Eight member states oppose EU plan to split up energy giants

(BRUSSELS) - Ministers from eight European nations, led by France and Germany, have written to the European Commission criticising its plans to force energy giants to split in two and offering an alternative.

The letter, received by EU Energy Commissioner Andris Piebalgs on Thursday, speaks of "several crucial doubts... concerning the legality, opportunity, proportionality and efficiency," of the European Commission's plans.

Neither the EU's impact assessment, nor the policy debate over the last few months have dissipated these "serious concerns," it added.

The letter was sent by the economy ministers from Austria, Bulgaria, Germany, Latvia, Luxembourg and Slovakia, as well as the French ecology minister, and Greek development minister.

EU officials want to increase competition in the energy sector by separating, or "unbundling" energy production and distribution activities, amid sharply rising prices.

The Commission's preferred plan of "ownership unbundling," forcing energy companies to get rid of one sector of their activities in the supply chain "is not compatible with constitutional law and with the free movement of capital," the eight national ministers said in their letter.

They also said that it was not "a sufficient and appropriate tool to deliver additional opening of the European gas and electricity markets" to reach the agreed objective of guaranteeing adequate investment in the networks and fostering the integration of national markets.

Piebalgs said earlier this month that he saw wide support for the controversial proposals to split up big power and gas companies to boost competition.

However, the proposals have faced stiff opposition from a minority of member states, led by France and Germany, where energy giants such as EDF and EON could be forced to part with choice assets if the proposals go through.

In a move to appease such concerns, the Commission also proposed a second scenario under which companies would be allowed to keep legal ownership of their transport networks as long as they are run by an "independent system operator."

However a European source close to the dossier said this alternative was even less palatable to the energy majors as they would not be sure that the resultant company's value and profits would be sustained.

The eight nations in their letter proposed a third way which they called "Effective and Efficient Unbundling".

Under the plan, the power operators would be allowed to own both the production plants and distribution grids, but the management of the two sectors would be strictly separated.

In the letter the eight EU nations also propose "to foster regional cooperation with the possibility to designate a regional coordinator in charge of facilitating the dialogue between all national competent authorities" and the power companies.

EU energy ministers are due to meet in Brussels at the end of the month to discuss the issue.