The European Commission is calling on members of the 25-nation economic bloc to step up efforts to open energy markets to competition in its latest benchmarking report. The Commission identifies insufficient integration between national markets as a major obstacle to the successful implementation of a competitive market. Limited interconnection infrastructure between some Member States is also holding back market development, says the Commission.

The Commission advocates changing the rules governing cross-border gas and electricity sales to ensure maximum use of existing infrastructure, although new investment is required in the case of gas. The Commission also notes that markets are often dominated by one or two big domestic operations. In most countries more than 25% of large customers have changed supplier since the process of market opening started, but switching rates have never reached 50%. Furthermore, switching is made often only to another domestic supplier. The Commission further argues that full separation of distribution will be required in order to ensure prices represent industry costs and the scrapping of subsidies.

In its report on implementing the common market in gas and electricity, the Commission notes that obstacles to competition remain in domestic electricity markets. Few obstacles remain in Sweden, Finland, Denmark and the UK, where over 50% of big clients have changed customer, but the Commission highlights bad market structure and lack of integration in France, Belgium, Greece, Italy, Spain, the Netherlands, Lithuania, Ireland, Slovenia, the Czech Republic, Slovakia and Latvia, where the percentage of clients changing supplier ranges from 0% to 25%.

The Commission argues that independent network managers and an increase in interconnection capacity are vital components in the development of a competitive electricity market.

Furthermore, in many Member States it is difficult to change gas supplier because there are inadequate storage and balancing systems and high distribution costs, a situation compounded by a persistent lack of integration between national gas markets.

Meanwhile, some 18 out of 25 nations failed to meet the July 2004 deadline for implementation of the Directives and as a result, a number of infringement procedures have been launched.