Electricity InquiryMain DG Competition conclusions

Jean-Paul Aghetti

IFIEC Energy Forum

February 2006

IFIEC EUROPE – International Federation of Industrial Energy Consumers

Slide 1

IFIEC EUROPE – International Federation of Industrial Energy Consumers

Outlook: Post KyotoOutlook: Post Kyoto

EU ETS not working properly serious threat to EU industry‘s competitiveness and survival

Very weak basis for a proactive and enthusiastic Very weak basis for a proactive and enthusiastic industry involvement and co-operation in designing industry involvement and co-operation in designing

and deciding on a Post Kyoto strategyand deciding on a Post Kyoto strategy

Market Concentration

IFIEC has always said the electrical companies didn’t compete.

IFIEC EUROPE – International Federation of Industrial Energy Consumers

When analysing whether there is scope to withdraw physical capacity, it appears that load factors have increased over time in Germany suggesting higher

efficiency levels and a tighter supply/demand balance. Significant generation capacity – most of it with low

marginal costs was retired in Germany despite slowly increasing demand.

Also, certain plants with rather low marginal costs did not operate at all times

Market integration

IFIEC was always reluctant on auction for cross-border capacity.

As DG COMP ?

IFIEC EUROPE – International Federation of Industrial Energy Consumers

Inefficient congestion management methods (including explicit auction)

Transparency

What are we waiting for ?

IFIEC EUROPE – International Federation of Industrial Energy Consumers

The need for greater transparency is widely recognised. Lack of transparency amounts ton an entry barrier, undermines the level playing field between market

participants.

Price formation

How can we explain the electricity price from 34 €/MWh to 56 €/MWh in less than one year ?

IFIEC EUROPE – International Federation of Industrial Energy Consumers

Coal prices have remained relatively stable thus not explaining any prices increases. Analysts cannot yet agree to which extent the value of CO2 allowances is priced into

electricity prices.

Price formation

What is the opinion of the referee (s) ?

IFIEC EUROPE – International Federation of Industrial Energy Consumers

Industrials users claim that electricity producers should not entitled to factor in the value of allowances, as there

were largely distributed for free.Generators claim that the value of CO2 allowances are

opportunity costs which can be factored in legitimately.