Competition in the tomorrow's European energy markets of tomorrow: between uncertainties and opportunities

Everyone knows that energy prices have soared in all EU Member States in 2022. The European Commission ("EC") has therefore initiated several proposals that would help consumers pay their electricity bills but also lay the groundwork for the greener energies of tomorrow. At the same time, these initiatives raise some antitrust questions.

Competition vs. Regulation

Faced with sky-high prices for energy, the Member States have introduced various measures in 2022 to tackle the problem. However, the EC believes that such measures adopted solely at the national level risk creating uneven conditions for companies operating in the EU energy market. From this perspective, the EC proposes a uniform approach in the EU by means of a Council Regulation. In essence, the EC sets out exceptional, temporary measures to (i) reduce electricity demand, (ii) limit revenues of low-cost ("inframarginal") electricity producers (which have made impressive profits amid high electricity prices), and (iii) impose solidarity contributions on surplus profits of fossil fuel companies. The surplus revenues will be redirected to final customers, whether private or commercial, who are most exposed to high electricity prices.

There is still some leeway for the Member States. It is foreseen that they will be free to choose the appropriate measures to meet the demand reduction, provided these are in line with the relevant EU competition and electricity market rules. Member States also retain the right to introduce more ambitious limitations on the revenues of electricity producers, which in a way gets us back to the potential uneven conditions that the EC wanted to avoid in the first place.

Competition vs. Cooperation

An additional strategy of the EC, this time a long-term one, envisages the diversification of energy supplies within the so-called REPowerEU Plan. The EC is considering several ways of cooperation: (i) an energy platform for the voluntary common purchase of gas, LNG and hydrogen; (ii) long-term cooperation frameworks for purchasing gas and hydrogen; and (iii) a joint purchasing mechanism for gas that would negotiate and contract on behalf of the participating Member States. Further measures for substituting fossil fuels are pushed forward in the domain of renewables, hydrogen or biomethane, including measures to encourage biogas producers to create energy communities.

While all this would be frowned upon in the context of orderly competition principles, the EC admits that cooperation is necessary to reduce dependence on gas and accelerate the green transition. In anticipation of potential criticism, the EC provides that such constructs will be subject to antitrust review. The EC further notes that the exchange of information favoured by such measures will have to comply with antitrust rules.

In practice, however, this is likely easier said than done. Further clarity for individual undertakings on cooperation initiatives may be achieved by means of direct exchanges with the EC under its new informal consultation guidelines.

Uncertainties and opportunities lie ahead

It remains to be seen At the same time, opportunities arise thanks to the cooperation mechanisms set out by the EC to make energy greener and less dependent on gas. But for now, exceptional (though not yet desperate) times require exceptional measures.

author: Bianca Duca