June 19, 2008

Fight Looms in Europe on Energy Proposals Parliament Insists on ‘Unbundling’ Plan

European Union lawmakers agreed Wednesday to a tough line on a proposal for liberalizing power markets in Europe, putting them on a collision course with the governments of several member states, which want the bill watered down.

The European Commission, the EU's executive arm, proposed last year to separate the ownership of natural gas and electricity providers from the pipelines and grids used to distribute it. It argued that the so-called unbundling would help new entrants to the market and lead to lower energy prices.

But energy ministers from the 27 EU countries yielded to pressure from France and Germany this month, supporting a plan that would give giant energy companies alternatives to splitting their power supply and distribution businesses.

The European Parliament, however, which must also approve the bill, stuck firm to the commission's initial preference for full ownership unbundling.

It rejected a compromise deal based on Franco-German proposals by 378 votes versus 267 in favor, with 22 abstentions. "We need a shake up of the market in order to introduce true competition," said Eluned Morgan, a Welsh EU lawmaker who guided the legislation through the Parliament.

"European consumers have been paying over the odds for electricity," she added. "The best way to deliver energy is through a very strong separation between energy supply and transmission. We want easier access for renewables and for small enterprises."

The Parliament must now reach a compromise with member states.

Berlin and Paris have spearheaded opposition to any plan that would break up national energy champions. They proposed allowing utilities to keep ownership of transmission networks under strict supervision by a regulator.

Their hand appeared to be weakened in recent negotiations when two big German utilities, RWE and E.ON, were required to sell parts of their transmission networks to settle antitrust cases brought by the EU Commission.

But the German government has maintained its position nonetheless, and energy ministers agreed on their compromise this month, mindful of the fact that France takes over the EU presidency in July and has stated its reluctance to move the issue forward.

Originally published by Reuters.

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