The European Commission published the final report of its 'Sector Inquiry' on 10 January 2007.
What is the Sector Inquiry?
The European Commission’s energy sector inquiry was launched in June 2005, pursuant to Article 17 of Regulation (EC) No. 1/2003, with the objective of identifying the barriers currently impeding the development of a fully functioning open and competitive EU wide energy market. The preliminary report was published in February 2006.
The final report confirmed the Commission’s initial analysis that barriers to competition exist in a number of areas. It focussed on:
- market concentration/market power,
- vertical foreclosure,
- lack of market integration (including lack of regulatory oversight for cross-border issues),
- lack of transparency,
- price formation,
- downstream markets,
- balancing markets, and
- liquefied natural gas.
Furthermore, it called for urgent action and for priority to be given to four areas:
- achieving effective unbundling of network and supply activities,
- removing the regulatory gaps (in particular for cross border issues),
- addressing market concentration and barriers to entry, and
- increasing transparency in market operations.
Ofgem strongly welcomed the findings of the Sector Inquiry and believes the Commission must make full use of its competition powers where evidence of abuses exist and in the examination of mergers and acquisitions.
Application of EU Competition Law
Ofgem is a competition authority responsible under the Competition Act 1998 for enforcing competition law in the gas and electricity sectors. The substance of UK competition law is the same as Arts. 81 and 82 of the EC Treaty except for geographical scope.
When a competition complaint is raised that relates to the commercial activities connected with the generation, transmission or supply of electricity or the shipping, conveyance or supply of gas, Ofgem has the same powers as the OFT to investigate and take action under UK or EC competition law.
Fur further information on the application of concurrent powers by UK competition authorities see the Office of Fair Trading document, Concurrent application to regulated industries - PDF, 190KB - opens in a new browser window.