Power to the Energy Consumers

Abstract

In the Winter of 2016 the European Commission published a package of proposals for the reform of EU energy legislation. This contribution deals with the question what can energy consumers expect from the proposals regarding their rights and chances to actively participate in the energy market in the transition towards a Smart Energy System. It is positive that the package proposes to enhance consumer protection and consumer empowerment by clarifying and expanding the rights for the so called “active” consumers, including prosumers. Whether the consumer will really be empowered to take part in the energy market will to a large extent depend on several legal and economic factors. First, Member States still have considerable leeway to specify the main principles regarding tariff regulation, the role of distribution system operators (DSOs) and consumer participation. The exact specification of these principles is complex and involves careful balancing of short and long term interests of consumers. Second, behavioral economics’ research shows, that consumer behavior very often is not rational nor energy efficient from the perspective of the consumers. Energy contracts will become more complex with different types of (eg. dynamic) retail prices. This creates a greater risk for consumers making wrong decisions in decision-making processes regarding energy (service) contracts. Therefore, care should be taken that newly generated data by smart devices such as smart meters is presented in a user friendly (transparent, verifiable, objective, personal) way to the energy consumers. Considering the uncertainties regarding future behavior of the energy consumer, the EU and national legal frameworks should not set the market design in stone. This entails that national regulatory authorities should be attributed sufficient leeway to assess the necessity and proportionality of the required level of consumer empowerment and access regulation and to adjust regulations when necessary.

Keywords: smart energy system, active consumers, market design, empowerment, regulation, innovation

JEL Classification: K23, K32