Europe's electricity markets show every sign of speeding toward free competition since deregulation last year. Indications include the swift fall of electricity prices in Germany; the breakup of Italy's national electricity producer, ENEL; the opening of an electricity-trading exchange in Amsterdam, with another to follow in Frankfurt; and the growing availability, across the Continent, of price information.

Indeed, the rapid pace of liberalization in some countries has led producers and consumers to pressure other countries to catch up. Low prices in Germany, for example, are making consumers in the United Kingdom ask why their prices are so high. Meanwhile, German producers feel that they should have the right to buy electricity-generating companies in France if they are to be subject to foreign bids such as the one the French producer EdF made for the German generator EnBW.

Indeed, all sorts of companies—including upstream oil and gas companies, downstream commodity retailers, and utilities wishing to move sideways—want to buy or build electricity-generating plants in Europe. Deregulation has put the sector into play, but though European Union legislation aims to create a level playing field, national markets are leveling out from different starting points and at different speeds. The truth is...