In the time-hallowed manner of public consultations of this nature, either at the EU or at the member-state level, it is likely that any submissions that do not dove-tail precisely with the “gospel” emanating from Brussels will be ignored and the policy-makers and politicians will carry on their merry way pursuing their “project”.

It would be wonderful if this forum were to provide an opportunity to debate some of the issues that arise before the EU’s energy policy strategy is set in stone for the next decade.

There are numerous grounds on which the overall thrust of EU energy policy could be critiqued, but, for the sake of brevity – and with the hope of encouraging some response and debate, I will focus on a limited number.

Firstly, energy seems to be associated with electricity and gas; much less attention is paid to petroleum products. Is it assumed that there is a single market in petroleum products and that this market is genuinely competitive? Secondly, the focus on electricity and gas encourages broadly similar policy and regulatory arrangements for both. This ignores the fact that there are no network externalities in a gas pipeline (unlike high voltage electricity networks) and that, therefore, pipeline capacity may be quantified, defined in long term contracts, provided by competing investors and traded. The wilful ignoring of this significant, and distinguishing, feature of gas pipelines has contributed in a big way to the current failure to establish a genuinely competitive single market in gas.

And thirdly, there are some “myths” which seem to infuse the thinking of both Prof. Monti and Commission staff.

1. There is a belief that the larger the number of suppliers, traders and shippers the more competitive the market is. Accompanying this is:
2. All new entry is efficient and should be encouraged. This leads to:
3. Incumbents and, ultimately, consumers should bear the cost of new entry.
4. More competition will reduce and eliminate monopoly profits.
5. The market will not, willingly, ensure financing of all of the investment policy-makers believe is required. Therefore, direct (or indirect) government (or EU) financing is required.

It would take some time to debunk these myths, but some limited refection should reveal how nonsensical they are. For example, short term markets with volatile prices will never provide the assurance of investment recovery required by investors in specific, long-lived assets. Genuinely competitive markets in the provision of electricity generation capacity and of gas pipeline capacity are capable of providing this, but the long term, almost indefinite, commitment of small volume final consumers of electricity and gas needs to be converted into long term contracts for the energy production and delivery capacity. Full retail competition, with its focus on consumer-switching and customer-churn, has obliterated this commitment.

There is probably nothing more ridiculous than prices being raised to facilitate new entry. Consumer surplus is being eroded without any guarantee that the new entry will be efficient. It is a charter for rent-seekers and not a process that will generate efficiency benefits. In addition, the “burden of choice” is being imposed on consumers who, in the main, would prefer a secure, affordable and reliable supply. Consumers were never directly asked for their consent to introduce full retail competition. It was decided as a high level that it would be a “good thing”. They are now burdened with the costs and effort of choosing among competing suppliers who have little basis for differentiating their products and services, of fending off unsolicited mail, telephone calls and calls at their doors, of the difficulties that inevitably arise when switching supplier and, the ultimate horror, dealing with call centres.

Furthermore, it is for sector regulators and/or competition authorities to deal with monopoly profits; by definition, this should not be an issue for genuinely competitive markets.

And finally, the idea that government, or EU, officials are better equipped to allocate finance and deal with the risk and uncertainty associated with long term investments than are competitive markets with clearly defined property rights should encourage laughter once it is expressed.