Britain and France face energy-liberalisation clash

Around a third of the 27 EU member states have taken a stance so far, meaning the issue is still largely undecided. But clear battle lines have begun to emerge.

"The UK, Denmark and the Netherlands are clearly on the offensive" in favour of ownership unbundling, said a French diplomat, adding that Belgium, Portugal, Spain and Italy were not opposed to the idea.

Earlier, France had taken the lead of the opposite camp. In a letter sent on 10 January to Energy Commissioner Andris Piebalgs, French minister-delegate for industry François Loos said that the liberalisation process had failed to bring the desired lower prices to consumers, pointing out that electricity prices had "more than doubled between 2004 and end 2006". 

"Like the Commission, we therefore consider that dysfunctions exist on the market,” Loos wrote. "But we diverge on the identification of causes and therefore, on the remedies," he added. 

In particular, Loos said France "does not consider that these dysfunctions are attributable to integrated energy operators nor to the presence of dominating incumbent operators" such as EDF or GDF. On the contrary, he argued that large European energy groups are "a guarantee to security of supply", saying they are in a stronger position to negotiate prices with major supply countries such as Russia. 

Countries that support France in the unbundling battle include the Czech Republic, Austria and Hungary, the French diplomat said, with Ireland, Sweden and Lithuania expressing "reservations". 

But a British diplomat said that the debate could be shifting in favour of unbundling. "There was more support than expected" at the meeting, he said, pointing out that unanimity voting would not be needed in Council should the Commission follow up with a formal legislative proposal at a later stage. 

Because qualified majority would apply, he suggested that countries opposed to unbundling could be placed in a minority position and eventually overruled. There was "no large-scale outright opposition" to unbundling, the British diplomat noted: "Maybe the debate is shifting."

Meanwhile, Germany, once a staunch opponent of ownership unbundling, appears to have softened its stance. In an interview with the Financial Times on 12 January, Economy Minister Michael Glos said he "would not rule out any option" on energy liberalisation. 

But he insisted that "decisions made so far, for instance the obligation legally to unbundle distribution and production, are fully implemented everywhere as "a prerequisite" to further action. In a second step, he said, an independent system operator would take care of managing the networks owned by large integrated companies. And only after that could full unbundling be considered. "If the independent system operator works, we will not need such a step," Glos said. 

Mr Glos’s remarks were quickly interpreted by free-market supporters as a U-turn. But others say that it only reflects a softening in tone that is largely due to the fact that Germany, as holder of the rotating EU Presidency until July, has a responsibility to act as a bridge-builder in the debate. "Our impression is that there is an inflexion but not a turnaround," the French diplomatic source said, indicating that Mr Glos’s position "resembles very much to what France has said to date, namely full transposition [of existing legislation] before considering anything else".

For his part, Commission President José Manuel Barroso made his position clear as he presented a package of energy proposals on 10 January. "The Commission has set out a clear preference for the option of ownership unbundling while recognising that another option is possible," he said.

He also warned that "less ambition on unbundling will require more on the regulator", resulting in tighter scrutiny over large integrated energy groups.