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Power Firms Ready to Cede Some Control of Networks

After Brussels accused European energy companies of hurting competition with their stranglehold on power supply networks, the firms have proposed handing over their networks to regional operators. The concession is aimed at preventing the companies from being broken up.

AP

European energy providers are under tension: The EU wants to break them up.

Now the European Commission wants to put an end to what it sees as anti-competitive behavior -- and the energy giants are not amused. In order to prevent their break-up they have come up with a plan to retain some degree of control over their networks.

Brussels demanded in January that transmission networks and power generation be placed under separate ownership. Now several companies have come forward with an offer to voluntarily give up control over their networks, the Germany daily Süddeutsche Zeitung reported on Tuesday. The proposal, which at first glance looks like a move towards breaking up the companies, in reality marks an attempt by them to keep control of the networks.

Under the initiative, energy companies would hand over network control to independent regional trusts which would be in charge of gas and electricity distribution as well as financial investment in it. Ownership of the networks would however remain with the energy giants. The proposal calls for a merger of the networks in Germany, France and the Belenux countries. It is not yet clear who the trusts would be run by.

With this network-pooling idea, the energy companies want to avoid being broken up by European Competition Commissioner Neelie Kroes. "If we create the competition ourselves, it'll take away the basis for the proposal from the Commission," one unnamed executive was quoted as telling Süddeutsche Zeitung.

Kroes has criticized the energy giants for being anti-competitive and for raising gas and energy prices. She believes that only a separation of production and supply will lower prices. European Commission President José Manuel Barroso supports her: "If the corporations violate European law through their coupling of electricity generation and network management, the Commission will intervene," he said in an interview with business daily Handelsblatt on Tuesday.

The newspaper reported that the idea first came up in late January when the managers of the German energy companies E.on, RWE, EnBW and Vattenfall met with Andris Piebalgs, EU Commissioner for Energy, and proposed the model of regional network operators. Piebalgs is reported to have been positive about the idea. By opening up national energy markets, the network pools could benefit the European Union, a close associate of Piebalgs told Handelsblatt.

The energy companies also stand to gain, writes Süddeutsche Zeitung. They could keep ownership of the billion-euro networks, which would earn them a very valuable high credit rating. The merger of national networks would also create an attractive energy market comprising five countries.

And the companies could enjoy the support of some of their own governments. The German and French governments have voiced skeptism about the idea of breaking up the energy giants, and could be open to alternative models.

Although Barroso has said his preference is for a break-up of the energy companies, he told journalists on Tuesday that the plan to pool European supply networks would be "progress" and could be a "way of reaching the strategic goals."

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