Competition, Contracts and Electricity Markets
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Competition, Contracts and Electricity Markets

A New Perspective

  • Loyola de Palacio Series on European Energy Policy

Edited by Jean-Michel Glachant, Dominique Finon and Adrien de Hauteclocque

This book fills a gap in the existing literature by dealing with several issues linked to long-term contracts and the efficiency of electricity markets. These include the impact of long-term contracts and vertical integration on effective competition, generation investment in risky markets, and the challenges for competition policy principles.
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Chapter 11: The Essential Facilities Doctrine in European Competition Policy: The Case of the Energy Sector

Adrien de Hauteclocque, Frédéric Marty and Julien Pillot

Extract

11. The essential facilities doctrine in European competition policy: the case of the energy sector Adrien de Hauteclocque, Frédéric Marty and Julien Pillot 1 INTRODUCTION1 The 2004 US Supreme Court’s landmark decision in Trinko2 established a major divide between US and European competition policies. Overall, the larger degree of acceptance of the Essential Facilities Doctrine (thereafter EFD) in European competition policy may induce more frequent mandatory access decisions to dominant firms’ strategic assets. If such access-based policies may enhance consumer welfare in the short term, they could compromise dynamic efficiency in the longer term by reducing investment returns and so the incentives to invest. This trade-off is at the heart of many decisions to be taken by regulators and competition authorities in the energy sector. Indeed, the specific characteristics of electricity and gas markets (for example, balancing services in electricity and storage in gas) make them particularly prone to facility foreclosure compared to other network industries such as telecommunications. As a consequence it is generally harder for the regulatory authorities to effectively monitor access. On the other hand investment in the network, in particular in electricity and gas cross-border interconnectors, is crucial for security of supply, the effective development of competitive markets and the massive integration of renewables in energy systems. The fine-tuning of the application of EFD-related principles, either under sector-specific regulation or competition law, is thus an important area of energy regulation. This chapter reviews and questions the current implementation of EFD principles by European authorities...

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