EU’s energy giants could opt for unbundling

Andris Piebalgs, the European commissioner for energy, says that Europe’s giant energy companies might decide themselves to sell off their transmission assets even if governments remain opposed to forcing a split.

Speaking to European Voice on the day that the European Commission adopted a new package of proposals to liberalise the energy sector, Piebalgs said that energy companies might prefer ownership unbundling - separating their transmission networks from their generating facilities - to the alternative of creating a fully independent system operator (ISO). "Companies will decide what is the best option for them. If they say, ‘we don’t like the ISO model’, they can go for the other," he said.

Under an ISO, companies with generating assets would lose control over operational and investment decisions even if they still owned shares in the new transmission entities. One EU official said that energy companies could find this "uncomfortable" and it could lead to a "gradual progression to full unbundling".

The commissioner rejected suggestions that he had deliberately proposed a very heavy bureaucratic approach to regulating ISOs to force governments to choose ownership unbundling. "Perhaps it [the ISO approach] could be improved to make it less bureaucratic," Piebalgs said. But, he stressed, the ISO option "must guarantee the same result" as ownership unbundling in providing fair access to energy markets.

Piebalgs said that the Commission had proposed the ISO option as a way of accommodating the views of France and Germany which are deeply opposed to ownership unbundling that would force their energy giants to sell off transmission assets.

The commissioner said that his proposal, which offered ISOs as an alternative to ownership unbundling, responded to a letter sent in July by nine ministers responsible for energy, "which said ‘if you propose only ownership unbundling we will not negotiate’".

Piebalgs said that he was still optimistic about the chances of getting a deal in the Council of Ministers despite the opposition of several key member states. "Everyone understands we should have common action on energy, including France and Germany. This gives me confidence," he said.

The commissioner said he was pleased that the final package had emerged from the Commission more or less unchanged, although he admitted that an earlier idea to have trustees to ensure that ISOs were truly independent had been dropped. This would make the ISO approach less bureaucratic, he said.

He denied suggestions that he had allowed his proposals to be watered down by opening the door to regional ISOs, ie, transmission operators working together across a number of EU countries. He emphasised his resolve to achieve effective unbundling.

"If you apply unbundling [a regional ISO] could be helpful for creating Europe-wide markets. It’s a good idea but if companies think that it will replace the drive of the Commission for ownership unbundling they are mistaken," he said.

The European electricity industry favours the creation of regional ISOs but there are fears that they might allow firms to carve up regional markets. John Mogg, chairman of UK energy regulator OFGEM and the European Regulators Group for Electricity and Gas, said that if vertically integrated utilities (i.e. who are not effectively unbundled) set up regional ISOs "that could be dangerous".

Piebalgs said that he would have liked stronger powers for the agency for the co-operation of national energy regulators. "My experience is that independent institutions are the most efficient," he said. But he said that the Commission’s final proposal had "found the right balance" and gave regulators as much independence as they could have under the current legal framework.

The commissioner also said that the proposed "reciprocity" requirement that companies from third countries could enter the EU market only if they signed agreements with the EU to grant access to their domestic markets were not intended to force Russia to sign up the Energy Charter. "This is not about Russia. Gazprom is so important and such a big supplier, rules need to be crystal clear," he said. Citizens had fears that if there was more unbundling a big monopoly would come in. "It is important to give political assurances that it will not be the case if we open up the market," he said.

Andris Piebalgs, the European commissioner for energy, says that Europe’s giant energy companies might decide themselves to sell off their transmission assets even if governments remain opposed to forcing a split.