Implementation of the Electricity and Gas Directives

Implementation of the Electricity and Gas Directives - 2005 report disclaimer: the views expressed in this presentation are those of an individual Commission official, not those of the European Commission as a whole.

Process in compiling report • Regulators’ submissions based on a standard structure • Full consultation with stakeholders – over 40 responses received • Close co-operation with DG COMP sectoral inquiry

General evaluation- some positiives • Efficiency benefits of market opening are confirmed • Electricity prices are still 5-10% lower in real terms for most customer groups • Investments are being made in new plant across the EU • 20 GW under construction now, 100 GW planned [according to Platts]

Electricity some progress almost everywhere: but, insufficient integration missing infrastructure unbundling of network operators incomplete inappropriate regulation of prices Gas major problems in many MS gas cannot be easily moved around EU segmented markets old capacity reserv-ations not helpful unbundling of network operators incomplete But obstacles remain

General ongoing concerns • Inreases in wholesale prices and effect on very large users • Is the price formation mechanism transparent enough and producing sensible results • What is the effect of emission trading • Gas price/security of supply • Complex network management, effect of wind • Consistent powers of regulators - independence

Wholesale electricity prices are increasing

So are gas prices

Switching: some progress for electricity Cumulative since market opening

Competition and market integration - Electricity LV EE IE SI HU AT PL UK FR BE LT LU SK CZ DE ES NL IT NORDIC Market share of 3 largest producers (%) • Electricity markets are still largely national • Not enough physical capacity is made available • More co-ordinated grid management needed for a European market

Regional markets are a necessary step : to get from this poor moderate poor

to this… ………..or better

Conclusions • Global energy prices are increasing • Environmental objectives are also becoming more important • Despite some success, a European market is some distance away • European industry cannot afford half measures relating to competition

Are new measures needed? • Regulators should further improve matters relating to: • tariff harmonisation ( espec. gas) • balancing rules and market design • capacity allocation rules • Regulators should already have a high level of powers overs these subjects for both gas and electricity

Are new measures needed? • Some arriving soon: Gas Regulation 1775/05 and guidelines on congestion management for electricity

Are new measures needed? • New Directives\Regulations? • YES if it is clear that competition is not functioning well in current framework • Commission GREEN PAPER to be issued in March 2006 will open debate on this theme

Are new measures needed? • Sectoral Inquiry – five key issues: • Market Concentration • Vertical Foreclosure [network and supply], [generation and supply] • Lack of market integration • Lack of transparency • Price formation issues • DG COMP interim report was issued 16 February – consultation process

Timetable 2006 • Country-by country investigations, new report end-year • Infringement cases, non conformity of laws and other measures • Conclusion of sectoral inquiry 2007 • Decision about new proposals

Thank you for your attention http://europa.eu.int/comm/energy/electricity/index_en.htm

Implementation of the Electricity and Gas Directives