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EU: New ACER/CEER Annual Report on Internal
Electricity and Natural Gas Markets
ACER (Agency for the Cooperation of Energy Regulators) and CEER (Council of
European Energy Regulators) have recently published their Annual Report on the
Results of Moni-toring the Internal Electricity and Natural Gas Markets in 2012. This
second report looks at the retail and wholesale electricity and gas markets, as well
as consumer protection, in the European Union.
The end result of energy market liberalisation, market integration and improved
cross-border access should be a net benefit to the end user. Nevertheless, this
target is yet to be reached. Despite a substantial drop in demand, the price of
electricity for household consumers still increased by 4.6% and for gas by 10% in
2012.
Contact
Raluca Dîrjan
T: +32 2 743 40 41
E: r.dirjan@schoenherr.eu
According to Lord Mogg, Chair of ACER’s Board of Regulators and CEER President:
The advantages brought about by the single market, such as lower wholesale
electricity prices or a more efficient use of interconnectors identified in the study,
still have fully to benefit final consumers in the retail market.
The most relevant findings of the report are briefly listed below:
Retail Market
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despite low economic growth, gas and electricity prices have
significantly increased, both for households and industrial consumers,
in most Member States.
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after tax, electricity prices increased on average by 4.6% for
households and by 5.2% for industrial consumers between 2011 and
2012. For gas, after tax prices increased by 10% for households and
11% for industrial consumers.
•
There are substantial differences between pre-tax prices for electricity
and gas across the Member States, and this is true even for countries
with relatively similar regulatory frameworks for their retail markets.
•
In some Member States, the larger share of the electricity and gas
prices is made up of taxes and network charges rather than the
energy-only prices. Some of the extra charges are in fact a result of
the support schemes for renewable energy.
•
Regulated prices are still a feature of the majority of the retail markets
(18 Member States for electricity and 15 Member States for gas).
•
In a number of Member States, the main driver for setting the
regulated prices is political rather than the underlying costs of supply.
Keeping regulated prices restricts market entry, increases investor
uncertainty, and does not incentivize consumers to switch suppliers.
•
For the gas market, the Czech Republic, Great Britain, the Netherlands,
Slovakia and Spain are the Members States that host the largest
number of suppliers headquartered in another Member State. For
electricity, the most open market is Great Britain followed by the
Netherlands and Portugal.
•
Latvia, Lithuania, Estonia, Finland, Greece, Bulgaria, Poland, Portugal
and Slovenia are the least integrated gas markets.
THE INFORMATION IN THIS DOCUMENT IS INCLUDED WITH THE UNDERSTANDING AND AGREEMENT THAT SCHOENHERR IS NOT ENGAGED IN RENDERING LEGAL OR
OTHER PROFESSIONAL SERVICES BY POSTING SAID MATERIAL. THE INFORMATION AND OPINIONS CONTAINED IN THIS DOCUMENT ARE FOR GENERAL
INFORMATION PURPOSES ONLY, ARE NOT INTENDED TO CONSTITUTE LEGAL OR OTHER PROFESSIONAL ADVICE, AND SHOULD NOT BE RELIED ON OR TREATED AS A
SUBSTITUTE FOR SPECIFIC ADVICE RELEVANT TO PARTICULAR CIRCUMSTANCES. SCHOENHERR DOES NOT ACCEPT ANY RESPONSIBILITY FOR ANY LOSS WHICH MAY
ARISE FROM RELIANCE ON INFORMATION OR OPINIONS PUBLISHED IN THIS DOCUMENT.

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High transmission / distribution charges and high taxation influences
the entry choice between national markets. As a result, there is the
need to work on harmonisation of the cost assessment methodologies
for transmission and distribution charges to be able to progress
towards more market integration.
•
The main barriers to market entry are perceived to be: consumers’
reluctance to switch suppliers, retail price regulation, the regulatory
framework for the network charges, lack of liquidity, and insufficiently
unbundled electricity suppliers.
Wholesale Market
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The report confirms that market coupling is an important driver of
price convergence.
•
Following the implementation of market coupling, the overall efficient
use of interconnectors (i.e. power flowing from lower to higher price
zones) increased from 60% in 2010 to 76% in 2012.
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There is little use of cross-border capacity after the day-ahead market
closes; the unused capacity is roughly 60%.
