The overall objective of the Competition Law Sector Inquiry is to address the barriers currently impeding the development of a fully functioning open and competitive energy market throughout the EU by 1 July 2007. The Competition Law Sector Inquiry has highlighted three major "problems areas" which are causing the European internal energy market to not function properly:
1. It is too highly concentrated (incumbents have very high market shares in their respective national markets). This restricts competition at the wholesale and retail level, as new entrants are dependent on a vertically integrated incumbent for services through the supply chain.
Proposed actions
· In the context of merger control, implementation of structural remedies such as divestiture requirements to prevent further market concentration.
· Introduction of energy release plans to develop market liquidity and reduce the effect of concentration. This includes electricity virtual power plant auctions and gas release plans which require incumbent companies to sell defined volumes of energy, usually on large scales, combined with the release of network capacity.
· Analysis by the national regulators of the conditions in their respective markets in co-operation with competition authorities in order to develop further measures to increase liquidity in the market. Some Member States have already introduced ceilings on ownership of electricity generation and long-term contracts to reduce market power by divestiture of production, asset swaps and contract releases.
2. It is characterized by a high degree of vertical integration - between generation, supply and network - leading to a lac ...