The Commission has published a detailed study carried out by an external consultant which finds that fuel costs have contributed to the increase of EU electricity prices since 2003, but that wholesale electricity prices are significantly higher than would be expected on perfectly competitive markets. The differences are highest when only a few generators with available capacity are needed to meet demand, especially at peak time. The results of the study broadly support the conclusions of the Commission's Final Report of the Energy Sector Competition Inquiry, namely that competition in EU wholesale electricity markets is not yet functioning properly.
The study is the first of its kind, as it is based on a unique database of more than one billion data points essentially provided by market operators themselves, and analyses hourly data on virtually all power plants in each market. The study consists of three parts:
?? The first part of the study looks at how many operators are effectively competing on the market on an hourly basis, looking both at available installed capacity and effective generation. The study confirms the findings of the Sector Inquiry that most markets are concentrated whatever the measurement adopted.
?? The second part of the study reports on the difference (“mark-up”) between what the price of the market was in the period and what it would have been if the markets in DE, ES, NL, and UK had been perfectly competitive. The study shows that the mark ups vary over time and between Member States. Mark-ups are generally higher in DE and ES, and lower in GB and NL. The mark-up identified in the study is not the same as the profit of each company. Profits depend on many other factors (type of plants owned, amortisation of the plants, sale channels used etc). However higher mark-ups will usually mean higher profits. This second part of the study also examines the impact of fuel prices, with the largest price rises being in NL and GB, essentially due to the large fleet of gas-fired plants in those markets.
?? The third part of the study looks at the relationship between the number of operators competing at a given time and the "mark-ups". The analysis corrected for some other possible causes of higher mark-ups such as the lack of electricity generating capacity of the whole market and peak and seasonal variations in demand, but the correlation between mark-ups and indispensability of certain operators was confirmed. [20 April 2007]