While ministers had agreed on the broad outline of a deal at the last Energy Council in June, many issues remained unresolved, including disagreements over how to prevent a small number of energy giants from dominating the EU market.
The Commission's original plans had sought to ease the stranglehold of national energy majors by forcing large integrated firms to sell off their transmission assets so as to keep these activities fully separate from energy production (so-called 'ownership unbundling'). But France and Germany successfully led a coalition of countries against the plans, finally obtaining the right for former state monopolies - such as EDF and GDF in France and E.ON and RWE in Germany - to retain ownership of their gas and electricity grids, provided that they are subjected to outside supervision.
But following pressure from countries like the Netherlands, Denmark, Spain, Portugal and Poland, the deal will forbid energy producers from buying up the transmission businesses of energy companies in European countries where full unbundling has been introduced. This effectively means, for example, that EDF would not be allowed to buy up high-tension electricity lines in the Netherlands.
Ministers also approved the so-called 'Gazprom clause', aimed at limiting the ability of energy companies from outside the bloc - including Russia's state-owned Gazprom - from buying up distribution networks.
But the Baltic States and Poland were disappointed that the clause had been weakened compared to initial plans for a 'reciprocity clause'. Such a clause would have acted as a sort of 'EU investment veto', preventing companies in third countries like Russia from acquiring European transmission assets unless they grant EU firms the same legal certainty and market-access rights as those enjoyed by foreign firms operating on EU soil. However, Germany, where roughly 40% of gas imports come from Russia's Gazprom, succeeded in pushing through a weaker clause under which only a bilateral political agreement will be required, in a bid not to upset its main provider. In effect, this means member states will be able to negotiate bilateral investment clauses individually.
Final technical arrangements were also cleared up, including the voting system for the new EU Agency for the Cooperation of Energy Regulators (ACER), which is to oversee the functioning of energy markets. Germany had originally pushed for bigger countries, with larger energy networks, to have a greater say over the agency's decisions. But under the final deal, all countries will have the same voting weight.
Commission President José Manuel Barroso welcomed the compromise as "good news for consumers and businesses in Europe" and "a crucial step towards the completion of the single market".
The compromise now has to be approved by Parliament, which could prove tricky. In the initial vote on the issue, the House had insisted that ownership unbundling should be the only option for liberalising the EU's electricity sector (EurActiv 19/06/08).