UK Lawmakers' Inquiry Sees Significant Flaws In UK Energy Market
Monday July 28th, 2008 / 0h16
LONDON -(Dow Jones)- A parliamentary inquiry concluded Monday there are significant flaws in the U.K.'s gas and electricity markets and called on the regulator, Ofgem, to conduct a thorough investigation and refer the sector to the Competition Commission if it can't come up with remedies. The inquiry, conducted by parliament's Business and Enterprise Select Committee, also raised concern over the possible imminent takeover of nuclear generator British Energy PLC (BGY.LN) by Electricite de France SA (1024251.FR). The U.K.'s wholesale electricity market, "may be undermined by market consolidation, such as the takeover of British Energy," the committee said in its report. It called on Ofgem and the Competition Commission to, "ensure no single generator has excessive market power." "It is clear that there are very real problems in the energy markets at all levels," said the committee's chairman, Peter Luff. "Our view is that changes can best be made through improving market design, by taking specific regulatory steps, and by continuing to work for liberalization of European markets." "Ofgem, though, is going to have to demonstrate a rather greater sense of urgency than has been apparent so far," he said. The committee said it found no evidence of anticompetitive collusion between the big six suppliers in the U.K. - Centrica PLC (CNA.LN); Scottish and Southern Energy PLC (SSE.LN); the U.K. arm of Germany's E.ON AG (EOA.XE); Npower, the U.K. arm of RWE AG (RWE.XE); ScottishPower, a subsidiary of Spain's Iberdrola SA (IBE.MC); and EdF Energy, the U.K. arm of Electricite de France SA (1024251.FR). However, it advised the regulator to remain watchful for companies that were, "abusing their market position to choke off new entrants," and refer the matter to the Competition Commission if they find any evidence of this. "In a retail market dominated by six major players, it is easy for those players to make informed judgments about the behavior of their competitors...this alone can distort competition," the report said. The inquiry also raised concerns about the day-to-day functioning of gas and electricity markets in the U.K. and the impact this is having on prices and competition. The wholesale electricity market has, "a severe lack of liquidity," that is contributing to price volatility and dulling market signals for potential new investors in U.K. power generation, the report said. It also concluded that the liquidity on the forward gas market beyond a few months into the future, was lacking and recommended that "Ofgem investigates urgently why gas producers seem unwilling to trade on the forward market." The committee also criticized the government for failing to spot and act on the growing need for gas storage as domestic U.K. production declines. "This is now an issue of national importance," the report said. Ofgem should also investigate the rules governing the usage of the Isle of Grain liquefied natural gas import terminal, which it said could be contributing to the under use of the facility, the report said. The committee predicted that, "gas and electricity bills for consumers (will) rise significantly in the near future, over and above the increases already announced this year." U.K. industry may struggle to compete with European rivals because they face comparatively higher energy bills, the report concluded. EdF Energy raised its gas prices by 22% and its electricity tariffs by 17% Friday, blaming rising wholesale energy costs. Other suppliers are widely expected to do the same shortly. Company Web site: http://www.parliament.uk -By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; james.herron@dowjones.com -0- Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=8ro1ps7j8xw5pBCRgA4Huw%3D%3D. You can use this link on the day this article is published and the following day.
Electricité de France (EDF) est le n° 1 français de la production, de la commercialisation et de la distribution d'électricité. Le CA par activité se...
