Wholesale energy prices continued to decrease in 2014. This fall had a positive impact on the prices paid by industrial consumers, but often not on the energy bills of residential customers.
According to the latest Market Monitoring Report presented today by the EU Agency for the Cooperation of Energy Regulators (ACER) and the Council of European Energy Regulators (CEER), 2014, household electricity bills in the EU increased, on average, by 2.6% with respect to the previous year, and gas bills by 2.1%.
Alberto Pototschnig, ACER Director, highlighted that “whilst half of the household bill is non-contestable, the other half of the bill is open to competition. There needs to be competition both at wholesale and retail level to ensure that EU energy consumers reap the full benefits of market liberalisation. Market integration efforts should continue and be intensified. Social welfare losses for Europeans due to unscheduled electricity flows alone total about 1 billion euro every year”.
The Report highlights the need to:
The Report confirms that day-ahead market coupling in electricity has enabled a more efficient use of capacity and helps price formation. It calls for coupling to be implemented on the remaining 12 (out of 40) borders within the EU. Also, national security of supply approaches should be coordinated, including through a European-wide adequacy assessment. For gas, the Report reveals there is an increasing price convergence among EU hubs as well as a narrowing gap between hub and long-term contract prices. Although gaps persist, recent infrastructure investments, in particular in reverse flow capabilities, are bearing fruit.
Any benefits for final consumers?
Although the lower wholesale prices did not result in lower retail prices in most countries, the Report shows that countries with longer experience of open markets generally offered more choice (including price preservation periods, dual-fuel offers or specific renewable features) to consumers who were in turn more active. Retail market concentration, however, remained high in general and higher in gas than in electricity.
Commenting on the consumer’s experience with energy markets, Lord Mogg, Chair of ACER’s Board of Regulators and CEER President, said: “More than half of all consumer complaints were related to prices, contracts and bills. Much more needs to be done to improve the functioning of retail markets and to gain the trust of customers to engage in our markets, including ensuring they get the information and services they need. Also, more than 80% of EU energy consumers remain with their original suppliers seven years after retail market liberalisation. Promoting well-functioning retail markets is therefore a core focus for regulators”.
Which are the main barriers to competition?
Despite the progress registered during 2014 towards completion of the Internal Energy Market, barriers to full market integration remain in most Member States, with the Baltic region and the South Eastern part of the EU facing the greatest challenges. According to the Report, in these regions the functioning of wholesale markets and transparency in price formation should be improved, while infrastructure should be further developed to support market integration.
If you wish to find out more:
ACER Press Release
ACER Citizens’ Summary
ACER Market monitoring Report 2015