EU Parliament Rejects Compromise on Energy Liberalization

Parliamentarians rejected a compromise deal proposed by European Union member states earlier this month which stopped short of forcing companies to sell off their grids and pipelines.

Eleven EU countries already ban gas companies from owning distribution networks while seven have the same rule for electricity groups. Many of those countries have insisted that their EU counterparts apply the same rules.

Compromise rejected

The compromise, rejected by the European Parliament on Wed., June 18, had been championed by France, Germany and six other countries as an alternative to complete "unbundling." The move was seen as an attempt to protect France's EDF and Germany's RWE, which would be broken up under unbundling.

The ministers wanted national governments to decide whether unbundling would take place. The compromise would have added conditions such as having separate management.

Back to the drawing board

The parliament did not like this compromise. Instead, it backed the original proposal by the European Commission in September 2007, to separate energy production and transmission. The Commission worried that conflicts of interest were keeping prices high and discouraging investment.

Unbundling was seen as a way to boost competition by making it easier for companies without their own power grids or pipeline networks to tap into the energy market.

The parliament and member states will now have to hammer out an agreement. Lawmakers in parliament will vote on the gas part of the plan next month.