Presentation ACER/CEER - Second Annual Report on the Results of Monitoring the Internal Electricity and Natural Gas Market
On 28 November 2013, ACER and CEER presented their joint Annual Report of November 2013 on the Results of Monitoring the Internal Electricity and Natural Gas Market in 2012.
We have briefly summarized hereafter the main conclusions of the report and what we have retained from the presentation and discussions. These notes are for general information purposes and should not be relied upon for other purposes. For the effective statements made we refer to the documentation below.
This second annual report of ACER/CEER focuses for 2012 on retail markets and consumer issues, on the main developments in gas and wholesale electricity market integration and on network access issues. The report also analyses continuing barriers to further market integration.
Summarized, the report draws the following conclusions:
Retail princes: despite low economic growth, gas and electricity prices rose significantly for both households and industrial consumers in the majority of EU Member States. In most EU Member States, household energy prices are greatly influenced by taxation and network charges, which usually make up more than half the total energy bill.
Entry barriers: relevant barriers to entry into retail energy markets persist across the EU. The main barriers to entry are the difficulties and reluctance of consumers to switch, retail price regulation and the regulatory framework for network pricing. The NRAs mentioned illiquid and concentrated wholesale gas markets and insufficiently unbundled electricity suppliers.
Consumer choice: switching of suppliers by household consumers remains low although some dynamism has been observed (Germany / Netherlands).
Price regulation: regulated prices remain an important feature of the retail markets. Although price regulation reduces margins, it is considered to dampen entry incentives, increases investor uncertainty and might prompt consumers to disengage from the switching process. Regulated prices should be set at levels which avoid stifling the development of a competitive retail market. They should be removed where a sufficient level of retail competition is achieved.
Consumer protection: although almost all EU Member States have transposed the 3rd Energy Package into national law, some disparity remains in the practical implementation of consumer protection due to differences of interpretation or transposition of the European provisions, especially as regards the supplier switching period, the protection of vulnerable consumers and alternative dispute resolution mechanisms.
Disputes: most EU Member States have implemented an alternative dispute resolution scheme, with in most countries a three-month limit on handling disputes. Significant differences exist in respect of data collection methods by NRAs.
Smart metering: most EU Member States have addressed the roll out issue of smart metering systems and performed the cost-benefit analysis recommended by the 3rd Energy Package. Some Member States have decided to roll out smart meters, others not. No common European standard for smart energy meters exists yet and lack of interoperability remains an issue.
Electricity - market integration; A significant scope for further wholesale electricity price convergence across Europe remains (18% decrease of price convergence was noted in CWE in 2012). Market coupling is recognized as an important driver of price convergence and led, for the day-ahead market, to an increase of 60% of the efficient use of interconnectors.
Electricity - loop flows: loop flows are an important barrier to market integration and to secure grid operation. Increased information disclosure in line with REMIT should remedy the lack of transparency with regard to the level of loop and transit flows and with regard to the number and costs of remedial actions by TSOs.
Gas - demand and price trends: gas consumption decreased in Europe by 4,1% in comparison with 2011 (as a result amongst others of the decrease of demand by electricity producers), but prices continued to grow.
Gas - liquidity: the liquidity in organised markets increased but the majority of traded volumes are still negotiated over the counter. Uncompetitive wholesale markets remain an issue in many EU Member States. Significant social welfare losses of several billion euros per year are noted as a result of imperfect integration and retail market fragmentation throughout the EU (especially in Bulgaria, the Baltic ‘energy island’, Slovenia, and Sweden).
Gas - cross-border transportation tariffs: cross-border interconnection tariffs are extremely heterogeneous and only partially transparent and tariff discrimination is hinted at. Long-term contracts still hamper price responsiveness.
Gas market - Gas Target Model: is under review to reflect the new challenges of the gas sector beyond 2014.
Gas market - transparency: full transparency compliance is not yet achieved, but improvements are being made.
After a brief and general introduction by the Lithuanian Vice-Minister, Ms. Zydrune Juodkiene, Lord Mogg and Mr. Alberto Pototschnig gave a presentation outlining the findings of the report.
This presentation and the content of the reportwas then discussed with the following stakeholders:
European Commission (Inge Bernaerts)
ENTSO-E (Pascale Fonck)
ENTSOG (Vittorio Musazzi)
BEUC (Monika Stajnarova)
EFET (Paul Dawson)
IFIEC Europe (Peter Claes)
Eurelectric (Anne-Malori Géron)
Eurogas (Margot Loudon)
We retained the following points of interests.
ACER voiced its concern on regulated pricing, calling it “perhaps a necessary evil”, but also calling attention to the observation that the electricity prices went up even more in the member states that know regulated electricity prices compared to other states. ACER also indicated that the regulated prices might have a hand in the unwillingness of consumers to switch providers, because the regulated prices cause the consumers to think that switching would make no difference, since they are guaranteed a regulated price anyway.
ACER and CEER, as well as the BEUC and Eurelectric, noted that the lack of provider switch by consumer is in a large part due to the lack of accessible information to consumers. Most consumers do not even know they have options, and do not know where to find information; In addition the switching procedures and complaint procedures are often perceived as too long and cumbersome to bother.
The European Commission also noted that the retail energy prices were rising, but was pleased to see the wholesale prices drop. However it voices its concern on seeing increased splitting up of the wholesale markets, which is a strong sign of a big price differences between different areas of the EU, and which is not good for the integration of the electricity market.
would like to see more price convergence in the EU, and considers market coupling and improving market conditions as key instruments;
believes that the Network Code on Capacity Allocation and Congestion Management (CACM) and its implementation will be a big step in the right direction;
wishes to bring to the attention that the advantages of price convergence need to be weighed against the costs of improving the electricity grids and other infrastructure and advocates an optimal use of the existing infrastructure;
considers the necessity of market design and developing long term price signals after implementation of Day Ahead Market Coupling, also for the Intra Day Market Coupling.
ENTSOG underlined the importance of quick implementation of the Network Codes, preferably before the deadlines.
The BUEC focused on the consumer rights and criticized the lack of information access for consumers.
EFET sees a well-functioning wholesale market as key to allow competition on the retail market. In that regard EFET:
sees the Day Ahead Market Coupling as only a first step, underlining that a fully common energy market needs Intra Day Market Coupling;
requests a focus on the costs of transport of energy;
asks for the development of continued initiatives for the market players to ensure competitive pricing.
IFIEC Europe was critical on the report, wishing it in the future to contain more information on:
the energy markets outside of the European Union and their influence on the Union;
the security of supply (on a European, national as well as a regional level).
IFIEC Europe also points out that many aspects of the energy market with regard to industries are purely national and as a result doubts Market Coupling is the absolute answer to ensure integration of the energy market.
Eurogas advocates for further elimination of the barriers for competition on the retail gas market and wants better accessible information towards the consumers.
R. Feltkamp / M. Godin