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EU's Barroso backs calls to split energy transmission, supply

European Commission President Jose Barroso urged the split of energy companies into separate transmission and supply businesses to bolster competition in theEuropean Union's electricity and natural-gas market.

Barroso endorsed calls by EU Competition Commissioner Neelie Kroes for stricter rules to make energy networks accessible to companies without their own grids. Existing EU legislation requires providers such as Germany's E.ON AG to have a legal separation between transmission and supply, a practice known as “unbundling.” “We intend to propose new measures on ownership unbundling,” Barroso told a conference today in Brussels. He said the package, due to be outlined Januar 10, would aim for a “more coherent” European energy network. The commission is bolstering efforts to open the EU's €250 billion ($321 billion) power and gas market to more competition. National barriers persist after 2003 market-opening legislation, threatening to increase prices, curtail supply and weaken the economy of the 25-nation bloc. The new push by the commission, the EU's regulatory arm, follows Spanish efforts to thwart a takeover of Endesa SA by E.ON and a French-orchestrated merger of Suez SA and Gaz de France SA to avert a possible bid for Suez by Italy's Enel SpA. “Open markets, not narrow nationalism, are the way to energy security and sustainability,” Barroso said. The EU must “free up energy markets to the benefit of energy consumers.”

Existing EU legislation gave businesses the right to choose suppliers in July 2004 and will extend that option to households in July next year. The rules also include the legal unbundling requirement to facilitate grid access for companies without their own networks such as the UK's Centrica Plc. Barroso declined to elaborate on the plans for ownership unbundling, which the commission could try to enforce using its competition powers. Another option is to seek the change in draft legislation that would require the support of EU national governments and the European Parliament. The commission is having trouble enforcing the 2003 EU energy market-opening legislation, which got the backing of European lawmakers after years of debate. In April, the commission said 17 member states were in breach of the laws. The commission has begun to use its antitrust authority to bring about market opening. Kroes is leading a commission probe into the functioning of the EU's power and gas market and has threatened to fine energy companies as much as 10% of annual sales for failing to open their power grids and pipelines to competitors. (Bloomberg)