energy, banking, transport (rail and bus) • Findings based on satisfaction and switching surveys comprehensive questionnaire, in-depth findings • Follow-up study on retail electricity Tools to be used: • Surveys, Mystery shopping, Stakeholder consultation Questions: • Can consumers benefit from a well-functioning market in terms of price, choice and quality? • Are consumers able to make informed, rational and empowered choices? Issues: • Information and awareness, switching and comparability of offers, unfair commercial practices, billing, contract terms, dispute resolution Results will be published in Autumn 2010

6. Consumer empowerment in competitive energy markets: making markets accessible • Competition: unknown territory for most individual consumers • Consumer participation  empowerment • Information: correct, concise, comparable • Case in point: energy bills Citizens’ Energy Forum mandate: Commission led a Working Group on Billing • Participation: ERGEG, consumers (ECCG sub-group on Energy), industry • Focus: regular paper bills, annual reconciliation statement • Deliverable: Recommendations, good practices  Commission created model bills

9. Consumer legislation relevant to energy • Unfair Commercial Practices Directive • prohibits misleading practices  affect purchase decision • false or deceiving information e.g. nature of electricity, its specifications or price and how it is calculated. • Omission or unclear/unintelligible information also be misleading. Energy companies must advertise or inform consumers about the main characteristics of their services or the price in a clear, truthful and intelligible manner. • prohibits aggressive commercial practices

10. Unfair Commercial Practices Directive cont. Examples of possible unfair practices in energy under UCP: - misleading green claims: e.g. green label without authorisation - using general claims e.g. "green electricity" without being able to substantiate the claim, may deceive consumers  misleading. - onerous or disproportionate barriers for consumers terminating a contract or switch to another energy company Example: a company excessively delaying contract termination could be an aggressive commercial practice Case study: Italian Antitrust Authority fined companies in telecoms sector for excessive delays /obstacles to terminate contract on the basis of UCP. • UCP will become a Spanish law in the next 2-3 months. • National enforcement: determination of unfair practice and action. • Consumer protection authorities, consumers & energy regulators must co-operate effectively to discontinue any such practices.

11. Consumer protection in new EU legislation • Third Energy Package: Consumer provisions • Complaint handling measures • Single contact points (possibly sub-national) • Ombudsmen • Protection of consumers • Member State definition of vulnerable consumers  refer to energy poverty • Prohibition on disconnection at critical times • Interaction with other social policy measures • 3 weeks max. switching period, final bill in 6 weeks • Consumer access to consumption data in (sufficient) time periods (defined nationally)

12. Consumer perceptions in Spain: electricity and gas Electricity • 19% find difficult to compare offers from suppliers (EU-27 average 29%) • 68% did not try to switch provider in the last two years  not interested in switching, (1% did not try because too difficult). • 47% of those who switched provider claim the new one is cheaper, ( EU-27 average 69%) • 61% find prices increased in the 12 month before the interview. Gas • 19% found difficult to compare offers • 70% did not try to switch provider  not interested in switching. • 37% of those who switched claim the new one is cheaper, while 31% think that prices remained apprx. the same after switching. • 62% find prices increased in the 12 months before the interview. Flash EB 243 "Consumers' views on switching service providers"

13. Spain status quo: energy and consumers • No regulated tariffs any more • "Last resort services" and • "social bonus" for vulnerable customers • in force since 1st July 2009 as Public Service Obligation. • Ministry to report to Commission on such PSOs by end of this year.

14. Competitive energy markets & affordability 1 • 1/3 EU consumers find electricity, gas and water too expensive (Eurostat) • In some EU countries 1/3 consumers faced difficulties to keep houses warm (2006) • Low income consumers have a budgetary need to 'pay as they go' – this has created higher bills in the past (UK) • UK defined fuel poverty & published data: in 2008 more than 20% households fuel poor (>10% of income on energy), UK target: no fuel poor by 2016-18 • Similar stories for “newer’’ EU Member States

15. Competitive energy markets & affordability 2 • EU law: "reasonable prices" for electricity & gas. • Member States must define reasonable prices & who benefits from special treatment (social tariff or other) • Commission to make sure that definition will not impact on competition and • Commission will facilitate dialogue, exchange of good practice, make sure that competition will not negatively affect consumer welfare • Further input in the framework of Citizens’ Energy Forum

16. Information on Energy and Consumer Bills: http://ec.europa.eu/consumers/citizen/my_rights/energy_en.htm Report by the Working Group on Billing: http://ec.europa.eu/energy/gas_electricity/forum_citizen_energy_en.htm (click on 2nd Citizens’ Energy Forum, Reports) Monitoring markets and the Consumer Markets Scoreboard http://ec.europa.eu/consumers/strategy/facts_en.htm DOLCETA: sustainable consumption and services of general interest www.dolceta.eu Thank you for your attention!