The Quest for Reasonable Retail Energy Prices in Europe: Positive and Normative Dimensions

Abstract

Public opinion in various EU Member States increasingly perceives energy prices as unreasonable. Primarily owing to distributional concerns, state interference with the liberalized retail energy market is ever-present across many EU Member States, despite its implications for the development of competitive (national and EU) energy markets. Rather than solely engaging with the conditions of state intervention as such, this article takes a step back and argues that an appreciation of what constitutes a reasonable price for energy supply is a necessary prerequisite in determining the relevance, scope, and conditions of state intervention in retail energy prices. In the absence of a definition of the concept in secondary legislation, it offers a novel conceptual framework centred on the contextual interpretation of ‘a reasonable price for energy supply’. This article offers two understandings of reasonableness: one underpinned by the principle of market competition and the other understood as affordability. It elaborates on the different set of conditions and criteria against which they are judged and it explains how these have informed various instruments enshrined in the energy liberalization directives for achieving reasonable prices for end-consumers. These range from consumer empowerment measures to more direct consumer protection measures informed by affordability concerns. After providing a taxonomy of the latter instruments, it examines their respective advantages and disadvantages by focusing on how these are perceived by the EU framework. Its broader aim is to contribute to a more nuanced understanding of what is meant by a ‘reasonable retail energy price’ within the context of national and EU competitive retail energy markets and explore how the resulting tension between the two understandings of reasonableness is accommodated in the broader EU constitutional and institutional context.