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 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

2 nd 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 1 st 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 Similar stories for newer EU Member States

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 Competitive energy markets & affordability 2

Information on Energy and Consumer Bills: Report by the Working Group on Billing: (click on 2 nd Citizens Energy Forum, Reports) Monitoring markets and the Consumer Markets Scoreboard DOLCETA: sustainable consumption and services of general interest Thank you for your attention!