EU offers new compromise on utilities split

The European Union executive proposed last year forcing vertically integrated utilities to spin off their electricity grids and gas pipelines -- known as “ownership unbundling” -- to spur more cross-border competition and bring down prices. Berlin and Paris led eight countries that opposed that plan and suggested an alternative “third way” that would avoid a breakup of giants such as Germany’s E.ON and RWE and France’s EdF and Gaz de France.

A group of liberal-minded countries, led by Britain and Sweden, are pressing for full ownership unbundling and an influential European Parliament committee backed that approach last week, strengthening the hand of the liberalizers. All sides are committed to seeking a deal next month before the end of Slovenia’s six-month term in the EU chair but positions are still far apart.

The sources said the new Commission proposal, backed by the Slovenian presidency and to be discussed by EU ambassadors on Wednesday, would allow utilities to retain ownership of their gas supply and distribution businesses under strict conditions. It does not cover electricity but would set a precedent. An EU source said a central feature of the new proposal was a compliance officer who would have strong regulatory powers to ensure that the owners make required investments in energy infrastructure and the network company is independently managed. However, the Commission has dropped the idea of putting a heavily empowered independent trustee on the supervisory board of network companies, which Berlin and Paris had complained was tantamount to expropriation. “The new option looks for other ways to get to the same result without the independent trustee,” the source said.

The Financial Times Deutschland daily, which said it had obtained a copy of the proposal, said utilities could be fined up to 10% of their turnover if they breached the terms of the unbundling rules. It called the paper a final offer from European Commission President Jose Manuel Barroso to German Chancellor Angela Merkel and quoted an EU official as saying if Berlin and Paris blocked it, there would be no solution until 2011-12, leaving companies in legal uncertainty. EU Competition Commissioner Neelie Kroes is meanwhile using her antitrust powers to try to force a breakup of some vertically integrated energy companies by threatening charges of anti-competitive behavior that carry heavy fines. (Reuters)