Close examination of the energy market

This was the first time when the Polish energy companies were directly asked by the European Commission to provide accurate data on their economic activity, passing over governmental institutions.

General Directorate of the European Commission on Competition (DG Competition) made the decision to initiate the investigation related to electric energy and gas sector on June 13. The investigation is to identify the possible competition perturbations that can be dealt with by means of legal regulations related to wholesale market operation and price determination methods. The actions resulted from the price increase of electricity and gas in 2005 as well as the forecasts indicating a further increase. It was also a reason why large industrial customers complained so much. The action also completes the report on progress in implementing provisions of the electricity and gas directive. The final results of the investigation are expected in 2006.

Questionnaires

Following the decision regarding initiation of the action, the European Commission has sent hundreds of questionnaires to companies in the electric energy sector, asking for detailed information. They reached energy producers, energy traders, system owners and operators, energy markets, wholesalers, industrial associations as well as end users and retail buyers. PKE was also one of the addressees of the aforementioned questionnaire. Detailed questions were divided into the general part and six sections. The answers were to be provided to the Commission in two parts; the deadline was early September 2005.

Scope of the questions

The questions are very detailed and there is no doubt that they have been prepared by the competent people familiar with the functioning reality of companies in the electric energy market. They focus on commercial activity of companies, possibilities of unilateral imposing of conditions, commercial practice, price determination principles or energy sales methods. The questions also relate to contracts concluded for longer periods of time. Moreover, relationships between transmission system operators and their subsidiaries are examined together with operative and legal requirements to use connections between transmission systems. A few questions also refer to the problems of connecting new generated energy to the system and temporary schedules applied in planning liquidation or construction of generated energy. Examples of some questions are presented below.

• Please indicate weighted average monthly prices (in EUR/MWh) applied to sell your base loads of electric energy on wholesale markets (OTC or electric energy market) for individual supply periods (in this context, here base load means continued supply within in a specified period of time). Please indicate prices for the period from January 2001 to May 2005.
• Please indicate the quantity of generated electric energy on an annual scale, taking into account the time interval from 2001 to 2004 in GWh as well as the percentage of annual energy sales within the scope of long-term supply agreements.
• Please list all long-term supply contracts, regardless of the fact whether you are the purchasing or the selling party, in force as on April 1, 2005.
• Please provide a list of all your applications since January 1, 2000 related to connecting new generated energy of 50 MW or higher to the electric system.

Observations of the European Commission

Definitely, the concerns of the European Commission were caused by the situation that could be observed in the European energy markets for a longer period of time. No new participants emerge, the level of concentration is constantly high and investments are far from sufficient. A small number of changes of suppliers made by customers are observed. Moreover, the energy flow between individual states of the EU seems to have a limited influence on the price difference in such states. Additionally, insufficient impartiality of system operators and the possibility of significant problems in use of the existing transmission power are emphasised.

Can the European Commission conduct such actions?

In accordance with the regulation 1/2003/EC, the European Commission is authorised to take such an action and have wide possibility to demand the required information. Moreover, the regulation provides for the possibility of imposing fines or periodical penalties for insufficient information or failing to provide the information within a given deadline. The obtained information may serve as the basis for undertaking relevant measures aiming at restoring competition on individual markets. The measures might even include individual decision for specific entities.

Stanisław Tokarski
Jerzy Janikowski