On 5 December 2008 the European Commission published in the Official Journal a summary of its competition law concerns regarding the German provider RWE's involvement in the German gas transmission network and details of the commitments which RWE have offered to address these concerns.

The background to this development lies in competition law rather than the developing EU energy policy. In May 2006 the Commission conducted dawn raids at the premises of a number of European gas and electricity companies, including at RWE's offices. In 2007, the Commission initiated proceedings against RWE, alleging that they had abused their position as dominant Transmission System Operator (TSO) with control of access to the transport infrastructure and that this had resulted in their dominance as a natural gas supplier preventing other companies from entering the market.

RWE proposed to take action to address the Commission's concerns by selling off its gas transmission network (with the exception of those parts of the network co-owned with other parties) and supplying the purchaser with the services and personnel necessary to operate the transmission system. The offer made by RWE will be adopted subject to positive market testing. This comes hot on the heels of E.on's offer to divest 5000MW of its generating capacity and part of its transmission business, following similar competition concerns being expressed by the Commission.

Although these measures are the result of competition law investigations, they should be viewed in the context of the ongoing political wrangling over the EU's third energy package. In particular, will competition law be used as a tool to promote full ownership unbundling, notwithstanding the partial unbundling options under the third package?

The sale of assets to a separate company, as opposed to an Independent System Operator (ISO) route, represents the Commission's preferred outcome from an unbundling perspective. However, there is still political resistance to a full unbundling package, in particular from France and Germany who favour the ownership of assets by a vertically integrated ISO. The proposals made by E.on and RWE, if adopted, may further undermine this resistance by introducing fuller unbundling into the German marketplace. It remains to be seen how this will inform future political debate.