1. Electricity Inquiry Main DG Competition conclusions Jean-Paul Aghetti IFIEC Energy Forum February 2006 IFIEC EUROPE – International Federation of Industrial Energy Consumers Slide 1

2. IFIEC EUROPE – International Federation of Industrial Energy Consumers Outlook: Post Kyoto EU ETS  not working properly  serious threat to EU industry‘s competitiveness and survival Very weak basis for a proactive and enthusiastic industry involvement and co-operation in designing and deciding on a Post Kyoto strategy

3. Market Concentration IFIEC has always said the electrical companies didn’t compete. IFIEC EUROPE – International Federation of Industrial Energy Consumers When analysing whether there is scope to withdraw physical capacity, it appears that load factors have increased over time in Germany suggesting higher efficiency levels and a tighter supply/demand balance. Significant generation capacity – most of it with low marginal costs was retired in Germany despite slowly increasing demand. Also, certain plants with rather low marginal costs did not operate at all times

4. Market integration IFIEC was always reluctant on auction for cross-border capacity. As DG COMP ? IFIEC EUROPE – International Federation of Industrial Energy Consumers Inefficient congestion management methods (including explicit auction)

5. Transparency What are we waiting for ? IFIEC EUROPE – International Federation of Industrial Energy Consumers The need for greater transparency is widely recognised. Lack of transparency amounts ton an entry barrier, undermines the level playing field between market participants.

6. Price formation How can we explain the electricity price from 34 €/MWh to 56 €/MWh in less than one year ? IFIEC EUROPE – International Federation of Industrial Energy Consumers Coal prices have remained relatively stable thus not explaining any prices increases. Analysts cannot yet agree to which extent the value of CO2 allowances is priced into electricity prices.

7. Price formation What is the opinion of the referee (s) ? IFIEC EUROPE – International Federation of Industrial Energy Consumers Industrials users claim that electricity producers should not entitled to factor in the value of allowances, as there were largely distributed for free. Generators claim that the value of CO2 allowances are opportunity costs which can be factored in legitimately.