Global Economics

EU Nears "Unbundling" of Power Utilities


The European Commission plans to submit legislation that would force large energy companies to fully separate production and distribution

EU energy giants are coming one step closer to losing full control over their assets, with the European Commission pressing ahead with legal moves to break up major concerns into smaller pieces and saying it has the backing of member states.

Senior EU officials, speaking on condition of anonymity, confirmed that Brussels will table a piece of legislation which would force large energy companies to sell off part of their business in order to fully separate production and distribution.

The so-called "ownership unbundling" is seen by Brussels as key to boosting competition and bringing down consumer prices.

The draft legislation is to be presented in July or September, EU officials said, arguing they had received a green light from EU leaders at the spring summit (8-9 March), which outlined new targets in the field of energy.

According to the summit conclusions, EU leaders approved "effective separation of supply and production activities from network operations, based on independently run and adequately regulated network operation systems which guarantee equal and open access to transport infrastructures and independence of decisions on investment in infrastructure."

They also agreed that any move towards unbundling should take account of the specific characteristics of the gas and electricity sectors and of national and regional markets.

The vague wording has once again proved right the old saying "the devil lies in the detail" however, as some EU capitals argue they have not committed themselves to any specific legal model yet.

"The summit did not call for ownership unbundling," one diplomat told EUobserver in response to the commission's legal plans, but added "it was not a surprising move," given that the EU's executive arm has been clear about its preference all along.

Member states themselves have been split into two camps on the issue, with, for example, the UK, Ireland and the Netherlands favouring the asset break up idea, but with France and Germany, home to energy giants EDF and E.ON, opposed.

During the summit, Austrian Chancellor Alfred Gusenbauer said that "property-oriented unbundling would not be a step in the right direction, given the current dependence on outside energy sources," adding "there is a danger of EU companies getting under control of extra-European forces."

Meanwhile, the commission seems to be taking full advantage of the EU states' wrangling, with its officials saying Brussels "is not going to give up the idea [of ownership unbundling] just because discussion has not finished yet."

LONG LEGISLATIVE LIST

However, the proposal to unbundle EU energy companies is only one aspect, as Brussels foresees a long list of legislative steps following the adoption earlier this month of the energy-climate change package.

This year, for example, will see eleven different initiatives in the area of environment, eight in the energy field, two in competition and 13 initiatives falling under the external relations umbrella.

One of the most hotly awaited pieces of law - a directive on the use of renewable energy - is to be tabled in the third quarter of this year and will contain three chapters: on biofuels, on heating and cooling and on renewable electricity.

"The commission has a fair idea what is the renewable potential of each member state," EU officials said, but added the main task - how to get from six to a 20 percent share of green energies in overall EU energy consumption by 2020 - still needs to be figured out.

According to the commission, member states would not be given any medium term target but only one to be fulfilled by 2020. If they fail, the commission would start a regular infringement procedure.

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