Efforts to step up market opening measures in the Gas and Electricity Internal Market Directives are needed, the Commission has said, and that the only way to bring about the required improvements to competition in the internal energy market is by further integrating national markets.

The Commission’s annual “benchmarking” report shows some progress, but 18 out of 25 Member States failed to respect the July 2004 deadline for implementation of the directives. Consequently, a number of infringement procedures were launched in the following October.

However, the markets in some countries, such as gas and electricity in the UK and electricity in the Nordic region, were already reported to be well-developed, with a robust level of customer activity and lower prices as a result.

The report cited insufficient integration between national markets as the main obstacle to the successful implementation of a competitive European energy market.

But the market was shown to be having a positive impact, and electricity prices were shown to have fallen in real terms by 10-15% since 1995 figures, even despite recent price rises (see related story).

In most countries, over 25% of large customers have switched supplier since the market opened, but these switching rates have not reached as high as 50% in any country.

Furthermore, in most cases, switching was only made to another domestic supplier. The report also revealed that foreign suppliers’ shares in national markets were generally less than 20%.

“The Commission’s report shows a huge variation in the success of market opening by Member States, but I expect a significant improvement once the directives are fully implemented,” Commissioner for Energy Andris Piebalgs stated.

“In the new global environment of higher primary energy prices, it is more important than ever for the European community to live up to its commitment for competitive gas and electricity markets.”

In 2005, the Commission will undertake a further in-depth review of progress in creating the internal electricity and gas market. On the basis of this market analysis, the EC will then assess the need for additional measures to improve functioning of the European energy market.

By Jane Kettle

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