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The liberalisation of Europe’s energy markets is set to expand and accelerate in the coming years. The expansion is due to the requirement for accession countries to meet the EU’s market rules, while at the same time the EU is revising its regulations which will i ncrease market opening. These processes are proposed despite serious concerns regarding the impact of liberalisation on the sustainability and functioning of the market.

The liberalisation and in most cases subsequent privatisation process has enabled a small number of companies to increase their dominance in the energy market. In particular, Electricité de France (EdF), RWE and Eon have increased their share of the EU market in recent years – by 7% in the last five years. However, as important as the overall EU market share, is the fact that these companies are acquiring dominant positions in the individual Member States markets, for example RWE and Eon obtaining the major non-nuclear generators in the UK, while also increasing cross utility ownership, such as the Eon/Ruhrgas merger. As a consequence these companies are gaining considerable influence in both the EU and national energy markets.

Unsurprisingly, these same companies are dominant in the acquitions in accession countries. However, the degree of their control is alarming. Of the total number of mergers and acquitions in accession countries by foreign firms, over 80% were made by EdF (with Gaz de France), Eon or RWE. Consequently, the market dominance that is already causing alarms in the EU will increase, not decrease following accession. The purpose of liberalisation was to increase competition but yet the process is actually restructuring the energy systems from national monopolies to regional oligopolies.

Such a process is bad for the market as it increases cross subsidy – on a national and transnational level – and reduce the relative power of the regulator. This will especially be true in accession countries where big companies, such as EdF, have at total economic turnover which is greater than the GDP of the countries they are investing in.

As well as increasing competition, market liberalisation was supposed to result in increase transparency, greater flexibility to deal with social and environmental concerns and the lowering of energy prices for the consumer. The degree to which this has occurred varied, but what is clear is that the full range of benefits that liberalisation could have brought to consumers have not reached the final customers. For example in the United Kingdom prices in the wholesales price of electricity have fallen by 18% in recent years, but the decrease in domestic consumers bills was only 2.5%, thus significantly increasing the profits of the electricity suppliers.

In 2003, the EU will adopt new proposals for the further liberalisation of the energy markets. These proposals are likely to further benefit the large and integrated electricity companies, who will be able to continue cross subsidy and increase their market dominance. Proposals to increase transparency have largely been ignored or distorted while amendments to increase public service obligations have been removed. The current proposals must not be passed as proposed and in particular accession countries, who will have entered the EU before the new rules are in force, must take note of the serious, environmental, social and economic consequences that they pose.

A detailed assessment of the current status of the liberalisation and privatisation of Europe’s energy sector, produced by Environmental Non-Government Organisations has been prepared.

In November 2002 at the European Social Forum in Firenze trade unions, politicians and environmental NGOs from Central Europe and the EU presented their views on the current situation. Copies of the overheads of some of these presentation are also available.