Paris and Berlin win EU energy liberalisation deal

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EU energy ministers bowed to pressure from France and Germany at a meeting on Friday, agreeing on a “general approach” to opening gas and electricity markets that prevents integrated firms such as EDF and E.ON from selling off their transmission grids.

While details of the deal still need to be hammered out, the broad outline of the agreement is based on a ‘third way’ compromise proposal elaborated jointly by the Commission and the outgoing Slovenian EU Presidency in May (EURACTIV 16/05/08).

It would allow former state monopolies such as EDF or GDF in France and E.ON or RWE in Germany to retain ownership of their gas and electricity grids. However, they would have to leave their management to an independent transmission operator (ITO) with “effective decision-making rights” over day-to day activities such as network operation and maintenance. 

The alternative model should be subjected to a review by the Commission two years after entry into force of the directive, according to the agreement. 

Ministers also discussed the role and powers of a new EU Agency for the Cooperation of Energy Regulators (ACER) to oversee the functioning of energy markets, notably with respect to cross-border cooperation between transmission system operators (TSOs). The agency should be independent from the Commission and member states, but its powers should not supersede those of national regulators. 

This is contrary to the wishes of a majority of MEPs in Parliament’s Industry (ITRE) Committee, who on 28 May voted favour of strong regulatory powers for ACER (EURACTIV 29/05/08).

The full Parliament will have its say on the Council’s agreement during plenary votes later this month and in July. A slight majority of ITRE Committee MEPs consider ownership unbundling as the preferred option and remain sceptical of the ITO model (EURACTIV 07/05/08).   

In response to the Council, the European Commission released a statement that "strongly welcomed" the agreement.

Commission President José Manuel Barroso called it "a major step towards a truly integrated European energy market, and the right European Union response to the structural challenges we face". 

The deal was also applauded by EU Energy Commissioner Andris Piebalgs, who said member states showed "a great degree of goodwill to reach a compromise which is acceptable for all".

Andrej Vizjak, the Slovene economy minister who chaired the Council meeting, described the agreement as "an extraordinary achievement" that will be "important for the further development of the energy market". "In the long term, this compromise proposal means better, more efficient and more competitive functioning of the market, which is important for consumers," he said.

Jean-Louis BorlooFrench minister for sustainable development and ecology, hailed the agreement as "historic", saying it necessitated compromises from all sides. "We have today demonstrated the EU’s capacity to share a common objective, the construction of an integrated market for gas and electricity for the benefit of consumers, while respecting the diversity of our histories and economic models," Borloo said.

Malcom Wicks, the UK's energy minister, also reacted favourably. The agreement "will put downward pressure on prices, give consumers greater choice and level of service, and help bring on new clean, green energy," he said in a statement.

The EU's small and medium sized enterprises, however, considered the agreement "disappointing", descrbing the Luxembourg deal as "a bow to monopolistic national champions".

"The ‘third way’ suggested by the Council, coupled with the unacceptable absence of a strengthened, EU-wide regulatory power, does not bode well for SMEs, which are still likely to be at the mercy of quasi-monopolistic structures and left with no real choice of contractors for electricity and gas supply", said Gerhard Huemer, Director for Economic and Fiscal Policy at UEAPME, the European SME orgnisation.

On 19 September 2007, the Commission presented its proposals for a 'third package' of proposals to further liberalise the EU's energy market (EURACTIV LinksDossier)

The proposals sparked a major controversy over the issue of 'ownership unbundling', meaning the break-up of large vertically-integrated energy firms like EDF and E.ON that simultaneously control the assets to produce and distribute electricity.

France, Germany and six other member states have been leading the resistance to the unbundling plans. Together, they tabled an alternative proposal in February which, they argue, would guarantee a similar result without forcing energy firms to split their energy production and transmission businesses (EURACTIV 01/02/08).

  • 17 June: EP first reading on electricity market and agency.
  • 8 July: EP first reading on gas market.

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