The article was first published on Vísir on Thursday, 21 December 2023.
Recently, there has been considerable discussion of the bill from the Parliamentary Industry Committee on amendments to the Electricity Act to ensure that the public has priority access to electricity in the event of a sustained energy shortage. The bill, among other things, provides that in the event of an energy shortage, companies that purchase electricity wholesale from Landsvirkjun may only sell that energy to the public, institutions and small and medium-sized enterprises, but not to large consumers, as they do to some extent at present. However, these conditions will not apply to Landsvirkjun; that company can therefore continue to offer all its customers, including large consumers, electricity on the same terms as before.
The bill was scheduled to be dealt with before Christmas, but its consideration was ultimately postponed. The Competition Authority provided an opinion on the bill, which was published on the authority's website on 12 December 2023.
For the record, we consider it appropriate to highlight a number of points that are of great importance when rules on this matter are drawn up and enacted.
First, it should be emphasised that the Competition Authority fully understands that the problem which could potentially arise in the electricity market in the near future, due to a shortage of electricity, must be addressed. It may therefore be important to ensure that the public and businesses are prioritised for electricity over large consumers, and also that consumers' electricity costs do not become excessive in the event of an energy shortage.
When choosing methods to protect these public interests, it must be borne in mind that the objectives of the Electricity Act concerning increased competition and consumer protection have not been fully realised in the twenty years since the Act came into force. It is therefore important that all current measures are aimed as far as possible at increasing competition, including not impairing the ability of smaller and newer market participants to compete with larger ones.
When special public interests, such as public access to electricity, need to be protected, it is important to choose the course of action that most supports competition and least restricts it. There is a recognised methodology that aims to do this, but it has been called Competitive assessment (i.e. competition assessment toolkit). Is this methodology described in Opinion No. 2/2009, Government assessment of competition. The Competition Authority has advocated the application of competition assessment in the preparation of new laws and regulations, but with mixed success.
One of the general pitfalls to avoid is for the government to discriminate against companies in the market through regulation. This can have serious consequences for the public interest if laws and regulations discriminate against market participants in a way that impairs the ability of smaller players to compete. This can, for example, happen if rules are introduced that in some way provide a dominant or public company with opportunities not available to others, or place restrictions on smaller and newer companies that do not apply to the dominant company.
Such rules could, in turn, have the effect of making it more difficult to protect competition through the application of general competition rules in the future, including the prohibition on the abuse of a dominant position.
Although the aim of the present Bill is to protect the interests of the public and businesses in relation to the electricity transactions of large consumers, the discrimination it entails could, in the long term, harm competition in the sale of electricity to the public and businesses.
The Competition Authority has received a number of complaints and suggestions in recent months regarding the competitive conditions in the electricity market. They are in many cases related to the energy transition and changes due to action on global warming, and the attempts of new and smaller players to enter the market and grow alongside more established companies. These complaints and suggestions are a testament to a ferment and a desire for change that, in the long term, can lead to more effective competition. The focus of the government must be on facilitating new opportunities and more effective competition, and on removing the existing barriers to competition.
All of the above must be borne in mind when selecting ways to protect public access to cheap electricity. The aforementioned opinion of the Competition Authority on the Industry Committee's bill is based on these considerations.
Sigrún Eyjólfsdóttir is an expert at the Competition Authority.
Steingrímur Ægisson is a project and team manager at the Competition Authority.
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