EU states reject breaking up energy firms

"We submitted suggestions to the Commission," said Germany's Economy Minister Michael Glos. "I expect that the Commission will take appropriate account of them in elaborating its proposals for a third Directive package on the internal market for electricity and gas."

"The majority is not with me at this stage," Reuters cited EU Energy Commissioner Andris Piebalgs as saying after the meeting. He however added that he still believed unbundling was the best way forward to ensure fair competition and lower prices for consumers.

As the staunchest supporters of unbundling, the UK had made its position known in a written contribution circulated prior to the meeting. 

"Without proper separation there is a strong risk that network businesses will fail to develop the network if this will enable new generators and suppliers to compete with the affiliated businesses. The UK believes that full ownership unbundling is the best way to ensure this," the document reads.

If anything, full ownership unbundling is more important in the gas sector, the UK believes. "The scope for discrimination is greater for gas than for electricity as the system operator is able to exercise more direct control over access to gas pipeline capacity because of the nature of the commodity and therefore discriminate against non-affiliated companies."

According to Green MEP Claude Turmes, "effective unbundling of supply undertakings and transmission system operators is necessary so as to take away the distortion of investment incentives".

"TSOs that are not effectively unbundled from supply undertakings have no incentive to optimise network use in the overall interest of the market. They have no incentive to invest in the network to facilitate new entry at generation or supply levels."

However, it seems that those arguments have failed to convince France and Germany, which argue that large integrated companies are in a better position to negotiate contracts with powerful external suppliers such as Russia's Gazprom.

"For ownership unbundling to be effective, it needs to be accompanied by a high level of regulation," said a French diplomat before the meeting. He said the question was how far member states were ready to go in accepting regulation from Brussels.

Apart from France and Germany, countries opposed to unbundling include Austria, the Czech Republic, Greece, Luxembourg, the Baltic states, Slovakia and Hungary, the diplomat said. Supporters include the UK, Netherlands and Ireland.