By Marcin Grajewski and Ilona Wissenbach
BRUSSELS, Feb 28 (Reuters) – European Union energy ministers debated on Thursday the best way to separate power supply from transmission networks after surprise news that Germany’s E.ON, the world’s biggest utility, is planning to sell off its grid.
The EU has agreed in principle to liberalise its wholesale energy market, effectively separating power production from distribution, to boost competition in the European electricity and gas market and drive down prices.
But while the executive European Commission has pressed for full “ownership unbundling” or a completely independent company to run pipelines and power grids, eight countries led by France and Germany have proposed an alternative that would avoid the mandatory break-up of Europe’s vertically integrated utilities.
The debate was shaken up by news from the German government that E.ON is prepared to sell its long-distance power grid in Germany, abandoning its resistance to the EU plan.
The Frankfurter Allgemeine Zeitung, which broke the news, said E.ON was in advanced talks with Brussels on divesting its energy grids.
A Berlin government spokesman confirmed to Reuters that E.ON chief executive Wulf Bernotat had told Chancellor Angela Merkel of the plan. The company declined immediate comment.
Claude Turmes, a member of the European Parliament’s energy committee for the Greens group, told Reuters: “We have been aware for some time that E.ON but also RWE and Vattenfall are in close touch with investment banks to sell their grids … This is a tipping point in the debate.”
The EU executive’s powerful competition department has been investigating suspicions that Europe’s giant vertically integrated utilities abuse their dominant position under EU antitrust rules.
The EU’s Slovenian presidency, seeking a compromise by June on legislation to liberalise the European energy market, said it would try to reach agreement on broad principles on Thursday that could accommodate all 27 member states.
“First of all, I will be very glad if today we will accept those key principles,” Slovenian Economy Minister Andrej Vizjak told reporters.
OWNERSHIP UNBUNDLING BEST?
Asked about the Franco-German alternative, supported by eight countries, he said: “I am very glad they made a concrete proposal … We will try to find within these principles solutions for these eight countries.”
European Commission President Jose Manuel Barroso said on Wednesday the EU executive was convinced that full “ownership unbundling” remained the best solution, followed by the Commission’s fallback option of having grids and pipelines run by a totally independent transmission system operator.
But he hinted that Brussels might accept a compromise including the third alternative.
“There were recently some proposals I think made by eight governments. Eight is clearly not a majority but anyway it is a minority that can block the majority. So let’s see if it is possible to come to an agreement that is progress,” he told the Centre for European Policy Studies.
The Commission had been seeking for years to get European utilities to divest their energy grids to increase competition by giving competitors easier access to the networks.
The German and French governments have supported their companies in opposition to the Commission and proposed instead that utilities put energy grids into a separate company that they still may own, as opposed to selling them.
German Economy Ministry Secretary of State Peter Hintze told reporters he hoped the EU ministers would agree to include the “Third Way” proposal on an equal footing with the Commission’s proposals in the negotiations.
“We are pleased that the Commission is starting to think in this direction, that it’s a sensible suggestion… I’m optimistic that we’ll get a result that gives this Third Way a fair chance,” he told reporters.
But critics said E.ON’s divestment decision, if confirmed, could undermine that stance.
“It puts the German government in an impossible position,” said Turmes, an EU lawmaker from Luxembourg.
