Commission laments slow progress

London (Platts Power in Europe)--22Mar2004



Little progress is being made to improve the market structure of Europe's
electricity industry, the European Commission will say in a third benchmarking
report on implementation of the internal energy markets. In a draft of the
report seen by Power in Europe, the Commission says that the high level of
market power among existing generators, a lack of interconnection, and the
continued use of "uncoordinated and discriminatory methods to manage
congestion" serve to impede new entrants into Europe's electricity markets.

"Overall, progress in developing the internal electricity and gas market has
been steady but, if anything, a little disappointing," the draft concludes.
"However Member States are beginning to prepare for the next step for market
opening in 2004 which should see some acceleration. It is becoming clear that
the main problem for electricity in coming years will be the issues of market
dominance at national level and the inadequate level of interconnection
between Member States."

For gas, the report says that further progress "is dependent on improved
conditions for cross border exchanges and the development of a coherent
tarification and capacity allocation regime at EU level. The implementation of
the Madrid Guidelines and their development through the process set out in the
Commission's proposal for a Regulation will allow such improvements to be
made."

The Commission looks at customer switching as a guide to progress. Based on
experience in other sectors, it says that one might expect a well functioning
market to have around 15-20% of businesses changing supplier every year with
most, if not all, seeking to renegotiate tariffs with their current supplier
every year. For households, an annual level of switching of perhaps 10% would
seem a reasonable benchmark.

"Overall the data shows that, for electricity, the performance of the
different Member States in terms of the switching level for industry is, with
the exception of Belgium, Greece, and Luxembourg, relatively good," the
Commission says. For household customers, however, progress is slower with
only the UK and Nordic states meeting the rule of thumb of 10% per annum.

This story was published in Platts Power in Europe

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