Electricity liberalisation in Europe—how competitive will it be?

All the countries of Western Europe have taken steps to liberalise their electricity industries. Large consumers in every country can choose their electricity supplier, and in some countries, this choice has been extended to every consumer. The European Union has decided that from 2007 at the latest, all customers will be able to choose their electricity supplier. A number of large European electricity companies have been responding to this changing environment by merging with electricity companies in other countries. This means that while some national markets may not look unduly concentrated, concentration at the European level has been growing. This paper addresses the reasons for this, and asks whether the resulting industry structure will be sufficiently competitive to deliver gains from liberalisation.