(FRANKFURT) - The German government, one of eight in the EU that oppose plans to split up big energy groups, proposes a "third way," deputy economy minister Joachim Wuermeling said Friday.

Giving energy regulators increased powers would be a "sensible option," Wuermeling told the daily Sueddeutsche Zeitung.

The European Union's executive branch seeks to increase competition in the energy sector, and is drafting plans to break up big integrated gas and power companies despite stiff opposition from many countries and energy groups.

"The European Commission has dug itself into a hole" on the issue, he said, adding: "Dismantlement will not resolve the problem."

Wuermeling told the Sueddeutsche Zeitung that the idea of splitting up production and distribution activities was "premature" and should only be considered "a last chance solution."

His comments echoed those of the giant German energy companies RWE and E.ON, both of which fiercely oppose any plans for dismantlement.

The EU commission is also expected to propose creating a European energy authority charged with regulating cross-border energy flows.

Germany's stance against dismantlement is backed by France and seven other EU countries, while Britain, Spain and another six support the idea of unbundling ownership of production and distribution.

In August, the German business daily Handelsblatt said the EU commission was considering two options.

Energy producers that also own distribution networks would either have to sell them to an independent investor, or if they remained the owner would have to entrust management and investment decisions to an independent operator in exchange for "appropriate" fees.

The EU commission is to present a finalised draft text on September 19 that would build on a 2003 EU directive that requires European countries to have an independent national regulator.

The results of that directive are mixed so far, and its status remains to be clarified.

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