The EC says that long-term power purchasing agreements concluded between state-owned wholesaler MVM Rt and power generators may distort competition by guaranteeing generators a return on investment with no risk.

The Commission also says that the agreements, called PPAs, may be an obstacle to market liberalization as they cover 80% of the Hungarian power generation market, making it hard for new entrants to get a foothold.

"The investigation will allow the Commission to obtain more information on the PPAs and give interested third parties a chance to comment," said the Commission in a statement.

The Hungarian electricity market was opened to competition for non-household users in January 2003. By the end of last year about a quarter of demand was met on the liberalized market. Full market opening is due in 2007.