1

Energy market liberalisationThe Austrian experience

EPSU ENERGY CONFERENCE4th of november 2005

BrusselsPresented by Gunda Kirchner, researcher Austrian

Arbeitkammer, Vienna

Seite 2Chamber of labour

Represents the interests of 3 million employees and consumers in Austria.

Main tasks:

Fundamental research for the benefit of workers and consumers Participation in and control of legislation Direct Services for the members:

• individual consultation, • legal assistence in labour-law disputes

Seite 3Content

1. Liberalisation of the energy markets

2. Regulation structure

3. Structure and development of energy prices

4. Effects on employment

5. Security/quality of supply

Seite 4Content

1. Liberalisation of the energy markets

2. Regulation structure

3. Structure and development of energy prices

4. Effects on employment

5. Security/quality of supply

Seite 5European market opening 1996

National application up to february1999

Market opening for wholesale customers with annual need of 9 GWh

Regulated or negotiated access

Unbundling of accounts for TSO‘s from other business areas

Independent body to handle disputs about grid access

Seite 6Austrian electricity market opening19. february 1999

40

20

9regulated grid access

Independent mediation for grid access

Industrial consumers

19.2.1999

19.2.2000

19.2.2003

Seite 7Austrian electricity market opening 1st of october 2001

All consumers

Austrian Regulator

Seite 8European acceleration 2004

Market opening for all consumers per 1.7.2007Legal unbundling for vertical integrated firms with more than 100.000 connected customers up to 1.7.2007Added measures for consumer protection, to reach higher transparence in particularProvider of last resort

Seite 9

Electricity market opening EU-25in TWh and percent

050

100150200250300350400450500D

euts

chla

nd

Gro

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anni

Spa

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Sch

wed

en

Nor

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and

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ien

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rg

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enZy

pern

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land

in Prozentin TWh

S.: EU

Seite 10Gas market opening EU-25 in bcm and percent

S: EU

020406080

100120

Gro

ßbrit

anni

enD

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chla

ndIta

lien

Nie

derla

nde

Spa

nien

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ich

Dän

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eden

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ien

Bel

gien

Irlan

dLu

xem

burg

Fran

krei

chU

ngar

nP

olen

Slo

wak

ei

Percentbcm

Seite 11What‘s the matter now in Austria?

LLegal unbundling for distributors of gas in 2002, for electricity by 1.1.2006 !!

AAdded transparence for household consumers

PProvider of last resort

Seite 12Content

1. Liberalisation of the energy markets

2. Regulation structure

3. Structure and development of energy prices

4. Effects on employment

5. Security/quality of supply

Seite 13The Regulation bodymain responsibilities

1. Minister of economic affairs:= supreme federal authority for energy affairs

2. Energie-Control GmbH (=ltd.): Manager is bound by the instructions of 1. and office of 3.monitoring and controlling; statistics; comparison of tariffs; competition monitoring; mediation

3. Energie-Control Comission: independent regulation body, 3 persons – authorised by the

government, no direct control mechanismgrid tariffs; disputs about grid access – mediation;

4. Advisory council for electricity and gas:Members are e.g. representatives of market participantsAdvises on grid tarifs; terms of contract – distributors, all legal proposals of the regulator and the minister concerning energy

– e.g. renewables

Seite 14Regulatordecreased grid tariffs

Electricity:

430 mio € from 2 billions € since 2001

Gas:

32 mio € from 450 mio € since 2002

Seite 15Content

1. Liberalisation of the energy markets

2. Regulation structure

3. Structure and development of energy prices

4. Effects on employment

5. Security/quality of supply

Seite 16The electricity costs

Capacity and workNetwork loss

Network access Etc.

+

+

Electricity price Grid tariff

RenewablesSmall hydro power (10 MW)Combined heat and power

Stranded costs Electricity tax

20%VAT

Taxes and fees

Seite 17Electricity price structure – household3500 kWh per year

25%

46%

12%

17%energy pricegrid tarifftaxes and fees20% VAT

Seite 18

Development of household prices electricity, gas, district heating

Austria

90

95

100

105

110

115

120

125

Jän.0

0Mai.

00Sep

.00Jä

n.01

Mai.01

Sep.01

Jän.0

2Mai.

02Sep

.02Jä

n.03

Mai.03

Sep.03

Jän.0

4Mai.

04Sep

.04Jä

n.05

pric

e in

dex

(100

= a

vera

ge 2

000) GAS

DISTRICT HEATING

ELECTRICITY

Q.: EVA

Seite 19Electriciy prices household EU-25

A

AT: full liberalisation

S: EU

Seite 20

Electricity cost structureindustrial customer

grid level 3, 265 GWh

grid tariff21%

electricity price63%

Stranded Costs 1%

energy tax, net2%

supplements for res, shp, chp

13%

Seite 21Cost structure industrial customer24 GWh per year

S: EU

Seite 22Cost structure industrial customer 50 GWh per year

S: EU

Seite 23Content

1. Liberalisation of the energy markets

2. Regulation structure

3. Structure and development of energy prices

4. Effects on employment

5. Security/quality of supply

Seite 24Employment in the Austrian electricity sector

1995 1998 2003

30.70028.500

23.000

0

5.000

10.00015.000

20.00025.00030.000

35.000

-2.200 -5.500

2001: full liberalisation of the Austrian electricity market

1996: First EU-directive

1999: National adoption

S: Statistik Austria, Forba, AK

Seite 25Employment in the Austrian gas sector

2366 2370

2020 2070

1800

1900

2000

2100

2200

2300

2400

2000 20012002 2003Oct 2002: fully market

opening gas

S: Statistik Austria, Forba, AK

Seite 26Employment in liberalised infrastructures

The main objective is to reduce the labour costsAbout 50 % of all employees are loosing their jobs within the first 10 years of market opening or privatisationMore jobs are cut by the incumbents than created by new (private) firms in the sectorNew jobs are worse – less money, new income structure e.g. performance related pay componentsShortened brake hours and rest periodsFlexibilisation of working hoursOutsourcingMuch more stress and uncertainty for the employeesIncreasing untypical and precarious jobsWorsened conditions for trade union

Seite 27Content

1. Liberalisation of the energy markets

2. Regulation structure

3. Structure and development of energy prices

4. Effects on employment

5. Security/quality of supply

Seite 28Annual non-availability of electricity unplanned

Seite 29Annual non-availability of electricity in Austria – unplanned

Minutes per year / medium voltage

Seite 30Annual non-availability of electricityplanned and un-planned

Seite 31Services of public interest

Legal obligation to connect the customers, but no legal obligation for supply

No Provider of last resort

No special protection for vulnerable consumers

☺ Regulator is the mediation body for any conflicts between consumers and energy enterprises

Seite 32Austrian perspectives by 1.1.2006

•Incentive regulation modell 1.1.2006 for electricity distributors

•Legal Unbundling 1.1.2006 for electricity distributors

Seite 33Conclusion

Need for "better regulation" in the sence of general economic welfare:

Political independence of the regulator ?

How to set political incentives for the regulation • quality of supply in general• qualitiy of the grid • employment • services of public interest

Is competition more important than security of supply?

Seite 34Thank you !

Gunda Kirchner

++ 43 (0)1 501 65 – 2224

Email:gunda.kirchner@akwien.at

Web:wien.arbeiterkammer.athttp://eu.arbeiterkammer.at/www-2007.html