Since the first electricity directive in 1999 Europe has sought to evolve as a market model for gas and electricity deregulation. By 2007, according to the latest timetable agreed by member states, the model will be complete in terms of full deregulation. But is Europe a suitable role model for other geographic regions? Looking closely at the European market are the Asian countries as they prepare legislation to open their markets to competition. With the exception of Singapore and Japan, which have introduced phased-in electricity deregulation programmes, the remainder of the Asian continent still has a captive gas and electricity market.
For these countries the choice is either to follow the route of Japan and Singapore or to look to other market models such as that of Europe. But as a market model of deregulation Europe tends to flatter to deceive. In the four years since the first directive came into effect the progress towards a single market has been somewhat lethargic with the EU market more fragmented than cohesive. This fragmentation is largely due to the political intransigence of some member states seeking to limit the powers of the European Commission. The end result is a largely ineffective European regulator in the EC with larger member states seeking to influence market change for their, and not Europe's, benefit. In this respect Europe does not provide a suitable deregulation role model for other geographic regions.
Arguably Europe is changing, albeit slowly, and the market model is improving as a consequence. Eventually, although probably not by the timetable deadline of 2007, the EU will achieve its aim of an internal energy market but it remains questionable whether it will be a suitable role model for other countries.
It is difficult to foresee an EU market with uniform cohesiveness between member states - particularly with enlargement next May. This lack of cohesiveness is also evident in the perceived importance of customers and incumbent players among member states. In the UK, Ofgem has always identified the importance of deregulation with customer benefits, placing the interests of the customer before incumbent players. By contrast, most other EU member states place significantly more importance on incumbent players than customers, which has seen the evolution of a number of 'national utility champion' companies. The development of these national champions in turn has an impact on market competition throughout the region.
What the EU market tends to illustrate through its ongoing deregulation process are the differences between the member states, and the difficulty in achieving a regional internal market as a result of these differences. In this respect the EU cannot be considered a wholly suitable role model in itself, but it can be used as points on the learning curve for other countries and regions seeking guidance on market deregulation. This may be particularly beneficial for the south east Asian countries, which are currently at different phases in the deregulation legislation process, and where there is little conformity in terms of the deregulation process or centralisation of energy policy.
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