Price Comparison Tool (PCT) is termed as all digital content and applications developed to be used by consumers primarily to compare products and services online (ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Gas Markets in 2015, Consumer Protection and Empowerment, November 2016, p. 39).
PCTs are seen as crucial instruments to provide clear and transparent information to consumers.
Proposal for a Directive of the European Parliament and of the Council on the internal market for electricity (recast) on common rules for the internal market in electricity (recast), 30.11.2016, COM(2016) 864 final 2016/0380 (COD)
Independent comparison tools including websites are an effective means for customers to assess the merits of different energy offers available on the market. Search costs are lower as they no longer need to collect information from individual suppliers and service providers. Such tools can provide the right balance between the need for information to be clear and concise and the need for it to be complete and comprehensive. They should aim at including the broadest possible range of available offers, and at covering the market as completely as is feasible so as to give the customer a representative overview. They can also reduce search costs as customers will not need to collect information separately from individual suppliers and service providers. It is crucial that the information given on such tools be trustworthy, impartial and transparent.
1. Member States shall ensure that customers have access, free of charge, to at least one tool comparing the offers of suppliers that meets the certification criteria set out in Annex I. The comparison tools may be operated by any entity, including private companies and public authorities or bodies. Customers should be informed of the availability of such tools.
2. Member States shall appoint an independent competent authority responsible for certifying comparison tools and ensuring that certified comparison tools continue to meet the criteria set out in Annex I.
3. Member States may require the comparison tools referred to in paragraph 1 to include comparative determinants relating to the nature of the services offered by the suppliers.
4. Any tool comparing the offers of suppliers shall be eligible to apply for certification in accordance with this Article on a voluntary and non-discriminatory basis.
The role of PCTs in the EU Internal Energy Market is highlighted by the so-called Winter Energy Package (see in the box Recital 23 of the Proposal for a Directive of the European Parliament and of the Council on the internal market for electricity (recast) on common rules for the internal market in electricity (recast), 30.11.2016, COM(2016) 864 final 2016/0380 (COD)).
Winter Package underlines that:
- the comparison tools may be operated by any entity, including private companies and public authorities or bodies,
- customers must be informed of the availability of such tools,
- the EU Member States are required to appoint an independent competent authority responsible for certifying comparison tools and ensuring that certified comparison tools continue to meet the established criteria.
According to Article 14 and Annex I to the aforementioned Proposal for the Directive, PCTs comparing the offers of suppliers will be required to meet the certification criteria.
The said provisions stipulate that the Price Comparison Tools must:
(a) be operationally independent and ensure that suppliers are given equal treatment in search;
(b) clearly disclose their owners and the natural or legal person operating the tool;
(c) set out clear, objective criteria on which the comparison will be based;
(d) use plain and unambiguous language;
(e) provide accurate and up-to-date information and state the time of the last update;
(f) include an as complete a range of energy offers as practicable covering a significant part of the market and, where the information presented is not a complete overview of the market, a clear statement to that effect, before displaying results; and
(g) provide an effective procedure to report incorrect information on published offers.
The above ACER/CEER Report of November 2016 refers to the following data on PCTs in the EU energy markets:
- reliable PCTs are available in 20 EU countries for electricity and 15 for gas,
- there are some EU countries with several PCTs, such as Germany (10), Great Britain (12) and the Netherlands (9).
PCTs are either provided by the the EU Member States National Energy Regulatory Authorities (NRAs) or by an authority dealing with consumer protection (in most EU countries with one, two or three PCTs) or they can be privately-owned.
The said Report also notes an interesting case for PCTs in Norway - see box.
In 2015, a new and improved price comparison tool (PCT) was launched in Norway, following the implementation of new regulation under the Energy Act which obliged electricity retailers to report all of their offers in the PCT rather than only a selection of them. The PCT was developed by the Norwegian Consumer Council (Forbrukerrådet) on mandate from the Norwegian government, in close cooperation with the Norwegian Water Resources and Energy Directorate (NVE).
The new PCT has significantly improved the ability of Norwegian consumers to compare electricity offers, by presenting all electricity offers available in the market through a user-friendly web-site called Strompris.no.
Forbrukerrådet's new PCT replaced a previous, publicly-run PCT, which had outdated reporting criteria and design, and as a result displayed only a limited number of the offers available in the market. In many cases, retailers chose to meet the reporting obligation only for their cheapest offers, while leaving more expensive offers out of the tool. This resulted in information asymmetries regarding the prices offered by retailers and put consumers at a disadvantage.
A study of market effciency commissioned by NVE found that 62% of consumers were on contracts that were not available through the previous PCT, and that these contracts were on average more expensive. As consumers were suffering from insufficient comparability and transparency, this adversely affected market effciency. Moreover, price statistics collected by a number of institutions, e.g. NVE, the national statistical bureau etc., were based on prices that were not representative of what most consumers were paying.
New regulation for the Price Comparison Tool
In 2014, NVE received a mandate from the Norwegian government to develop a new regulation for reporting electricity contracts under the Energy Act for use in the new PCT. With this mandate, NVE has become directly responsible for defining the reporting criteria for the new PCT. The guiding principle of the new regulation was that all retail contracts in the market must be reported, including contracts no longer offered. The new regulation was adopted by the Ministry of Petroleum and Energy, and entered into force on 1 April 2015. NVE will follow up on the regulation by formally supervising the reporting requirements and, when necessary, NVE will be able to set further requirements on the content, form and extent of the reporting in the PCT.
Stakeholder concerns with regard to the new tool
The stakeholders which were consulted throughout the design phase raised some key concerns with regard to the possibility for retailers to define new offers and price structures when deciding on definitions for reporting purposes. For example, retailers were concerned that all individually-concluded agreements with consumers on the basis of an offered price would have to be reported on separately in the tool, as the burden of reporting would limit their ability to offer individual pricing to their customers. NVE balanced these concerns with the need for comparability in the PCT, allowing individual pricing (depending on consumer specifics) within each offer.
Forbrukerrådet designed the new PCT, having in mind its user-friendliness, enabling consumers to receive a ranking of offers by entering their address and consumption volume in the PCT. The default offer type listed are spot-price offers, linked to the day-ahead wholesale price within the relevant bidding zone in Norway. Consumers can also choose to view rankings of fixed-term fixed-price offers, variable price offers where retailers adjust the price, or other offers. Offers are ranked according to the expected total monthly price for the consumer, including the network tariff cost.
ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Gas Markets in 2015, Retail Market, November 2016 p. 22, 23
Proposal for a Directive of the European Parliament and of the Council on the internal market for electricity (recast) on common rules for the internal market in electricity (recast), 30.11.2016, COM(2016) 864 final 2016/0380 (COD), Article 14, Annex I, Recital 23
ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Gas Markets in 2015, Consumer Protection and Empowerment, November 2016, p. 39, 40
ACER/CEER Annual Report on the Results of Monitoring the Internal Electricity and Gas Markets in 2015, Retail Market, November 2016, p. 22, 23