The Energy Sector Competition Inquiry was launched in June 2005 and is a competition investigation based on Article 17 of Regulation 1/2003. On 10 January 2007, the Commission published its final report on the Inquiry, concluding that consumers and businesses are losing out because of inefficient and expensive gas and electricity markets.

The Energy Sector Competition Inquiry was launched in June 2005 and is a competition investigation based on Article 17 of Regulation 1/2003. On 10 January 2007, the Commission published its final report on the Inquiry, concluding that consumers and businesses are losing out because of inefficient and expensive gas and electricity markets. The Commission highlights several major shortcomings in the electricity and gas markets in this final report and proposes a series of individual action points to improve the regulatory framework for energy liberalisation. In this regard, the Commission has already conducted numerous inspections at the premises of those companies where the Inquiry has suggested that an investigation is warranted.

The final report highlighted that the most serious problems within the energy sector are:

  • Too much market concentration in most national markets
  • A lack of liquidity, preventing successful new entry
  • Too little integration between Member States' markets
  • An absence of transparently available market information, leading to
  • Distrust in the pricing mechanisms.

In addition, the Commission takes the view that:

  • The current level of unbundling between network and supply interests has negative repercussions in market functioning and investment incentives
  • Customers are tied to suppliers through long-term downstream contracts
  • Current balancing markets and small balancing zones favour incumbents
  • LNG supplies can increase upstream competition and security of supply.

As a result of the Inquiry and, more particularly, the Preliminary Report to the Inquiry, the Commission has already initiated a number of anti-trust cases where the Commission is suspicious that anti-competitive behaviour is intensifying the problems identified by the sector Inquiry. In addition to enforcement in individual cases, the Commission has identified the need to address key problematic issues and solutions in relation to the market structure and the regulatory environment in the energy sector.

The spotlight is clearly on the energy companies and the Commission's focus is unlikely to diminish over the coming years. It is likely that the Commission will initiate a number of new mechanisms to regulate the energy sector and is likely to target the main companies with focused and increased fervour.