Thursday

2nd Feb 2023

Brussels set for controversial energy market shake-up

The European Commission is set to push ahead with the idea that production and distribution channels need to be separated in energy companies, making it Brussels' furthest-reaching intervention in the sector yet.

According to German daily Handelsblatt, EU energy commissioner Andris Piebalgs will table on 19 September a law suggesting two scenarios of the so-called unbundling – something Brussels believes is key to introducing competition to the area.

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Under the first model – known as full ownership unbundling – companies would be forced to either sell their distribution networks to an independent investor or to form new separate business through shares split.

The second model foresees big energy companies handing managing control over distribution networks to an independent system operator, while they would still retain ownership of networks.

"If you want to guarantee that consumers can choose their energy supplier, that necessary investment is done, and that prices respond to market rules, you need strong measures to ensure real competition in the EU", the European Commission said on Thursday (23 August).

The EU's 27 energy ministers will meet to discuss the legislative plan in October. A decision is expected sometime next year.

However, EU capitals are split into two camps on the issue, with the UK, Ireland, the Netherlands, Sweden and Spain favouring the more radical asset break-up idea.

They argue that control of both supply and distribution makes it harder for new entrants to enter into the market. For example, London – in line with its liberalisation policy – has opened its energy market to foreign electricity and gas groups, while British companies cannot fully expand into other countries.

On the other hand, France and Germany, home to energy giants EDF and E.ON, reject full separation of energy assets, claiming the unbundling idea runs the risk of EU companies falling under the control of non-European firms.

Energy pricing

The European Commission is also set to boost control over prices for wholesale electricity and gas by giving more powers to national regulatory bodies as well as by setting up a new pan-European regulator.

According to Handelsblatt, utilities will be obliged to notify authorities over prices, volumes and the duration of contracts on wholesale markets for electricity as well as natural gas.

In addition, supervising authorities will be able to impose sanctions on utilities.

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Brussels is planning to prevent foreign companies from having "uncontrolled access" to the European energy sector in a bid to alleviate the fears of EU capitals opposing the separation of supply and distribution channels in energy companies.

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