(STRASBOURG) - The European Parliament on Wednesday backed a European Commission plan to separate the energy companies from their distribution networks despite member states' backing for a less drastic measure to boost competition.

Energy ministers from the 27 EU nations agreed on June 6 to spare big gas and power companies, such as France's EDF and its German counterpart RWE, from being broken up as part of a controversial shake-up of the sector aimed at firing up competition.

The ministers agreed that national governments could decide whether to force companies to part with their distribution networks or allow them to keep their gas pipelines or power transmission lines under strict conditions, including separate management.

However, parliament voted in a first reading Wednesday in favour of the original commission scheme to force power companies to hive off their electricity transmission networks into separate firms in what is known as 'full ownership unbundling.'

The parliament and member states will now have to reach agreement before a decision can be taken at the EU level.

Lawmakers in parliament will vote on the gas part of the plan next month.

Eager to boost competition, the European Commission originally proposed to split up energy groups last September in hopes of ending conflicts of interest it feared were keeping prices high and discouraging investment.

After the proposals sparked uproar from some of Europe's biggest energy companies, a group of eight countries led by France and Germany sought an alternative way to improve competition without breaking companies up entirely.

Eleven EU countries already ban gas companies from owning distribution networks while seven have the same rule for electricity groups.

Many of those countries wanted full ownership unbundling of distribution networks as the only option.

Energy: internal market in electricity, cross-border exchanges, access to network (amend. Regulation (EC) No 1228/2003) - European Parliament Legislative Observatory

Text and Picture Copyright 2008 AFP. All other Copyright 2008 EUbusiness Ltd. All rights reserved. This material is intended solely for personal use. Any other reproduction, publication or redistribution of this material without the written agreement of the copyright owner is strictly forbidden and any breach of copyright will be considered actionable.