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Germany says EU to dilute plans for breakup of energy companies - extended

European governments will probably stop short of forcing the breakup of energy companies to bolster competition in the electricity and natural-gas market, opting for a softer approach, Germany's energy minister said.

European Union regulators want to split energy utilities such as E.ON AG into separate production and transmission businesses to make networks accessible to companies without their own grids. Germany and France oppose the idea, which energy ministers from the 27-nation bloc discussed today. „We will come to an agreement on a middle way,” German Economy Minister Michael Glos, who also handles energy policy, told reporters in Brussels. „There are extremely different traditions in member states.” The European Commission is stepping up efforts to open the EU's €250 billion ($328 billion) power and gas market because national barriers persist after 2003 legislation gave customers the right to choose suppliers. The lingering obstacles threaten to increase prices, curtail supply and weaken the European economy. The fresh 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.

„We want more competition,” said Glos, who chaired the energy meeting because Germany holds the EU's rotating presidency. „It's not easy.” The commission says the breakup of companies into separate production and transmissions businesses - known as „ownership unbundling” - is the best approach. The commission says this would prevent incumbents from favoring their own transmission companies at the expense of new entrants. „European energy markets are not functioning properly,” the commission said in an e-mailed statement today. „To enter a market, and provide real competition, new players need access to energy supplies, to the network and to customers. This is not happening.” Last month, the commission also outlined an alternative, less far-reaching approach that would allow production companies to remain the owner of transmission businesses while no longer being responsible for the units' operation, maintenance or development.

France is proposing a third option in which national regulators would enforce rules on non-discriminatory grid access and oblige companies to invest in networks. Breaking up companies „could have unfavorable consequences,” French Industry Minister Francois Loos, also responsible for energy matters, told reporters. „You could have ownership unbundling and the new owner, for example, has no interest in investing.” The commission aims to present draft legislation to split energy production and transmission after EU governments debate the matter, including at a March 8-9 summit. A draft law would need the backing of governments and the European Parliament. The energy ministers failed to approve a separate commission recommendation for a binding renewable-energy target of 20% in 2020. The EU's current goal is for renewable energies such as solar and wind power to have 12% of the market in 2010. As part of its recommendation for a new, binding target, the commission also urged the EU to set a minimum 10% target for biofuels in vehicle fuel in 2020 - a goal the ministers endorsed today. The EU's current biofuels goal is 5.75% by 2010. (Bloomberg)