Germany backs electricity giants in bid against ‘unbundling’

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German incumbent energy companies will receive support from the German Presidency to avoid being disbanded, according to draft conclusions for the 2007 Spring Council, seen by EURACTIV.

German incumbent operators EnBWEoNRWEVattenfall and VDN plan to propose to the Commission to bundle transmission lines for electricity and gas within a region extending to France, Belgium, the Netherlands and Luxemburg, Süddeutsche Zeitung  reports. The move is intended to avoid more far-reaching steps by the Commission to enforce the liberalisation of energy markets. 

The plan is also supported by Eurelectric, the branch association of the electricity industry. “Eurelectric is exploring the benefits of a regional model of co-operation whereby Transmission System Operators (TSOs) link their activities so as to act seamlessly – this would act as a driving force for market-development, while allowing TSOs to operate independently of any particular generation company,” an Eurelectric position paper published on 6 March 2007 says. The paper goes on to say that “the process of competitive market integration cannot be reduced to a mere question of forced divestment of transmission assets (‘ownership unbundling’).”

In an interview with the Financial Times, German Chancellor Angela Merkel backed this notion: “I do not think the issue of competition can be reduced to the unbundling question. Stripping the energy producers of their networks is no guarantee that there will be more competition. What you need is a strong regulatory system to enhance competition and the right incentives to invest.” Hinting at the UK, which is, together with the Commission, the strongest advocate of unbundling, Merkel added: “In some countries, the separation of rail services and networks did not exactly improve the network’s quality.”

Along the same lines, the draft conclusions for the 8-9 March 2007 Spring Council, of which EURACTIV obtained a copy, invite the Commission to elaborate measures for an “effective separation of supply and production activities from network operations (unbundling)”. But it reaffirms that “the first step…is to ensure timely and full implementation in letter and in spirit of existing Internal Market legislation relating to the opening up of the gas and electricity markets”.

According to the June 2003 electricity directive, transmission networks have to be run independently (unbundled) from the production and supply side. This means that companies have to have networks operated by legally separate entities. The Commission wants to go a step further, however, and also unbundle ownership of energy suppliers and transmission networks. This would mean that large incumbent companies that still own the complete supply chain, from electricty production to the delivery to the customer, would have to be disbanded. 

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