EU Agrees to Open Energy Markets

By Stephen Castle and James Kanter

The European Union agreed Friday to open its energy markets and weaken the grip of the largest providers, a move that could lower bills and grant choice to consumers by letting new competitors into the market.

EU ministers concluded months of negotiation over the contentious legislation, which had created a schism between countries that want to liberalize the energy market, like Britain and some Nordic countries, and France and Germany, which fought hard to keep their energy giants intact.

The consensus reached Friday is expected to pave the way for approval by the European Parliament during the next six weeks.

When effective, about two years from now, the measure will require large European energy companies like Electricite de France and E.ON of Germany to separate their production and transmission operations and ease access to them for competitors.

In 2003, lawmakers approved measures to improve consumers’ energy supply choices. But the EU’s euro 340 billion, or $529 billion, power and natural gas market remains fragmented by national barriers, according to the European Commission, which conducted a detailed study of the sector.

The president of the commission, Jose Manuel Barroso, hailed the accord as “a major step” toward achieving greater integration in the European energy market.

“It is good news for business and citizens alike who need competitive prices and security of energy supply,” he said in a statement released after the agreement was made in Luxembourg.

Britain and Sweden are among countries that have supported the commission’s goals because they have already opened their markets to competition.

But they were vigorously opposed by Germany and France, which lobbied strongly against the toughest measures to defend their powerful former state monopolies.

Under the compromise, electricity and gas utilities could keep ownership of gas and power supply and distribution businesses.

But the new companies – called Independent Transmission Operators – would not share computer systems or offices with companies generating electricity.

National regulators would be able to choose managers of the transmission businesses, and managers’ salaries would be based exclusively on the performance of those businesses, rather than generating companies.

The transmission companies also would be prohibited from discriminating against new entrants on the market, and national regulators would have the power to impose fines on transmission companies that break the rules.

“This is a very significant day for energy in Europe,” Malcolm Wicks, the British energy minister. “Today’s agreement will bring about a real improvement in the way energy markets function across the EU. It will put downward pressure on prices, give consumers a greater choice and level of service, and help bring on new clean green energy.”

The Continent’s big energy companies have faced a two-pronged attack from the EU.

The EU executive has threatened to use its power as an antitrust regulator to break apart the distribution and retail businesses of the major European energy companies like Electricite de France and E.ON of Germany to loosen access to networks and pipelines.

Though some of the fiercest resistance to liberalization came from Chancellor Angela Merkel of Germany, her position was undermined by the reaction of some German companies who faced separate action from the European Competition Commissioner, Neelie Kroes.

Two of the top German energy companies have said they are ready to settle antitrust charges with the European Commission, by agreeing to a break-up.

E.ON said in February it would sell its power grid and some generation plants to settle EU antitrust charges. Last week, RWE said that it had agreed to sell its 4,100-kilometer, or 2,540- mile, gas transmission network.

At the meeting Friday, ministers argued over several details, including the point at which the new arrangements will be reviewed.

Originally, Britain had suggested a clause that would require a full break-up of utility ownership after a certain number of years, though that was blocked by France and Germany.

Under the compromise the system will be reviewed two years after coming into force.

If found to be ineffective, measures will be proposed a year later.

Assuming the proposals gain the support of the European Parliament, they will enter into force in spring but take a further 18 months to implement.

Originally published by The New York Times Media Group.

(c) 2008 International Herald Tribune. Provided by ProQuest Information and Learning. All rights Reserved.