EU governments strike deal on energy market liberalization

Oct 11, 2008 02:00 AM

Energy ministers from European Union (EU) member states stroke a compromised deal to liberalize energy markets on after months of negotiations.
The legislative package for the EU electricity and gas market, finally agreed by EU energy ministers at their monthly meeting in Luxembourg, is aimed to build a complete European internal energy market with open competition and effective regulation. A main element of the legislation is to break up energy giants so as to make it easier for new market entrants and promote competition.

The European Commission proposed last year to force energy giants to sell off their transmission networks, the so-called ownership unbundling. Due to opposition from Germany and France, EU leaders agreed at a June summit to let energy giants retain ownership of their transmission networks, but those networks have to be operated under independent supervision.
However, countries which have already split their energy companies were concerned that their transmission networks could become targets of takeover by foreign rivals that have not been broken up.

Ahead of the meeting, the Netherlands, among others, had pushed for the right to be allowed to block such deals, while Germany had argued that that would be contrary to EU competition rules. A compromise deal hammered out after lengthy debate said that energy companies of countries which do not practice full unbundling can not take over transmission networks in countries which practice full unbundling.
The other compromise is related to "the third country clause", which in the original proposal bans outside energy providers such as Russia's Gazprom from acquiring gas pipelines and power grids in the EU unless they open their own networks to EU investors.

Germany successfully diluted the ban and the final agreement said outside suppliers must be open to EU investments and also meet a European Commission "security of supply" test. It was said Germany did not want to upset Gazprom since 40 % of its gas imports came from the company.
The European Commission President Jose Manuel Barroso and the EU Energy Commissioner Andris Piebalgs welcomed the deal. They said the agreement will enable many of the benefits of an open and competitive energy market including fair prices for citizens and industry, open up business opportunities for new or smaller companies and set out clear investment conditions for new power plants and transmission networks.

"I am delighted by this extremely good news for consumers and businesses in Europe. It is a crucial step towards the completion of the single market," Barroso said.
After the compromise, the deal still needs approval from the European Parliament, which tends to take tougher stance on the unbundling of energy giants. The commission said the whole package is expected to be adopted in the first half of 2009.

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