Utilities market Drivers: Policy & Regulation

Publication Date	September 2006
Publisher	Datamonitor
Product Type	Report
Pages	21
ISBN Number	not applicable
Product Code	DAT00432

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Summary

Introduction

Policy and regulatory issues have a profound impact on utility markets. The EU and US differ greatly in their approaches to market liberalization, wholesale market development, security of supply and the environment. Understanding how the key issues will evolve requires a nuanced appreciation of these varied regulatory approaches.

Scope

An examination of the pace and nature of retail market liberalization measures in gas and power, in both the EU and US.
An examination of wholesale market development in gas and power, including a review of regional transmission organization development in the US.
An analysis and projection of the security of supply focus of power markets in both the US and EU.
An assessment of current measures to meet environmental obligations, from metering initiatives to carbon trading schemes.

Highlights

Effective wholesale markets require independent transmission systems. The EU has succeeded in implementing legal unbundling of transmission operators for gas and power. The US has implemented ownership unbundling in gas, but failed to unbundle power transmission. Investigations in 2006 have show that discriminatory practices in the US remain.

The U.S. Federal Trade Commission is heavily focused on investigations of potential price collusion in the petroleum industry, and is not focused on liberalization in the power and gas sector. In fact, in stark contrast to the situation in the EU, the US government has pushed parts of competition oversight to the regulatory level.

The US federal government has required public utilities to install smart meters, but will not impose similar requirements on investor-owned utilities. In contrast the EU has a May 2008 deadline for time-of-use metering in gas and power that applies to all utilities. Some countries, such as Italy, are already leaders in smart meter implementation.

Reasons to Purchase

Understand retail market opening and wholesale market development timelines and dynamics in the EU and US.
Project how European and American generation capacity will change in response to security of supply concerns.
Understand the major energy efficiency and carbon reduction initiatives in the US and EU.

Content

Catalyst
- Policy and regulation are together one of the fundamental drivers of utility markets.
Summary
Methodology
Analysis
- Europe has a common framework for utility competition in gas and power markets, but implementation at the national level will be uneven
- The European Commission has established a common policy/legislative framework for market liberalization in Europe
- After 2007, differences in electricity market competitiveness across Europe will remain
- After 2007, differences in gas market competitiveness across Europe will remain
- Competition authorities will shape energy market liberalization in the EU
- In the US only wholesale gas markets have a common (nation-wide) framework for utility competition
- Responsibility for energy market regulation in the US mirrors constitutional divisions of power
- Wholesale power market development in the US is patchy
- The US government has imposed a consistent policy / legislative framework for gas transportation infrastructure, while the level of retail competition for gas supply differs from state to state
- Competition authorities will not shape energy market liberalization in the US
- The US and EU are strong proponents of coal and nuclear to increase security of supply
- The UK has joined France as a proponent of nuclear power
- Major European importers of Russian gas have sought to both secure access to gas and boost the use of coal
- US security of supply efforts are heavily focused on coal and nuclear power
- The US has introduced legislation to boost investment in power transmission infrastructure
- Europe is pushing ahead with smart meters as a means to improve energy efficiency
- The US federal government has required public utilities to install smart meters, but will not impose requirements on investor-owned utilities
- The US will not ratify the Kyoto Protocol in the near future, while Europe will slightly miss its 2012 Kyoto targets
- The Emissions Trading Scheme is Europe's answer to the Kyoto Protocol: the scheme works, but currently under-prices carbon
- The US leads the EU in implementing market-based NOx and SOx reduction schemes.
- The US is expanding its Acid Rain Program through a new NOx and SOx cap-and-trade system.
- The EU's Large Combustion Plant Directive comes into full force in 2008.
- Glossary
Appendix
- The MCI Index assesses the competitive environments in 20 key European gas and power markets and forecasts switching behaviour
- Datamonitor Consultancy
- Ask the Analyst
List of Figures
- Figure 1: Summary Market Competitive Intensity (MCI) Power Scores
- Figure 2: Summary Market Competitive Intensity (MCI) Gas Scores
- Figure 3: The US government has tried but failed to impose a consistent policy/legislative framework for electricity infrastructure
- Figure 4: Wholesale power market development in the US is patchy
- Figure 5: Retail competition for gas supply differs from state to state
- Figure 6: The composition of US primary energy consumption will remain fairly constant
- Figure 7: The US relies heavily on nuclear and coal in the power industry, and this is not likely to change post-EPAct 2005
- Figure 8: The Emissions Trading Scheme (ETS) is a cap-and-trade carbon emissions market designed as Europe's key tool to meet Kyoto obligations
- Figure 9: The US has a head-start over the EU in NOx and SOx reduction initiatives.
- Figure 10: The MCI Index is calculated by deriving a weighted average of scores over 9 key metrics divided into three distinct categories