EU agrees on new rules for gas, energy markets

Oct 10, 2008, 17:43 GMT

Luxembourg - European Union energy ministers on Friday agreed to new rules for its gas and electricity markets after a long and heated debate, diplomats said.

The deal brings to an end a year of bitter wrangling between member states after the EU's executive, the European Commission, proposed laws aimed at increasing competition in the bloc's energy market.

And it sets out exactly when and how European energy companies will be able to take over rivals in other EU states - a question which emerged as the most thorny question in recent months.

At the heart of the commission's proposal is the idea of 'unbundling,' by which companies which both produce and transport energy are forced to give up control of their transmission systems.

The proposal is meant to do away with unfair practices whereby, for example, electricity generators who also own transmission grids refuse to let other generators use them - thereby stifling competition and forcing prices up.

EU member states agreed to that principle in June, although they insisted that the companies should not have to sell off or hand over their transmission systems to new managers as long as they maintained a clear separation between the branches of the company.

But that compromise sparked a debate over whether a 'bundled' company, with full ownership of transmission and production, would be able to take over energy companies in another EU state - and thereby raise the spectre of unfair practices.

Ahead of Friday's meeting, the Netherlands had pushed for the right to be allowed to block such deals, while Germany had argued that that would be contrary to EU competition rules.

A compromise deal hammered out after lengthy debate on Friday ruled that companies which generate electricity or gas will not be allowed to take over energy-transmission companies in EU states which practise full unbundling.

But it also said that they would be allowed to take over transmission systems in 'bundled' countries, and energy generators across the EU, unless the national government ruled otherwise, and the EU's executive, the European Commission, approved the ruling.

The commission has to rule on such issues within two months, the compromise deal says.