Thursday, 7 April 2011

Name the price... on regulation of end-user energy prices.

Yesterday the European Commission formally requested Italy, Poland and Romania to bring their national legislation on regulated end-user energy prices in line with EU rules.

What does that mean? The EU law promotes market self-regulation, which means that the prices for energy should be set based on supply and demand. If the prices for the end-users are set by that state, then on one hand you could argue that consumers should be safe from over-pricing due to any energy crisis that might happen, but on the other hand there is no possibility for the companies who are on the market to compete and to offer better deals to consumers. The market becomes underinvested, the prices end up being unnecessarily high, companies might not be willing to enter such a market which often leads to monopolistic situation. The consumers end up having limited choices or no choice at all when all the options look the same...

These three mentioned countries have been accused by the European Commission of not having complied with the EU law. E.g. Poland demands of energy enterprises to specify the end-user prices for gas and then to obtain a prior approval from the national regulatory authority for such prices. If after this formal notification, there will be no adjustment of national regulations, the case will be directed to the ECJ.

Press release - here.
More on internal energy market - here.

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