Brussels sets tough conditions for ‘Third Way’ on energy

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The European Commission has put forward detailed conditions for national champions in France and Germany to retain ownership of energy transmission assets in an attempt to strike a compromise over its controversial proposals to open up gas and electricity markets.

In a set of amendments circulated in late April, the Commission specifies the conditions under which it could accept the so-called ‘Third Way’ trumpeted by eight EU countries as an alternative to splitting the production and transmission businesses of large integrated energy firms.

“The Third Way needs to be strengthened in order to be acceptable,” EU Energy Commissioner Andris Piebalgs told the French Senate at a hearing on 17 April. But he declined to give deputies further details, saying the Commission would wait for a vote in the European Parliament’s industry committee on 6 May before taking a more definitive stance.

Under the proposed amendments, obtained by EURACTIV, former state monopolies such as E.ON in Germany and EDF in France would be allowed to retain ownership of their power grids. 

However, they would have to leave their management to an independent subsidiary, the transmission system operator (TSO), with “the power to independently adopt its annual investment plan and to raise money on the capital market, in particular through borrowing and capital increase”. 

Every year, the TSO would be required to submit a ten-year investment plan to the energy regulator at national level, based on existing supply and demand forecasts. 

A veto right for EU member states?

The TSO would also have a supervisory body “in charge of taking all decisions which may have a significant impact on the value of the assets” of the vertically-integrated company. 

EU member states would be allowed to appoint one member of the supervisory body with “a veto right with respect to decisions that in his view may significantly reduce the asset value of the transmission system operator”. The other members would be appointed by an independent trustee, who must not have been involved with the vertically-integrated group for at least five years prior to his appointment.

Speaking to the French Senate on 17 April, EU Energy Commissioner Andris Piebalgs said he was "rather optimistic" about reaching a political agreement at the meeting of EU energy ministers on 6 June.

"The two groups of countries until now opposed on the issue are now talking to each other and searching for a compromise that could be acceptable to all member states," Piebalgs told the French deputies. "There are no problems relating to the objectives of unbundling; the difficulties only relate to the method of implementation."

British diplomat described the Commission's amendments as "very interesting proposals" and "a better starting point" than the French and German proposal for a Third Way. He added he would be "surprised if all eight countries" opposed to unbundling rejected it.

French source was more evasive, saying "all amendments that reinstate the Third Way receive our support".

Claude Turmes, a Green MEP with knowledge of the negotiations, was cautious about the status of the Commission's proposed amendments. "This text is changing all the time. Everybody has an interest in spreading false information."

Turmes restated his belief that the Commission's initial proposal for full ownership unbundling would receive a large backing in Parliament, saying "there will be a majority in favour" at the vote in the industry committee on 6 May.

In its third liberalisation 'package' proposals unveiled on 19 September 2007, the Commission left member states with two options to complete the liberalisation of the EU energy sector:

  • Forcing big energy firms to sell off their power transmission and gas storage assets in order to keep these activities fully separate from energy production ('Ownership unbundling'), or;
  • allowing them to maintain ownership of their transmission assets but leave their management to an Independent System Operator (ISO) responsible for taking investment and commercial decisions. 

France and Germany have vehemently opposed the plans and formed a blocking minority with the support of six other member states (Austria, Bulgaria, Greece, Luxembourg, Latvia and the Slovak Republic). 

Together, they tabled an alternative proposal – called the 'third way' – which, they argue, would guarantee a similar result by introducing safeguards to ensure the independence of energy grid operators (EURACTIV 01/02/08).

  • 6 May: Parliament Committee on Industry, Research and Energy (ITRE) to hold key vote on Morgan report (Directive on internal market for electricity).
  • 19 May: ITRE Committee vote on La Russa report (Directive on internal market for natural gas).
  • 28 May: ITRE Committee vote on following reports: 
    • Vidal-Quadras (Regulation on access to the network for cross-border exchanges in electricity).
    • Paparizov (Regulation on access to the natural gas transmission networks).
    • Brunetta (Regulation on the Agency for the Cooperation of Energy Regulators). 
  • 6 June: Energy Council to aim for political agreement on the liberalisation package.
  • 16-19 June: Parliament plenary vote on Morgan and La Russa reports.
  • 19-20 June: EU summit in Brussels to provide last chance for agreement if Council meeting of 6 June fails.
  • 7-10 July: Parliament plenary vote on Vidal-Quadras, Paparizov and Brunetta reports. 

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