E.ON Shocks with Proposed Self-Breakup

The German utility's surprise announcement that it may sell its transmission networks may affect the EU plan to liberalize the energy sector

by Renata Goldirova

Germany's biggest energy utility, E.ON, said on Thursday (28 February) it was ready to sell its transmission networks, something that could affect the ongoing battle between EU governments over the European Commission's plan to liberalise the union's energy sector.

"It's very astounding what happened here," German secretary of state for the economy Peter Hinze said in response to E.ON's announcement, adding: "The timing coincidence of these events, at a moment when the commission is trying to force through a very sharp position against a minority [of countries], is a very questionable game".

Other energy utilities, such as France's EdF and Germany's RWE and EnBW, have also reacted coldly to the new market development.

"What E.ON has done is unbelievable and has made everybody here very unhappy. It couldn't have come at a worse time," a senior executive at a big energy company told the Financial Times.

The company's surprising move is likely to undermine Berlin's fierce opposition to the Brussels-pushed idea of separating energy companies' production and supply wings.

Germany, together with Austria, Bulgaria, Greece, France, Latvia, Luxembourg and Slovakia, have formed a blocking minority group within the 27-nation EU.

But the European Commission has welcomed the company's suggestions, saying: "If adopted, [they] would structurally change the electricity sector in Germany and could spur competition in the sector to the benefit of domestic and industrial customers".

"It encourages us that our proposal is a very good one and it does not create problems for companies," EU energy commissioner Andris Piebalgs told journalists, reiterating Brussels' intention to push for full liberalisation, known as ownership unbundling.

The plan suggests splitting up energy firms' production and transmission wings by forcing the parent company to sell its transmission networks.

"All member countries would definitely like to have an agreement by June. Will we be able to bridge the differences? Well, I cannot promise you that, but there is a pretty good chance we will," Mr Piebalgs said about the prospects for his proposal getting the green light from member states.

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