Update on failing internal market electricity and gas

(September 2006) EPSU has requested Professor Steve Thomas to continue to monitor the working of the internal market for electricity and gas. This new paper contains analysis of recent papers of the European Commission, description of the headline news mergers and acquisitions, the experience of the author with French EDF and German Eon (active in the UK), the upcoming turmoil on the Norwegian market, prices in the UK and the following damaging conclusion and verdict on Commission Predident Barosso's plans for more competition:

(...)If markets cannot be created, the standard pro-competition measures, such as breaking up dominant companies, forcing liquidity into markets will be counter-productive. Large, stable companies with strong capabilities, long-term strategies and good employment practices will be replaced by much less stable companies with little commitment to the long-term development of the sector. Liquid spot markets will make long-term investment so risky as to impose a substantial risk premium on investment costs, raising overall costs substantially. Liquid spot markets will also tend to generate a large amount of price volatility because prices will tend to collapse if there is a surplus and sky-rocket if there is a shortage. This will make life intolerable for consumers, especially electric-intensive industry and poor residential consumers, both of whom rely on predictable, affordable prices to survive. (...)

- For the full report

Understanding European policy on the internal market for electricity and gas -
Evaluation of the Electricity and Gas Directives
by Professor Steve Thomas,
Public Services International Research Institute University of Greenwich,
September 2006