European Commission Analyzes Energy Prices and Costs

European Union 22 January 2014: The European Commission has released the 'Energy Prices and Costs Report,' which seeks to inform policy makers on recent energy price increases in Europe and their impact on energy consumers. The report describes the drivers for rising retail energy prices, with a focus on electricity and gas, and analyzes how their prices have evolved in recent years in different EU member States.

The report also compares energy prices in the EU with other regions, and considers how energy prices affect energy costs for households and industrial customers, including energy intensive industries.

The study finds that while retail energy prices for households and industry increased significantly in Europe between 2008 and 2012, wholesale electricity prices fell by one-third and wholesale gas prices stayed the same, bringing wholesale energy prices in Europe to a level roughly comparable with wholesale prices in the US.

According to the report, retail energy prices increased despite lower wholesale prices for four main reasons: higher network costs, taxes, and levies; retail price regulations accompanied by high market concentration; passing of infrastructure and technology investment costs to consumers; and gaps between consumer behavior and opportunities to reduce costs and increase efficiency.

The main recommendations in the report for controlling energy prices are to: complete the internal energy market to ensure efficient and competitive investments; increase energy efficiency; reduce energy use through product design, new technologies, changes in consumer behavior, and demand response; develop energy infrastructure; diversify energy supply and energy routes; speak with a single European voice in negotiations with major partners; and understand and minimize the impact of European energy policies on prices, consumers, and tax payers.

The report, a response to a request by the European Council in May 2013 to conduct a detailed analysis of energy prices and costs in Europe, was released in concert with the new EU framework on climate and energy for 2030. The study was written as a contribution to the new EU framework presented by the European Commission and  that will be discussed by the European Council in May 2014. [European Commission Press Release] [European Commission Energy and Climate Goals for 2030] [Publication: Energy Prices and Costs Report] [Publication: Commission Communication Accompanying the Energy Prices and Costs Report]