(BRUSSELS) - The European Commission called on Wednesday for major gas and electricity suppliers to split from their pipelines and power grids in the hope of infusing more competition into the sector.

Laying out a sweeping shake-up of the energy industry, the European Union's executive arm said that "tough conditions" were also needed on foreign companies to ensure a level playing field with suppliers from abroad.

If the Commission's eagerly -- and uneasily -- awaited proposals go ahead, the days are numbered for big integrated companies that both produce gas and electricity and then transmit energy to retail distribution networks.

The package of proposals has to be approved by the EU's 27 member states and the European Parliament.

The European Union's executive arm has long lamented what it considers to be a lack of competition in a sector as essential to Europe's economy as providing gas and electricity.

"If a company sells electricity and gas and at the same time owns the network it has every incentive to make sure that its competitors don't get fair access to its grid," Commission chief Jose Manuel Barroso told journalists.

For Brussels, fully integrated energy companies such as EON in Germany and EDF in France inevitably have conflicts of interests because they both produce energy and control the high-pressure pipelines or high-tension power lines that bring that energy to local house-to-house distribution networks.

Because such companies own the transmission networks, their customers have little choice but to buy gas or electricity from them.

"It's a bit like a supermarket that has its own brands but does not want to make shelf space available for other brands, let alone build new shelves, or open up new branches," Barroso said.

Not only does the situation stifle competition, but it also discourages companies from investing in Europe's ageing energy infrastructure because that might allow rivals to get in on their game, according to the Commission.

In the Commission's view, the best solution is to require gas and electricity companies to hive off their transmission networks from the production business into separate companies.

The separation of the generation and distribution businesses is already required in 11 countries for electricity and seven for gas.

The Commission also included a slightly less drastic option, under pressure from countries that do not have such rules and are up in arms at the prospect of their big energy groups being broken up.

Under the second scenario, companies would be allowed to keep legal ownership of their transport networks as long as they are run by an "independent system operator."

To avoid non-EU firms snapping up networks spun off in Europe, the Commission also proposed that foreign groups would have to prove that they did not own gas supply or power generating activities.

"We need to place tough conditions on ownership of assets by non-European companies to make sure that we all play by the same rules," Barroso said.

The conditions on foreign companies are widely seen as being designed to keep companies such as state-owned Russian energy giant Gazprom and Algerian state oil and gas group Sonatrach from gaining full control of the gas taps for European consumers.

In Moscow, Gazprom, which has made no secret of its desire to own networks in Europe, said it was preparing its response and "feels certain that its voice will be heard" about regulating EU energy markets.

The package also included plans to strengthen national regulators as well as set up a European authority to handle the growing number of cross-border issues confronting Europe's energy markets.

The proposals were welcomed by the European Union's BEUC consumer association, whose director Jim Murray said: "Until now, consumers have hardly benefited from liberalisation of the energy markets."

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