Eight EU states clash with Brussels over energy liberalisation

BRUSSELS - An alternative to the European Commission's plan to liberalise the EU's energy sector put forward by eight member states is running into difficulty, with Brussels questioning both the content and legal aspects of the initiative.

The proposal was formally handed to the commission and the Slovenian EU presidency at the end of January, with the backing of Austria, Bulgaria, Greece, Germany, France, Latvia, Luxembourg and Slovakia.

Dubbed the third alternative, it is looking for a different way to achieve the commission's aim of separating energy companies' production and supply wings.

Currently, it is being dealt with in the so-called working group for energy.

During the latest discussion, the commission said that the member states' proposal did not meet criteria outlined by the EU leaders summit in March last year, sources told EUobserver.

In addition, the commission put into question the legal basis of the alternative, arguing it is not up to member states to table EU directives.

When asked about the backstage discussions, EU energy commissioner Andris Piebalgs said on Wednesday (20 February) that he took "seriously" the group of eight's message.

"I very much congratulate the countries for coming with their opinion," he said, underlining that it proves their political will to find a speedy solution to the controversial issue.

But at the same time, he confirmed he had "no intention to withdraw the commission proposal and to re-formulate."

A top commission official added that if the executive body was to accept the member states' proposal, it would have to withdraw its legislative proposal at first.

The controversial 'unbundling' proposal was presented by Mr Piebalgs last year. It suggests splitting up energy firms' production and transmission wings by forcing the parent company to sell its transmission networks.

As an alternative scenario, he suggested setting up of an independent system operator. Under this proposal, big energy companies would retain ownership of the transmission lines, but hand managing control over networks to an entirely separate operator. This company would not share any shareholders with the parent company.

The asset break-up is seen in Brussels as essential to boosting competition and cutting prices in the energy sector.

From day one, however, a number of countries - led by France and Germany - has opposed the idea, saying it would infringe constitutional property rights, but not necessarily ensure more competition in the sector.

Paris and Berlin are home to energy giants EDF and E.ON respectively, which both supply energy and control transmission networks.

Under their joint initiative, energy firms' production and transmission wings should be independent from each other and connected only by a common set of shareholders.

"Transmission system operators shall be organised in the legal form of a joint-stock company," the document says, and continues: "The TSO shall have its own corporate identity, significantly different from the vertically integrated undertaking with separate branding, communication and premises".

A strict regulatory regime should be established in order to guarantee the separation.

Other member states meanwhile, including the UK, Ireland, Sweden, Denmark, the Netherlands, Belgium, Latvia and Spain, favour Brussels' more radical proposal.

Despite the wrangling between Brussels and the eight governments, commissioner Piebalgs believes the European Parliament could endorse his original unbundling plan in June, while an overall deal could be struck during the French EU presidency in the second half of this year.