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Not much cheer in energy liberalisation

The European Union opened more of its energy market to full competition yesterday but there was little to celebrate. Power prices are high, big utilities dominate, and only two of 25 EU states met a deadline to transpose rules into national law.

Opening the industrial market means companies can shop for the cheapest gas and electricity. The same will apply for household consumers in 2007. But the price war seen in the 1990s in the UK, the first to liberalise fully, is unlikely to be repeated.

Peter Claes, president of the Geneva-based International Federation of Industrial Energy Consumers, told Reuters power prices had risen 30-50 per cent over the past year. He complained of a supplier oligopoly and lack of exchange of power across borders.

Three mega-utilities - Germany's Eon and RWE and state-run Electricité de France - control 45 per cent of generation. Cable bottlenecks restrict cross-border competition.

In Germany, industrial energy users warned high prices were putting a million jobs at risk. Germany has created an energy regulator - it was the only EU country without one - but it may not get powers until January.

In France, the government is defying union action to pass legislation preparing EdF for privatisation, but EdF aims to hold at least 80 per cent of the liberalised market. Rivals will find it hard to compete with economies of scale from its nuclear production.

The European Commission this week surveyed the results of liberalisation in telecoms, energy, transport and postal services. Phone bills and air fares had fallen but progress elsewhere was poor. Without determination to let in new competitors, competitiveness will be hobbled.

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