The European Commission is to launch investigations into anti-competitive practices of some energy companies after a report found "serious malfunctions" in the sector.
Despite an effort to liberalise the market in the 1990s there is still a dominance of incumbents, no significant cross-border competition and dramatic price increases for consumers suggesting anti-competitive practices, the report said.
Ireland is singled out for not allowing competitors onto the electricity network run by the ESB Networks. This practice is legal if the network is congested but the report says "it was impossible to say whether and to what extent the congestion that was claimed to exist by the network operator was real".
Ireland is also held up for not making use of its interconnector with the UK's network.
"The Europe of today does not have the energy market that European industry and European consumers need. We are missing a great opportunity," Competition Commissioner Neelie Kroes said yesterday.
The report identifies five main areas of concern across the EU.
New entrants also had to battle against a lack of transparency which meant they did not have access to information on capacity, generation or reserve power.
Finally the report highlights price increases which are often not determined on the basis of competition. Gas charges in particular are linked to oil prices and fail to change along with a change in supply and demand.
The European Commission also identified practices which inhibit consumers from switching suppliers and "grandfathering rights" where companies have been able to maintain their dominance because of securing pre-liberalisation contracts. The Commission said the powers of national regulators needed to be increased in certain cases.
The Commission will now use the information gained in the report to begin antitrust investigations into some gas and electricity companies in the EU.
"We will tackle areas where we suspect violations of the competition rules, where action can have concrete and immediate effects, and where we can set valuable precedents," Ms Kroes said.
A Commission spokesman later declined to identify which companies were being investigated.
