Austria's Competition Watchdogs Criticize Concentration on Gas Market

The market concentration on the Austrian natural gas market is very high, one could “speak of quasi-monopolistic dimensions”, said the head of the Federal Competition Authority (BWB), Natalie Harsdorf. “Further results are now available, including on procurement strategies and prices, the effects of the electricity cost subsidy, the supply and switching behavior of consumers, and the development of market concentration,” explains Natalie Harsdorf.

The report provides new insights into pricing and market dynamics in the electricity and gas sectors and shows that, despite falling wholesale prices, end-customer prices in Austria have not fallen to the same extent. This is partly due to the high level of market concentration and consumers' unwillingness to switch.

High market concentration and sluggish customers

A key finding of the report is the continued very high market concentration in the grid areas for natural gas and electricity. BWB and E-Control show that monopoly-like structures prevail in the natural gas market in particular. This high concentration means that a few suppliers dominate a large part of the market, which considerably restricts competition. This enables energy suppliers to set prices that do not necessarily correspond to wholesale prices, but are often higher.

Particularly problematic is the reluctance of consumers to switch their energy supplier. According to the report, more than half of households in Austria have never changed their supplier, which further weakens competition. In western provinces such as Salzburg, Tyrol, and Vorarlberg, the switching rate is even lower. This consumer inertia means that the dominant providers can impose their prices relatively unchallenged without losing market share. This situation reinforces the already high market concentration and makes it difficult for new providers to enter the market.

Different price trends and their causes

The report also sheds light on the different development of end customer prices for electricity and gas. Although wholesale prices have been falling for around a year and a half, these savings are only being passed on to end customers very slowly and at very different rates. Some tariffs have even been increased significantly, while others have been reduced, leading to a considerable differentiation in prices.

In the opinion of the task force, these divergent price developments are a sign of insufficient market transparency and a lack of competitive strength. In particular, pricing by the dominant energy suppliers in their respective grid areas is often incomprehensible and deviates significantly from wholesale prices. The task force identified cases in which the electricity prices have risen to over 61 cents per kilowatt hour and for gas to over 25 cents per kilowatt hour - values that are far above average and hardly appear to be justified by the companies' purchasing strategies.

These price distortions can be partly explained by the practice of certain customer groups remaining in long-term, often index-based contracts that offer them no favorable alternatives. Many of these contracts are difficult to understand and offer little incentive to switch, resulting in thousands of consumers remaining on overpriced tariffs.

Legal and regulatory measures to stimulate the market

To meet these challenges, BWB and E-Control have formulated several recommendations. One of the most important recommendations concerns the transparency and comparability of energy supply contracts. The authorities are calling for these contracts to be made clearer and easier to understand to promote competition and strengthen consumer rights. Specifically, energy contracts should be designed in such a way that customers can easily see what costs they will incur and how these are made up. This would make it easier for consumers to make informed decisions and switch suppliers if necessary.

Another focus is on the extension of the federal law passed in June 2024 to mitigate the consequences of the crisis and improve market conditions. This law, which provides for measures against dominant energy suppliers, is currently set to expire at the end of 2027. However, BWB and E-Control are arguing that the law should either be extended or permanently incorporated into general antitrust law. Such a measure would ensure that supervision of the energy market remains in place beyond 2027 and that dominant companies continue to be closely monitored.

Criticism from the opposition

SPÖ energy spokesman Alosi Schroll sharply criticizes the black-green government and describes the energy policy record of the last five years as a “shambles”. He argues that the energy companies have used the crises of recent years to push through non-transparent price increases and make high profits.

Schroll criticizes the fact that the government has failed to legislate for necessary market interventions such as the permanent establishment of an electricity cost brake and the introduction of a gas and heating cost brake. He also sees a need for action on the part of energy companies, which have lost the trust of the public through a lack of transparency and excessive prices, and demands that they must now win back this trust with transparent and comprehensible offers.

District heating in the task force's sights

In addition to the electricity and gas markets, BWB has now also turned its attention to the district heating market. The supply of district heating is playing an increasingly important role in Austria, particularly in the context of the energy transition and the expansion of renewable energies. District heating networks are often localized and connected households often have few to no alternatives, which gives district heating providers a particularly strong market position.

Given this situation, BWB has launched a sector inquiry into the district heating market. This investigation is intended to clarify whether there is any distortion of competition or abusive behavior in this sector. It will not only analyze structural factors such as market concentration and barriers to entry but also the pricing and terms and conditions of suppliers. BWB has already received numerous complaints from consumers about the high costs and lack of transparency in the district heating sector. The results of this investigation could lead to further regulatory measures to promote competition in the district heating sector and better protect consumers.

The district heating industry in Austria is itself reacting calmly to the BWB's announced industry investigation, as it believes it is well prepared thanks to an existing code of conduct. This code, which has already been signed by 20 companies, serves as a guideline for transparent and legally compliant action and covers two thirds of households supplied with district heating. The waermepreise.at platform also supports price transparency in the district heating sector. Industry representatives emphasize that compliance with the code ensures that companies are on the safe side during the investigation.

Turbulent energy market

The results of the second interim report of the Electricity & Gas Taskforce make it clear that there is still a considerable need for action despite some easing in the wholesale markets. The high level of market concentration, uneven price trends, and consumers' unwillingness to switch continue to pose major challenges. The task force will continue its investigations to uncover possible potential for abuse and to strengthen competition in the Austrian energy markets.

Comments on the current interim report are still possible and welcome. BWB and E-Control emphasize the economic and social importance of the topic and invite all interested parties to participate in the discussion. The aim is to use the findings to develop measures that promote competition and make the energy market fairer for consumers.

With these measures, the authorities hope to improve market dynamics in Austria in the long term and ensure that the benefits of falling wholesale prices reach consumers. The next step will be a detailed analysis of the district heating markets, the results of which are expected in the coming months.

Austrian Federal Competition Authority

SPÖ

District Heating Industry in Austria