02 March 2006 | Rebecca Ellinor

UK buyers have welcomed a European Commission initiative to liberalise the energy market across the EU.

An eight-month EC investigation has revealed the continent suffers from powerful national and regional monopolies, a lack of transparency, little cross-border competition and poor effective competition in price setting.

It concluded the market is difficult for new entrants because many existing suppliers control infrastructure such as storage and pipelines. The lack of competition reduces choice and enables incumbent suppliers to raise prices.

The EC has issued a preliminary report on the inquiry, which is examining breaches of competition law in European electricity and gas markets and addresses barriers to an open market.

The commission has threatened legal action using its "anti-trust" powers against companies that impede competition. Further, it is investigating violations of rules concerning reduced energy flows and artificially inflated prices.

In November, UK gas set a record price of 165p/therm. Utility consultants Power Efficiency said that on the same day small quantities of gas were being bought and sold in the Netherlands for 43p/therm.

Responding to the preliminary report, Bobby Collinson, managing director of Power Efficiency, welcomed the report but added: "It is staggering how much work the commission has to do."

He said simple, fairly-priced access to pipelines "is still a long way off" and called for the British model to be imposed with network companies separate to suppliers. Gas tied up in long-term contracts should be released and use of international pipelines and storage, often fully-booked five or 10 years ahead, should be cancelled and auctioned off one year at a time, he said.

Andrew Bainbridge, director general, Major Energy Users' Council, said: "We hope the EC will impose severe fines or use its anti-trust power to break up those companies that refuse to follow the liberalisation route."

Energy regulator Ofgem said the EC was likely to face "stiff resistance" from energy firms.

The EC report is subject to consultation. Send your views to comp-energy-sector-inquiry@cec.eu.int before 1 May.

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