Power Engineering - EU spares energy groups from being broken up

9 June 2008 - EU nations have struck a deal that will spare big gas and power companies from being broken up as part of a controversial shake-up of the sector aimed at firing up competition.

"All member states have shown a great degree of goodwill to reach a compromise which is acceptable for all," said EU Energy Commissioner Andris Piebalgs in reaction to the deal struck by energy ministers in Luxembourg.

EU nations had been divided over whether to force big gas and electricity groups such as EDF of France or Eni of Italy to hive off their retail distribution networks into separate firms.

The agreement between energy ministers allows governments to decide whether to force companies to part with their distribution networks or allow them to keep their gas pipelines or power transmission lines under strict conditions.

In the latter case, the company would have to set up a transmission operator that would enjoy a "high level of autonomy" over management and investment decisions, according to the Slovenian presidency.

"Even if all member states do not agree with all points, we can see an agreement has been reached on the main elements," Slovenian Economy Minister Andrej Vizjak said of the deal, which still has to be approved by the EU parliament in July.

Eager to fire up more competition, the European Commission originally proposed the splitting up energy groups idea last September in hopes of ending conflicts of interest it feared were keeping prices high and discouraging investment.

After the proposals sparked uproar from some of Europe's biggest energy companies, a group of eight countries led by France and Germany sought an alternative way to improve competition without breaking companies up entirely.

Eleven EU countries already ban gas companies from owning distribution networks while seven have the same rule for electricity groups.

Many of those countries wanted full unbundling of distribution networks as the only option.

France, which is deeply opposed to the idea of breaking up big national champions in the energy sector, takes over the European Union's rotating presidency in July for the rest of the year.

After that, 2009 will be a year of political transition with a new line-up due at the European Commission and elections for the European Parliament during the course of the year.

German energy group EON said earlier this year it was planning to sell its high-voltage electricity network in the face of concerns from EU regulators.

Last week, fellow German energy group RWE proposed selling off its 4100-kilometre gas transmission network in order to avoid a drawn-out anti-trust battle with the commission.

Europe's top competition watchdog also recently launched an anti-trust probe into French-state controlled energy group Gaz de France.

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