EU Electricity Prices Kept High By Uncompetitive Market

Germany and Spain had highest markup.

A lack of competition in the EU's wholesale electricity market is making prices "significantly higher" than in a totally open market, a report published April 20 by the EU's executive arm showed.

While rising fuel costs have contributed to electricity price increases since 2003, "wholesale electricity prices are significantly higher than would be expected on perfectly competitive markets," according to the European Commission study. "The differences are highest when only a few generators with available capacity are needed to meet demand, especially at peak time," the Commission said.

The results of the study show that "competition in EU wholesale electricity markets is not yet functioning properly," it added.

The study will be fuel for EU Energy Commissioner Andris Piebalgs' campaign to see member states follow through on their commitment to create competitive energy markets. The unprecedented study carried out a detailed analysis of the wholesale electricity markets of six EU member states; Belgium, Germany, Spain, France, the Netherlands and Britain (excluding Northern Ireland) from 2003-2005.

EU investigators analyzed hourly data on virtually all power plants in each market. Part of the study compared the actual market price in four of those countries with "what it would have been if the markets ... had been perfectly competitive." The "mark-up" -- separate from normal profits -- between the two was found to be highest in Germany and Spain and lower in Britain and the Netherlands. No conclusions were drawn for France and Belgium due to a lack of information or, in Belgium's case, an unreliable market price.

Copyright Agence France-Presse, 2007

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