Effective consumer empowerment & protection in liberalised electricity & gas markets in Europe
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Effective consumer empowerment & protection in liberalised electricity & gas markets in Europe Kyriakos Gialoglou, European Commission, Consumer Affairs Congreso Energia y Derechos de los Consumidores , Valencia, 24 – 25/11/2009. Contents of presentation. Why an EU (energy) consumer Service?

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Effective consumer empowerment & protection in liberalised electricity & gas markets in Europe

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Effective consumer empowerment & protection in liberalised electricity & gas markets in Europe

Kyriakos Gialoglou, European Commission, Consumer Affairs

Congreso Energia y Derechos de los Consumidores, Valencia, 24 – 25/11/2009


Contents of presentation

  • Why an EU (energy) consumer Service?

  • Evidence-based policy and tools

  • How to empower consumers in open (energy) markets? Principles & tools

  • Consumer legislation relevant to energy

  • Consumer protection in new EU legislation

  • Spain and electricity and gas markets

  • Discussion: market competition and affordability


Why a Commission Service for Consumers?

  • Single Market Review

    • Reconnecting with citizens

    • Evidence-based & outcome-oriented policies

    • General market monitoring exercise

  • EU Consumer Policy Strategy 2007-2013

    • Better monitoring consumer markets and national consumer policies  Consumer Markets Scoreboard

    • To empower EU consumers, with real choices, accurate information, market transparency, effective protection and solid rights;

    • To enhance EU consumers‘ welfare, in terms of price, choice, quality, diversity, affordability and safety;

    • To protect consumers effectively, by ensuring protection against risks and threats that cannot be left to individuals to deal with.


Consumer Markets Scoreboard

  • Screening consumer markets

    • 5 Top level indicators: complaints, prices, satisfaction, switching and safety

      Identify malfunctioning markets for further in-depth analysis

  • Integration of retail internal market

    • Fragmentation, Cross border issues

    • Cross border sales, information, complaints, disputes, enforcement, consumers and retailers attitudes towards cross border purchases

  • Benchmarking the national environment

    • Performance of national policies / instruments

    • Enforcement & empowerment


2nd Consumer Markets Scoreboard

  • Markets that are not functioning well: energy, banking, transport (rail and bus)

    • Findings based on satisfaction and switching surveys comprehensive questionnaire, in-depth findings

  • Follow-up study on retail electricity

    Tools to be used:

    • Surveys, Mystery shopping, Stakeholder consultation

      Questions:

    • Can consumers benefit from a well-functioning market in terms of price, choice and quality?

    • Are consumers able to make informed, rational and empowered choices?

      Issues:

    • Information and awareness, switching and comparability of offers, unfair commercial practices, billing, contract terms, dispute resolution

      Results will be published in Autumn 2010


Consumer empowerment in competitive energy markets: making markets accessible

  • Competition: unknown territory for most individual consumers

  • Consumer participation  empowerment

    • Information: correct, concise, comparable

    • Case in point: energy bills

      Citizens’ Energy Forum mandate:

      Commission led a Working Group on Billing

      • Participation: ERGEG, consumers (ECCG sub-group on Energy), industry

      • Focus: regular paper bills, annual reconciliation statement

      • Deliverable: Recommendations, good practices

         Commission created model bills


Consumer legislation relevant to energy

  • Unfair Commercial Practices Directive

    • prohibits misleading practices  affect purchase decision

      • false or deceiving information e.g. nature of electricity, its specifications or price and how it is calculated.

      • Omission or unclear/unintelligible information also be misleading.

        Energy companies must advertise or inform consumers about the main characteristics of their services or the price in a clear, truthful and intelligible manner.

    • prohibits aggressive commercial practices


Unfair Commercial Practices Directive cont.

Examples of possible unfair practices in energy under UCP:

- misleading green claims: e.g. green label without authorisation

- using general claims e.g. "green electricity" without being able to substantiate the claim, may deceive consumers  misleading.

- onerous or disproportionate barriers for consumers terminating a contract or switch to another energy company

Example: a company excessively delaying contract termination could be an aggressive commercial practice

Case study: Italian Antitrust Authority fined companies in telecoms sector for excessive delays /obstacles to terminate contract on the basis of UCP.

  • UCP will become a Spanish law in the next 2-3 months.

  • National enforcement: determination of unfair practice and action.

  • Consumer protection authorities, consumers & energy regulators must co-operate effectively to discontinue any such practices.


Consumer protection in new EU legislation

  • Third Energy Package: Consumer provisions

    • Complaint handling measures

      • Single contact points (possibly sub-national)

      • Ombudsmen

    • Protection of consumers

      • Member State definition of vulnerable consumers  refer to energy poverty

      • Prohibition on disconnection at critical times

      • Interaction with other social policy measures

    • 3 weeks max. switching period, final bill in 6 weeks

    • Consumer access to consumption data in (sufficient) time periods (defined nationally)


Consumer perceptions in Spain: electricity and gas

Electricity

  • 19% find difficult to compare offers from suppliers (EU-27 average 29%)

  • 68% did not try to switch provider in the last two years  not interested in switching, (1% did not try because too difficult).

  • 47% of those who switched provider claim the new one is cheaper, ( EU-27 average 69%)

  • 61% find prices increased in the 12 month before the interview.

    Gas

  • 19% found difficult to compare offers

  • 70% did not try to switch provider  not interested in switching.

  • 37% of those who switched claim the new one is cheaper, while 31% think that prices remained apprx. the same after switching.

  • 62% find prices increased in the 12 months before the interview.

    Flash EB 243 "Consumers' views on switching service providers"


Spain status quo: energy and consumers

  • No regulated tariffs any more

  • "Last resort services" and

  • "social bonus" for vulnerable customers

    • in force since 1st July 2009 as Public Service Obligation.

    • Ministry to report to Commission on such PSOs by end of this year.


Competitive energy markets & affordability 1

  • 1/3 EU consumers find electricity, gas and water too expensive (Eurostat)

  • In some EU countries 1/3 consumers faced difficulties to keep houses warm (2006)

  • Low income consumers have a budgetary need to 'pay as they go' – this has created higher bills in the past (UK)

  • UK defined fuel poverty & published data: in 2008 more than 20% households fuel poor (>10% of income on energy), UK target: no fuel poor by 2016-18

  • Similar stories for “newer’’ EU Member States


Competitive energy markets & affordability 2

  • EU law: "reasonable prices" for electricity & gas.

    • Member States must define reasonable prices & who benefits from special treatment (social tariff or other)

    • Commission to make sure that definition will not impact on competition and

  • Commission will facilitate dialogue, exchange of good practice, make sure that competition will not negatively affect consumer welfare

    • Further input in the framework of Citizens’ Energy Forum


Information on

Energy and Consumer Bills:

http://ec.europa.eu/consumers/citizen/my_rights/energy_en.htm

Report by the Working Group on Billing:

http://ec.europa.eu/energy/gas_electricity/forum_citizen_energy_en.htm

(click on 2nd Citizens’ Energy Forum, Reports)

Monitoring markets and the Consumer Markets Scoreboard http://ec.europa.eu/consumers/strategy/facts_en.htm

DOLCETA: sustainable consumption and services of general interest

www.dolceta.eu

Thank you

for your attention!


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