This report was commissioned by the Portuguese Competition Authority to Cambridge Economic Policy Associates (CEPA) in order to (i) study the gas and electricity markets in Portugal, (ii) examine the proposed merger between the Portuguese electricity company EDP (51%) and the Italian oil company ENI (49%), and (iii) assess remedies that might be applied to mitigate its effects on competition. The report identifies that most electricity produced in Portugal was sold on long-term power purchase agreements (PPA) and that these contracts were not compatible with a competitive electricity market. The planned replacement of PPA, via CMEC, would have the same economic effect as the PPA arrangements. The report indicates that the merger would be detrimental to competition and issues a number of recommendations to mitigate the competition issues associated with the market structure and contractual framework.