The retail electricity market in the EU is to come into the spotlight with the European Commission announcing on 2 February 2009 that it will carry out a market study in this area. This has been prompted by the latest EU annual "Consumer Markets Scoreboard Report". While there is little detail at present, the European Commission has stated that the retail electricity market will be the target for a follow up market study for 2009 "to further investigate consumer conditions on specific household conditions, for example comparability of offers, the ease of purchase, and customer mindedness."
The Scoreboard Report found that less that two thirds of consumers are satisfied with their energy supplier and noted 60% of consumers reporting price increase from their energy supplier and only 3-4% reporting price decreases. It also concluded that switching is important in empowering consumers towards better outcomes and that "facilitating switching in key retail sectors should be a policy priority".
The European Commission has previously reviewed competition in the electricity markets in a sector inquiry which reported back in January 2007. This found various issues at the supplier level such as a high degree of market concentration and lack of liquidity, preventing market entry. However, this latest study will look at the market from a different point of view, focusing on consumer issues, rather than supply-side issues.
The Commission's investigation may follow lines similar to the investigation last year into competition in the Great Britain electricity and gas retail supply markets for domestic and small business consumers carried out by Ofgem, the GB gas and electricity regulator. For example, Ofgem's investigation covered:
- the customer’s perspective and experience of the market including access to information and barriers to switching supplier
- suppliers’ market shares, switching rates for different groups of customers (such as online, dual fuel, single fuel and pre-payment)
- the competitiveness of suppliers’ pricing in the different market segments and customer movement between payment types as well as suppliers
- the relationship between retail and wholesale energy prices
- the economics of new entry and the experience of companies trying to enter the energy market
Overall, Ofgem had concluded in GB no evidence of cartels but a number of proposed measures are currently under consideration as part of a follow on consultation, including:
- a requirement that different prices for different payment types must be cost reflective and a prohibition on undue price discrimination
- additional information obligations to customers relating to switching, including simpler easily comparable price metrics, information on available alternatives and a simpler switching process
- facilitating the smart metering roll out
- separate regulatory accounts for vertically integrated generation and supply businesses.
It is not clear at this stage whether the Commission would seek to go further and look at liquidity and market structure issues at the wholesale level that can affect prices to consumers.
The European Commission's press release sets out more detail.
