The European Commission has watered down plans to open up competition in the EU energy market in the face of opposition from Germany and France ahead of a key January paper on energy.
The commission will on 10 January unveil a major package of initiatives in the field of energy, designed to secure the EU's energy supply, bolster competition in the energy market and cut greenhouse gasses.
But Brussels is set to shy away from a head-to-head confrontation with the incoming German EU presidency over measures to boost competition in the energy market, according to a draft paper seen by Germany's Financial Times Deutschland.
The commission paper reaffirms Brussels' drive to "unbundle" large energy companies - the splitting up of energy supply activities and the ownership of infrastructure - but it offers national governments different ways on how to proceed with this.
One weaker option would be to keep the ownership of infrastructure in the hands of energy giants, but with neutral operators managing the networks.
The "unbundling" of energy giants is seen by Brussels as key to allowing new entrants to the market and forcing down prices for consumers, with EU competition commissioner Neelie Kroes stating last month "I see only one way forward if we are to restore credibility and faith in the market. Europe needs a structural solution that once and for all separates infrastructure from supply and generation. In other words: ownership unbundling."
But Germany, which sees its market dominated by giants such as E.ON and RWE, as well as France, where GdF and EdF supply the bulk of the market, have indicated their opposition to the idea of breaking up their energy champions.
Reacting to the commission draft, German state secretary for the economy Joachim Wuermeling said that even "more options" are necessary on unbundling.
The draft also waters down plans to introduce a single EU energy regulator, again merely presenting this as an option and stating that Brussels' goal is not to "replace or weaken national regulators."
German officials had earlier voiced opposition to the idea of a "mammoth European body" arguing that the problems on the electricity market differ greatly at national levels.
The German EU presidency will in March chair a summit where European leaders are set to sign off an energy action plan for the bloc on the basis of the commission's proposals.