Why are Europe's electricity bills so high? Austria has the answer

Euractiv

14 hours ago

With Austrian energy companies refusing to compete with one another, consumers at the mercy of their local hegemons are left paying higher bills than they should – a problem mirrored across Europe.
When energy prices in Russian-gas-addicted Austria surged – and Vienna's main utility company almost went bust – the government ordered the competition authority and energy regulator to examine the sector.
Two years on, their final report paints a damning picture of an energy market frozen in time.
'After 24 years of liberalisation, there is still no functioning national competitive market,' said Natalie Harsdorf, head of Austria's competition authority, the BWB.
Instead of utilities competing nationwide for the business of Austria's millions of households, firms have carved out regional fiefdoms – or as Harsdorf put it, 'we have regional companies that dominate the markets'.
Austria has one of Europe lowest contract-switching rates – a key indicator used to gauge market competitiveness – at just 4.5%. A typical new supply contract is currently around 10% more expensive than in neighbouring Germany.
The investigation revealed a retail electricity market riddled with 'countless cross-shareholdings between companies'. What that means is that each regional utility owns stakes in others.
'The question arises: do these companies even want to participate in Austria-wide competition?' said Wolfgang Urbantschitsch, head of the country's energy regulator, E-Control.
Vienna's main utility firm owns 28% of Lower Austria's EVN, which in turns holds an indirect 36% stake in Burgenland's primary energy provider. Most utilities also own shares in Austria's main power producer, Verbund.
So why compete? 'It seems that they do not need to,' Urbantschitsch concluded.
The situation has grown so dire that Austria is pioneering a new set of antitrust laws aimed at curbing the dominance of major energy suppliers. Introduced in 2024, the legislation compels firms to match consumer-friendly terms offered elsewhere – or explain why they don't.
'The BWB is now focusing on individual investigations,' Harsdorf said. Europe in trouble Austria is far from alone. Two major indicators suggest the entire EU is struggling to foster real competition for retail electricity consumers.
Just 7.15% of European household consumers switched suppliers in 2023, according to market data from the Council of European Energy Regulators (CEER) and EU watchdog ACER.
And for all of Austria's flaws, eight countries – including Romania, Slovakia, Poland and Luxembourg – fare even worse.
The problem: dominant utilities tend to hold onto consumers. Once switching rates drop below 10%, regulators say 73% of households are locked into a dominant supplier.
The Herfindahl-Hirschman Index (HHI), a common measure of market concentration, tells a similar story. In 2023, just five EU countries were in the 'green' – indicating a competitive, unproblematic market.
Nine others – among them Belgium, Poland, Italy and Spain – were in the 'orange' zone, showing signs of worrying concentration.
A further nine countries were flagged 'red', where one or very few utilities dominate the retail market – leaving consumers vulnerable without firm regulatory intervention.
Too often, that oversight is lacking – and Germany offers a cautionary tale. In 2023, local grid operators saw a staggering 20.2% return on investment, an investigation by think tank BNE found.
'If network operators can achieve such returns, then something is fundamentally wrong with the regulatory framework,' said its CEO, Robert Busch.
While firms with state-backed monopolies should normally be afforded returns upwards of 5%, in some extreme cases – like EWE – profits surged to 50% on capital, BNE said.
(rh, aw)