Stagnating competition in Dutch electricity market

07 February 2008

Pauline Kuipers

Dutch consumers pay relatively high prices for electricity when compared to neighbouring countries. The cost of electricity may come down by several dozens of euros each year provided electricity transmission at cross-border interconnectors is improved, states the Netherlands Competition Authority (NMa). The NMa calls on the transmission system operators to join forces to this end. This is required in order for energy providers to make an optimal use of buying opportunities across North-West Europe and to increase price competition. These are the main findings of the NMa’s annual monitoring report on the functioning of the electricity wholesale market.

Electricity market

The regulator concludes that the Dutch electricity wholesale market is still characterised by a limited number of major producers and high prices. The analysis put forward by the NMa confirms the findings of the European Commission earlier this year, according to which higher prices are due to limited competition in the wholesale market. Through extending the available interconnection capacity, The Netherlands will further integrate into the North-West European market. This will enhance competition in the domestic market.

Last summer, Ministers and regulators representing countries in the region of North-West Europe (Germany, Belgium, The Netherlands, Luxemburg and France) agreed on a set of specific measures, as a prerequisite to creating a North-West European market. These measures included the introduction of cross-border ‘intraday’ trade. In order for the action plan to be implemented, TenneT, the Dutch TSO, must rapidly expand available cross-border transmission capacity, according to NMa report findings.

Gas market

Measures are also required to improve competition in the wholesale market for natural gas. The NMa’s annual monitoring report on the functioning of the gas market identifies a number of major bottlenecks impeding competition in the wholesale market. In particular, market parties indicate a shortage of available gas import capacity, gas storage capacity and quality conversion, while at the same time these facilities are not always being optimally used. Report findings confirm the need for the action plan which was presented by the NMa to the Minister of Economic Affairs in early October 2007. The regulator urges for better rules of play and transparency in the gas market, which requires further integration into North-West Europe also.

Source: Press Release NMa, 10-12-2007at www.nmanet.nl.

Authors

Kuipers-Pauline

Pauline Kuipers

Managing Partner
Netherlands

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