Competition policy in the energy sector : Squaring the circle ?

The specific technical features of electricity and gas, both on the supply and on the demand side, make these sectors markedly different from all others. Because of the peculiarities of price formation in electricity markets, market integration need not benefit consumers even if it increases productive efficiency. Also, market power may be present in little-concentrated markets, while, conversely, the degree of concentration may in some cases have no impact on prices. The impossibility of storing electricity makes market manipulation and exploitative prices real risks in peak-demand periods, but it is very difficult to tell between abusive prices and the normal high prices that need to arise in such periods in order to cover the cost of peak investment. Finally, the Commission’s wariness of long-term contracts and its insistence of ownership unbundling between transportation and other activities so far lack a solid justification. Regarding gas, while increased competition in downstream markets may foster the diversification of supply sources, it may also shift rents towards the countries owning natural gas reserves, and this tension calls for new, imaginative solutions.

1. The electricity and gas sectors warrant a specific interest for several reasons. First, the issue of competition in these sectors has been for several years, and still is, at the top of the political agenda of the European Commission and within member states. Just like any recently and still incompletely liberalised sector, energy is rife with antitrust cases. On the merger side, former national monopolies have been piling up cash thanks to high prices and have gone on a cross-border shopping spree so as to form European giants, which gave rise to several national and European merger decisions (EDF/EnBW, EDP/GDP, Endesa/Gas Natural, ENEL/Acciona/Endesa, Suez/GDF, E.On/MOL, E.On/PowerGen, Iberdrola/Scottish Power, etc.). On the antitrust side, liberalisation has gone through the

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David Spector, Competition policy in the energy sector : Squaring the circle ?, mai 2008, Revue Concurrences N° 2-2008, Art. N° 17653, pp. 50-56

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