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EU readies for battle over energy markets

10 January 2007 – Germany and France geared up for a battle to save their powerful integrated energy companies from being broken up after Brussels published plans on Wednesday to tackle “serious competition problems” in the sector.

The crackdown on the power giants is part of an energy policy aimed at boosting competition, fighting global warming and cutting Europe’s “addiction” to oil and gas imports from countries such as Russia.

The European Commission wants to break the market grip of national energy incumbents, which it believes are stifling competition and deterring new market entrants, including suppliers of renewable energy.

José Manuel Barroso, Commission president, said there was a “clear preference” for the full ownership unbundling of integrated power companies such as Eon and RWE of Germany and EdF of France, forcing them to sell off their electricity grids and pipeline networks.

Michael Glos, Germany’s economy minister, said the move would be “very difficult” and might breach the country’s constitutional property rights. Francois Loos, the French industry minister, said bluntly: “Our system works.”

In an attempt to head off a clash with Berlin and Paris, the Commission also set out a weaker option where big power companies could retain ownership of the networks but management would be hived off to an independent operator.

Mr Barroso said if EU members chose that option they would have to accept detailed, prescriptive and costly additional regulation. “Less ambitious unbundling would require more from the regulator,” he said.

The issue is expected to be settled at a summit in early March, at which member states are also expected to broadly endorse the energy package.

Even if France and Germany stave off the threat of unbundling legislation, Neelie Kroes, EU competition commissioner, said she could still use new powers to break up companies for anti-trust abuses.

EdF said a European energy policy “does not require an unbundling of ownership between production and transport networks”. Eon said: “Such a radical intervention would lead to less competition and endanger security of supply in the end.”

Mr Barroso said the package heralded a “post-industrial revolution” in which Europe would move to a low-carbon economy with increased energy efficiency, lower emissions and more renewable power. “Europe has an addiction to energy and it’s even worse when you rely on someone else for that addiction,” he said.

Mr Barroso said Russia’s decision to shut down oil supplies to Europe passing through Belarus strengthened the case for greater self-sufficiency.

On climate change, the Commission proposed a cut of at least 20 per cent cut in EU emissions in 2020 compared with 1990 levels and more if a global agreement on a 30 per cent cut for all developed countries was agreed.

It was positive about nuclear power and set targets of 20 per cent for the use of renewable power as a total of EU energy use by 2020. Energy efficiency would increase by 20 per cent.

Europe’s “go-it-alone” plan to cut greenhouse gases has alarmed business leaders, who fear it could undermine competitiveness. “Far-reaching unilateral EU targets for reducing emissions are unacceptable,” said Unice, the employers’ federation.