NMa: energy market is functioning better and better
The energy market is dynamic, and is evolving well. At the same time however, there is still room for further development of the wholesale markets for natural gas and electricity. These are some of the conclusions the Netherlands Competition Authority (NMa) draws in its Energy Monitor ‘The Dutch energy markets in 2010,’ which it published today.
Half of consumers have already switched at least once
Switching energy providers may save a household several dozens to several hundreds of euros per year, and is usually a smooth procedure. Since the energy market was liberalized in 2004, one out of two consumers have already switched energy providers or plans at least once. In that context, the fear of red tape, often cited as a reason for not switching, has become less prominent: switching is increasingly becoming a normal and accepted process. Jaap de Keijzer, member of the Board of the NMa explains: ’Switching leads to more switching. It turns out that those that have experienced how easy it is to switch are more likely to switch again. Consumers are discovering that switching is not such a hassle after all.’ Customer satisfaction levels regarding service provided by energy providers have stabilized at a high level, and, on certain aspects, are increasing even.
However, consumers continue to struggle with fully understanding energy as a consumer product. Price remains the most important criterion for consumers when switching providers or contracts. Consumers that are thinking about switching have trouble comparing offers, and, in particular, understanding them. The importance of having offers that are easy to compare and to understand, for example through price comparison sites, remains high. The NMa in 2011 will continue to encourage energy providers to inform consumers well.
Profound changes on gas market imminent
Competition in the Dutch wholesale gas market has had limited success so far. The gas market is primarily impeded by limited access to flexibility services. Mr. De Keijzer adds: 'The NMa is expecting a turning point this year due to changes to the Dutch Gas Act. On April 1, 2011, GTS, the Dutch national transmission operator, will implement a new market model and a new balancing scheme. These implementations will give competition in the gas market a boost, and we are expecting a lot from it, particularly so because, at the same time, Dutch gas company Gasterra will introduce new products and services.’ Starting April 1, Gasterra will be offering products and services enabling suppliers to accommodate fluctuations in gas demand, both short-term fluctuations, as well as seasonal fluctuations. As a result of these changes, energy suppliers on the consumer market will have more options to buy natural gas. And consumers will benefit therefrom, too.
Market integration of electricity market is making progress
The electricity wholesale market is clearly ahead of the gas market, but competition on that market, too, can still be improved. Of particular importance is the progress the market integration process with neighboring countries is making. Increased competitive pressure positively affects consumer welfare. On November 9, 2010, market coupling with Germany was introduced, and, on January 12, 2011, with the Scandinavian market. Capacity on the connections with Germany and Norway are consequently better utilized. Mr. De Keijzer adds: ’The next step for the electricity market is the connection with England through the BritNed cable, which is expected to become operational April 1, 2011. If potential bottlenecks in the domestic grid are identified on time, the Netherlands is able to fully benefit from the couplings with our neighboring countries.’