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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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slide1

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
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
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
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
2 nd consumer markets scoreboard
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
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
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
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
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
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
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
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
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
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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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