1st Jul 2022

Brussels to announce EU energy sector shake-up

Despite a lack of political appetite in several EU states, the European Commission is set to push ahead with the furthest-reaching reform of the bloc's energy sector yet.

Later today (19 September), EU energy commissioner Andris Piebalgs will introduce a long-awaited set of rules for the market in electricity and natural gas, including the highly-controversial idea that production and transmission channels need to be separated in energy companies.

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  • The paper contains suggestions to limit foreign companies taking over European energy firms (Photo:

According to Mr Piebalgs' paper, seen by EUobserver, full ownership unbundling remains "the preferred option", because it "offers the best guarantees from a competitive point of view".

In practice, EU member states "must ensure that the same persons cannot exercise control over a supply undertaking and, at the same time, hold any interest in or exercise any right over a transmission system operator or transmission system".

"Economic analysis shows that full unbundling stimulates investments, reduces market concentration and brings down prices", the EU's executive body continues to argue in its document.

However, in an effort to avoid a head-to-head clash with the most reluctant EU capitals Brussels will also table an alternative to the radical asset break-up idea.

Under this scenario – known as the independent system operator – big energy companies will be able to retain the ownership of their network assets. On the other hand, they will have to hand managing control over transmission networks to an entirely separate operator.

Both options should apply in the same manner to the electricity as well as gas sector throughout the 27-nation union.

But just the very idea of unbundling – be it ownership or the management path – is likely to get some EU states angry.

So far, France and Germany – home to energy giants EDF and E.ON, which both supply energy and control distribution networks – have been among the staunchest opponents.

On the other hand, the UK, Ireland, the Netherlands, Sweden and Spain have thrown their weight behind the more radical asset break-up idea, arguing that control of both supply and distribution makes it harder for new entrants to gain access to the market.

Foreign bidders to face severe restrictions

Brussels' revolutionary plans have all the potential to provoke storm outside the EU borders too, as foreign bidders will be prevented from expanding in the 27-nation energy market without limit.

According to the commission paper, the European Union's electricity cables and gas pipelines should be declared "essential for the competitiveness of the economy and for well-being of the citizens" and as a result, non-European countries "cannot influence [their] operation".

In addition, third countries as well as their individuals cannot acquire control over a transmission system operator unless it is approved by the EU bloc.

The commission says the aim is "not to discriminate", but to make sure they "demonstrably and unequivocally comply with the same unbundling requirements as EU companies".

The robust protective shield is clearly tailored to alleviate the fears of those member states which say full separation of energy assets runs a risk of EU companies falling under the control of non-European firms, especially from source-rich countries such as Russia, Algeria or Saudi Arabia.

Moscow, which covers a quarter of the Union's gas as well as a quarter of its oil needs, recently labelled such protectionism as "near hysterical" and warned against legal consequences.

Bigger say for regulators

Other important elements of the proposal include enhancing the powers of national regulatory bodies, something seen in Brussels as key to limit scope of market abuse and boost trade and competition.

The commission suggests that regulators "have access to information on the operational decisions of the companies". The firms should be obliged to store the data for five years.

Wednesday's proposals, however, are just the preliminary kick-off in the lengthy legislative process, with the 27 EU energy ministers entering the battlefield in October.

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