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The report recognises that the increased penetration of intermittent
renewable energy raises challenges for the Transmission System
Operators (TSOs) to keep the system balanced. The TSOs will have to
use additional flexible resources to be able to balance the system. The
report concludes that the most efficient way to use the existing flexible
resources is to have a well-functioning market in which resources are
allocated based on price signals. The right price signals will also
stimulate the right amount of investments both in new generation and
in infrastructure. ACER believes that this result can be achieved by
finalising the full implementation of the Electricity Target Model for
cross-border trade, in particular the intraday and balancing
timeframes, which would enable the market to arrive at the prices
reflecting the correct value of flexibility.
•
Flexibility in the electricity markets requires an integrated and
functional gas market with an efficient balancing regime, storage
capacity (including line-pack), nomination time, bundled products (i.e.
energy and capacity) at interconnectors, and well-functioning
secondary capacity markets.
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The report recognises that given the current shape and substance of
the global gas market, European policies in and of themselves cannot
impact the price of gas in Europe.
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Although the gas consumption for EU 27 posted a year-on-year
decrease of 4.1% in 2012, gas prices continued to grow due mainly to
three factors: the lack of competition in terms of geographical sources,
the high demand for LNG in Asia (coupled with the high prices Asia is
ready to pay for LNG), and the indexation to the price of oil for longterm supply contracts.
•
Gas-on-gas competition improved in 2012, and the price of gas at
European hubs was lower than the forecasted prices under long-term
contracts. Full price convergence now exists in the North-West Europe
region. Prices in the Central and Southern Europe region (especially in
Austria and Italy) have also converged with those in the North-West
Europe region.
THE INFORMATION IN THIS DOCUMENT IS INCLUDED WITH THE UNDERSTANDING AND AGREEMENT THAT SCHOENHERR IS NOT ENGAGED IN RENDERING LEGAL OR
OTHER PROFESSIONAL SERVICES BY POSTING SAID MATERIAL. THE INFORMATION AND OPINIONS CONTAINED IN THIS DOCUMENT ARE FOR GENERAL
INFORMATION PURPOSES ONLY, ARE NOT INTENDED TO CONSTITUTE LEGAL OR OTHER PROFESSIONAL ADVICE, AND SHOULD NOT BE RELIED ON OR TREATED AS A
SUBSTITUTE FOR SPECIFIC ADVICE RELEVANT TO PARTICULAR CIRCUMSTANCES. SCHOENHERR DOES NOT ACCEPT ANY RESPONSIBILITY FOR ANY LOSS WHICH MAY
ARISE FROM RELIANCE ON INFORMATION OR OPINIONS PUBLISHED IN THIS DOCUMENT.

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In the gas market, liquidity increased in 2012 as a result of hedging
efforts towards spot trading due to greater economic uncertainty and
the renegotiation of some long-term contracts.
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The National Balancing Point (UK) and Title Transfer Facility (the
Netherlands) remained the most liquid and lowest-priced hubs.
Nevertheless, the majority of the traded volumes in Europe are still
negotiated over-the-counter. Other than these two hubs there has
been limited progress at the other European gas hubs, as most
Member States are still opting for national solutions.
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The report concludes that as a result of a weak market integration
across the EU, social welfare losses have risen to some several billion
Euros, with the highest losses in Bulgaria, the Baltic countries,
Slovenia, and Sweden.
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Cross-border interconnection tariffs are largely divergent from one
Member State to the next and are only partially transparent. In the
CEE region and for those Member States who joined in 2004 and 2007,
costing and pricing methodologies have not been fully published by the
TSOs and National Regulatory Authorities (NRAs) The report
recommends that Member States improve the information available on
tariffs and auction designs.
You can access the full report here:
http://www.acer.europa.eu/Official_documents/Acts_of_the_Agency/Publication/AC
ER%20Market%20Monitoring%20Report%202013.pdf
THE INFORMATION IN THIS DOCUMENT IS INCLUDED WITH THE UNDERSTANDING AND AGREEMENT THAT SCHOENHERR IS NOT ENGAGED IN RENDERING LEGAL OR
OTHER PROFESSIONAL SERVICES BY POSTING SAID MATERIAL. THE INFORMATION AND OPINIONS CONTAINED IN THIS DOCUMENT ARE FOR GENERAL
INFORMATION PURPOSES ONLY, ARE NOT INTENDED TO CONSTITUTE LEGAL OR OTHER PROFESSIONAL ADVICE, AND SHOULD NOT BE RELIED ON OR TREATED AS A
SUBSTITUTE FOR SPECIFIC ADVICE RELEVANT TO PARTICULAR CIRCUMSTANCES. SCHOENHERR DOES NOT ACCEPT ANY RESPONSIBILITY FOR ANY LOSS WHICH MAY
ARISE FROM RELIANCE ON INFORMATION OR OPINIONS PUBLISHED IN THIS DOCUMENT.