A Reuters report this week reveals that Sweden will investigate its deregulated electricity market because the government is worried that inadequate competition has allowed power firms to raise prices excessively.
The probe, which could lead to greater regulation of the market, is the culmination of a long-running debate about whether efforts to boost competition have failed to cut power prices after a market consolidation in the 1990s allowed big firms to gain greater control over the market.
It comes amid heightened concern in Sweden about anti-trust issues, following a high-profile price-fixing scandal involving Nordic airlines.
“I have ordered a speedy investigation into what has happened with prices,” Industry Minister Bjorn Rosengren said on Swedish television. “This could lead to a change in existing conditions and some sort of regulation.”
Rising power prices have also fuelled Swedish inflation, which is running above the central bank’s two per cent target, prompting a rise in interest rates last month. Although prices fell overall in July, electricity was still pushing up the consumer price index.
One of the government’s advisers on energy policy, Per Kageson, told Reuters two weeks ago that the liberalization of the market had failed as the biggest power producers have gained more control over prices and consumers had remained passive.
The opening of the market in the mid-1990s allowed end-users to shop around and haggle for the best deal but surveys show that 70 per cent have not used this right.
In the last five months, five Swedish power firms have increased prices by about 40 per cent, and critics have called for an anti-trust investigation as the companies raised prices by roughly the same amount at the same time.
The companies say they had to raise prices as underlying prices on the Nordic power bourse Nord Pool have nearly doubled in the past half-year on fears that water supplies would be lower than normal and nuclear power producers would cut output to boost prices further.
Nord Pool figures show the electricity price has more than doubled to 0.216 Swedish crowns ($0.021) per kWh in the first half of this year from 0.103 crowns a year earlier.
Sweden’s state-owned utility Vattenfall AB – the biggest Nordic player – has raised prices for domestic consumers by about 40 per cent in the last four months to 0.338 crowns.
Prices initially dipped after Sweden deregulated in 1996 when unusually heavy rain and snowfall during a three-year period kept down prices and toughened competition in the Nordic region.
Hydro-electricity accounts for half of Sweden’s power needs and nuclear energy accounts for most of the rest.
Criticism is growing as most of the companies reported rising profits in the first quarter, boosting profit margins.
Swedish-Finnish power firm Birka Energi, partly owned by Finnish energy group Oyj, reported a 59 per cent rise in profits two weeks ago which it attributed to the higher prices.
Last week Rosengren told Reuters that the government may become more restrictive with future liberalization because of a price-fixing scandal involving Scandinavian airline SAS AB .