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Price caps harming Europe energy market – report

  Retail power price caps are still preventing effective competition in parts of Europe, according to a new report by the VaasaETT Global Energy Think Tank.

 

Retail power customers in 13 European Union countries have been free to switch their energy supplier since July last year. But prices set by government or regulators in many countries are allowing incumbent utilities to keep a firm grip on their markets because new entrants cannot beat them. „Price caps are a big issue.

Most of Europe has some form of regulated tariff and those tend to be so low that really no one can come in below those tariffs,” one of the report’s authors, Philip Lewis said. “It’s killing the market off before it gets started.” Bargain hunting consumers in Britain are still shopping around for better deals more than in any other country, as they have done for years, the report says. Many in the Wallonia region of Belgium have also dumped their old supplier over the last year, while some customers in Germany have started looking for better deals too. But the report found that average European switching rates were still less than 4% compared with 13% in Australasia and North America.

Although artificially-low prices set by governments and regulators have helped dampen the impact of higher fuel costs on customers bills over the last year, in the longer term it could harm efforts to cut energy use and keep up supplies. “Regulated prices are typically political, preventing the market from reflecting the true scarcity of the resource, preventing the customers from saving energy,” Lewis said. The World Energy Retail Market Rankings report on global switching activity concludes that competition is purely theoretical in France, Greece, Romania and Poland and is “barely visible” in Spain, Italy, Denmark, Austria and Ireland. (Reuters)