EU plans split-up of energy giants

Oct 30, 2006, 13:07 GMT

Brussels - In an attempt to stimulate cross-border competition on Europe's energy market, the European Commission said Monday it was preparing to split up energy giants that control both the supply of energy and the infrastructure to deliver it.

Breaking up integrated energy firms was an 'absolute priority' to spur cross-border competition and tackle the insufficient level of unbundling in the sector, said EU competition chief Neelie Kroes.

'With the infrastructure in the hands of incumbent supply companies and electricity generators, opportunities for discriminating against competing suppliers abound,' she said in comments to an energy conference in Lisbon which were made available in Brussels.

'Europe has had enough of 'Chinese wall' and quasi-independence,' the commissioner said.

Only ownership unbundling could restore credibility and faith in the market as network companies were still favouring their own supply or generation businesses, Kroes said.

Such a policy would be a huge blow to some of the biggest and most influential companies in the EU.

Energy giants such as Germany's E.ON and RWE and France's EdF and GdF have expanded by combining supply and infrastructure and in some cases electricity and gas operations as well.

EU regulators have criticized the market dominance of these integrated companies.

The 25-member bloc's energy market - which in theory should be almost completely open to cross-border competition was still lacking in real commercial rivalry, they have argued.

Kroes also stressed that Europe's energy market needed more transparency. 'Regulators must be given the necessary independence and tolls to monitor the market,... including the ability to exchange market-sensitive information,' she said.

Hitting out at long-term supply contracts on the bloc's gas market, Kroes said that contracts should not block new entrants from buying enough gas to set up shop.

'Customers are too often locked in with their traditional supplier,' she argued.

Kroes said that regulators and market participants were increasingly supporting her stance.

However, the commissioner is likely to face tough resistance from Germany and other member states. The commission is due to propose a review of EU energy legislation early next year.

An earlier EU antitrust probe found that energy prices across the bloc were too high and that efforts to break up the sector have not gone far enough.

EU regulators have been at loggerheads with national governments such as Spain and France who are trying to protect their large companies, often involved with energy supply, from foreign takeovers.