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Competition

PR(07)01: The Authority publishes its Concluding Report in the sector inquiry into competition in the EEA EFTA electricity markets

9.1.2007

The EFTA Surveillance Authority has today published its Concluding Report on the findings of the electricity sector inquiry. Compared with the situation in many EU Member States, competition appears to be functioning fairly well in the wholesale electricity markets in Norway. However, certain concerns remain. Some issues were identified in relation to the market structure in Iceland. The electricity market in Iceland is however, rather unique as large power intensive users in Iceland tend to consume a high proportion of electricity generated   and the liberalisation process is at an early stage. Liechtenstein is to a significant extent dependant for its electricity supplies on the main Swiss electricity generator. The pending liberalisation proposals in neighbouring Switzerland may have an impact on the competitive landscape in Liechtenstein.

The European Commission has also published in parallel a Concluding Report on the results of its energy sector inquiry (gas and electricity). Together, the Concluding Reports of the Authority and the Commission provide an overview of the competitiveness of the electricity markets in the whole of the EEA.

A well-functioning electricity market is essential in meeting the challenges facing the EEA economies of sustainability, security of supply and competitiveness. The Sector Inquiry has focussed on the competitiveness of the electricity markets of the EEA EFTA States.

Detailed results were published in the Authority's Preliminary Report in February 2006. The Authority also carried out a public consultation, which largely confirmed the analysis presented in the preliminary report and provided additional useful information. The main barriers to effective competition in the EEA EFTA States identified in the preliminary report have not changed. However, since publication of the preliminary report in February 2006, the Authority has been able to strengthen and deepen its analysis.

First of all the Authority has been able to analyse information that was not available at the time of the preliminary report. In particular, the Authority has reinforced its analysis of market concentration levels, congestion levels, and market surveillance methods in Norway. Further examination of prices in Iceland following liberalisation and other market developments has also been performed. In Liechtenstein, the Authority has conducted an analysis of wholesale electricity pricing and an assessment of the possible implications of pending liberalisation proposals in neighbouring Switzerland. Finally, the Concluding Report addresses the comments received in the public consultation.

A common theme emerging from the sector inquiry is the existence of a relatively high level of concentration in the wholesale electricity markets of the EEA EFTA States. Several customers expressed concerns about the market power of the main electricity generators. 

In the view of some of the respondents to the sector inquiry, there may be some limited issues in Norway concerning unbundling of distribution and supply activities. The Norwegian government is presently formulating legislative proposals to address these issues. Existing long term power purchase agreements under which power intensive energy users obtain electricity pursuant to favourable conditions are gradually being phased out in Norway. Such long term power purchase agreements may raise competition concerns.

Certain concerns were raised in relation to the high levels of market concentration in generation in Iceland. The electricity market in Iceland is however, rather unique as large power intensive users in Iceland tend to consume a high proportion of electricity generated. The process of liberalisation in Iceland is also at an early stage.

Due to its geographical location Liechtenstein is to a significant extent dependant for its electricity supplies on the main Swiss electricity generator. Depending upon the outcome of the pending liberalisation proposals in Switzerland and bilateral negotiations between the EU and Switzerland for network access, customers in Liechtenstein may be able to switch to other EEA suppliers and transit electricity across Switzerland. Full details of the Authority’s conclusions may be found in the text of the Concluding Report.

The Authority launched the sector inquiry into competition in the electricity markets of the EEA EFTA States on 22 June 2005. The sector inquiry has been carried out in close co-operation with the European Commission which launched an energy sector inquiry into the European gas and electricity sectors on 13 June 2005. On 16 February 2006, the Authority published its preliminary report opening a two-month consultation period. The publication of the Concluding Report closes the Authority's electricity sector inquiry.

For further information, please contact:

Mr. Justin Menezes
Officer, Competition & State Aid Directorate
Tel. (+32)(0)2 286 18 84

10 January 2007




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