Download 23/02/2006 - IFIEC Europe

Competition Directorate-General
23 February 2006
Sector Inquiry on the gas
and electricity markets
Dominik Schnichels, DG COMP
Inquiry under Art. 17 Regulation 1/2003
• Launched June 2005
• 3000 questionnaires sent
• One of the most extensive
investigations under EU competition
law
• Issues Paper
Preliminary Report
•
•
•
•
•
Market concentration
Vertical foreclosure
Market Integration
Transparency
Price formation
Preliminary Report - Gas
Introduction
Price (€/MWh)
Hub Prices
28
26
24
22
20
18
16
14
12
10
8
6
4
2
0
Jan-02
Jul-02
Jan-03
NBP Day ahead
Jul-03
Jan-04
Jul-04
Zeebrugge Day ahead
Jan-05
Jul-05
TTF day ahead
Price (€/MWh)
Border Prices
28
26
24
22
20
18
16
14
12
10
8
6
4
2
0
Jan-02
Jul-02
Waidhaus
Jan-03
Jul-03
Jan-04
EmdenTroll
Jul-04
Jan-05
Jul-05
Baumgarten
Concentration
• High levels of
concentration at
wholesale level
• Incumbents largely
control imports and
domestic production
• Traded markets
dominated by
incumbents
Incumbent share of imports
Incumbent share of
domestic production
Austria
80-90%
-
Belgium
90-100%
-
Czech Republic
90-100%
-
-
80-90%
France
90-100%
-
Great Britain
20-30%
40-50%
Germany
90-100%
80-90%
Hungary
90-100%
90-100%
Italy
60-70%
80-90%
Netherlands
50-60%
90-100%
Poland
90-100%
90-100%
Slovakia
90-100%
-
Denmark
Vertical foreclosure –
infrastructure
• Gas infrastructure remains mostly owned by
incumbents and not sufficiently unbundled
• Long-term capacity reservations in “transit”
pipelines and storage
Excluded from TPA
booked capacity: between 1 and 5 years
length not specified
Country I
Country H
Country G
Country F
Country E
Country D
Country C
Country B
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Country A
% of total storage capacity
Storage capacity booked long term
booked capacity: less than 1 year
booked capacity: 5 years and more
available capacity
Transit capacity– East/West axis
East/West axis: largely sold out until 2015
Primary capacity reserved / utilised (% of maximum
technical capacity)
Maximum utilisation
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Less than 2 years
Incumbent-affiliate
Btwn 2 and 5 years
Producer
Btwn 5 and 10 years
Without contract
More than 10 years
Average unsold
Prices – indexation
Western Europe
UK
Eastern Europe
0,8%
16,5% 0,6% 14,6%
2,9%
1,1%
1,1%
7%
0,7%
5,2%
2%4,6%
2,6%
2,1%
1,1%
30%
0,6%
4,9%
16,2%
47,2%
40,1%
Heavy fuel oil
Light fuel oil and gasoil
Gas price
50,1%
Electricity price
Coal price
Other
Fixed
General inflation
Crude oil
48,1%
Conclusions
• Wholesale markets in the EU generally maintain the
high level of concentration of the pre-liberalisation
period
• Lack of liquidity and limited access to
infrastructure prevent new entrant suppliers from
offering their services to the consumer
• Transit capacity, crucial for market integration,
could be used much more efficiently
• There is a lack of reliable and timely information
on the markets, essential for healthy competition
Preliminary Report - Electricity
Introduction
• Prices increase significantly since 2003
• Prices differ significantly between Member States
Electricity prices on the rise all over Europe
Wholesale electricity price developments 2000-2005
year-ahead base load in €/MWh
90
Germany
80
The Netherlands
70
UK
UK
France
60
Nord Pool
€/MWh
France
The Netherlands
50
40
30
Germany
Nord Pool
20
10
0
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Concentration
• Incumbents control
generation assets
giving them scope to
exercise market
power by
France
Available installed capacity
0,5%
8,2%
2,2%
2,5%
Undertaking A
Undertaking B
Undertaking C
Undertaking D
– withdrawing capacity
or
– increasing prices
Other
undertakings
86,7%
Belgium
Available installed capacity
17%
• Scope for influencing
prices exists at a
number of power
exchanges
(examples: I, E, DK)
Undertaking A
Other
undertakings
83%
Vertical foreclosure
• Many market participants complain about
inadequate unbundling of network and
supply activities
• TSO level:
– Grid connection for new power plants
– Interconnectors
– Transparency
• DSO level:
– Inappropriate switching procedures
– Lack of ‘Chinese walls’
– Discriminatory access tariffs
Market Integration
• Competition from imports is insufficient to erode
market power of incumbents
• More interconnector capacity is needed
• Many interconnectors are chronically congested
• Long term capacity reservations reduce capacity
available for new entrants
• Revenues from auctions not used for
interconnector expansions
Transparency
• The level of transparency varies widely
between Member States
• 83% of market participants are not content
with current levels of transparency
Im p o rtan ce o f in fo rm a tio n a cc o rd in g to s u p p lie rs
in d isp en sab le
im p o rtan t o r u sefu l
n o t u sefu l
T S O netw ork
95.2%
4.8%
Interc onnectors
91.8%
8.2%
Load
94.6%
5.5%
B alancing
90.7%
9.3%
G eneration (production)
86.2%
13.8%
G eneration (c apacity )
94.1%
5.9%
Conclusions
• Markets remain highly concentrated
giving incumbent operators scope for
exercising market power/influencing prices
• Competition from cross-border trade
does not so far reduce incumbents’ market
power
• Market participants complain about insufficient unbundling of network and supply
activities which calls for further reflection
• There is a general consensus that more
transparency is needed urgently
Closing remarks
Context
• Growth and Jobs strategy
(Lisbon)
• Green Paper on energy
announced
• High Level Group
Way forward for discussion
•
Competition case priorities
• Review of regulation
• Unbundling
H