The battle over ownership of European energy networks is far from over. In September 2007, after a comprehensive market investigation, the EC published a series of legislative proposals aimed at “unbundling” the European energy sector. The EC’s proposal can only become EU law if it is jointly adopted by the Council of the European Union and the European Parliament. The Council and the Parliament reached a consensus regarding gas networks but have so far failed to agree with respect to electricity networks.

The key EC proposal was to prohibit energy suppliers from owning gas and electricity transmission networks in order to prevent vertically-integrated suppliers from discriminating against other users of energy networks. The EC also suggested, as an alternative, that a vertically-integrated supplier could retain the ownership of the network while its management would be transferred to an “independent system operator” appointed by the Member State. The Parliament and Council have clashed in their response regarding the electricity sector: 

  • Gas networks: the Council and the Parliament agreed that gas companies can retain the ownership of their networks provided that they ensure the networks’ operational independence. In particular, gas operators would be required to appoint an independent trustee and to set up a supervisory body in order to monitor the networks operations. 
  • Electricity networks: in January this year the Parliament voted in favour of full ownership unbundling of electricity networks and rejected all alternative arrangements. The Council however, believes that electricity suppliers should be given a choice between divesting their networks and transferring network management to an independent operator.

The clash reflects a disagreement between EU Member States. While the majority of Member States are favourable to ownership unbundling, a smaller group led by France and Germany are opposed to the breaking-up of “national champions” such as E.ON, RWE and Gaz de France.

However, this debate may soon become moot. Following the conclusion of its investigation into the energy sector, the EC launched a number of individual procedures against energy suppliers allegedly involved in antitrust violations. Rather then risk hefty fines and lengthy appeal proceedings certain energy groups decided to reach a settlement with the EC. In February 2008 E.ON offered to divest its German electricity transmission network (together with generation capacity) in order to address the concerns identified by the EC. RWE followed suit by committing itself to divest its gas transmission network in western Germany. The EC is currently assessing these offers. If the EC accepts the undertakings, it will terminate its investigations relating to the divested networks.

E.ON’s and RWE’s offers weakened Germany’s hand in negotiations within the Council. Moreover, the EC is pursuing investigations against Gaz de France and E.ON relating to alleged abuses in natural gas markets. These investigations may potentially lead to new settlement offers. As a result, national champions may feel compelled to divest their networks even if they are not required to do so by future legislation.