The European Union wants more competition in the energy sector, but the large energy companies aren't playing ball. Now Brussels is planning to take on the big boys with a far-reaching new law which will break up the giant energy suppliers into separate production and distribution companies.
European Commissioner for Energy Andris Piebalgs and European Commissioner for Competition Neelie Kroes have put together a draft package of regulations which would force large European energy companies to completely give up control of their distribution networks, the German business daily Handelsblatt reported Thursday.
The confidential draft proposes two models for separating power production from distribution, the paper reports. The first model involves companies either selling their distribution networks to an independent investor or spinning off their networks into a separate company. In the second model, the companies would retain ownership of the networks but appoint an "independent system operator" who would be given total control of managing distribution, a system which is already in place in parts of the US.
The intention is to stimulate competition in the sector, which the EU feels is lacking. The EU's goal, as part of its plans for liberalizing the energy market, is that companies and private households should be able to buy energy from electricity and gas suppliers anywhere in the EU. However the EU still cannot guarantee that every supplier can freely deliver energy to customers in every member state, according to Piebalgs' draft.
Piebalgs also wants prices for wholesale electricity and gas to be more closely regulated. He seeks to give national supervisory authorities significantly more power and to join them together into a new Europe-wide supervisory agency. The intention is to enable authorities to check if large established players are discriminating against new providers in the wholesale market.
A high-ranking official told the newspaper that the draft law was almost certain to be approved when it is brought before the European Commission on Sept. 19. The regulation package must then be approved by a majority of member states in the Council of the European Union before it passes into law.
The move is the EU's furthest-reaching intervention in the European energy market yet and is likely to lead to years of conflict. France, Germany and other EU states have repeatedly criticized plans to break up energy firms into production and distribution companies, as have influential energy giants such as Germany's E.on and RWE and the state-owned French energy monopolist EDF, who would be particularly affected by the move. However other EU members, led by the United Kingdom, are in favor of the separation.