Kroes Vows to Break Up Big Utilities

Pledging broad regulatory moves, the EU competition commissioner says the major energy companies' distribution stranglehold is a barrier to supply rivals

EU competition commissioner Neelie Kroes has vowed to break up Europe's major energy companies in a bid to stimulate cross-border competition in the bloc's energy markets.

The Dutchwoman wants to see gas and electricity giants which handle both supply and distribution - such as Germany's E.ON or French group EDF - to be split up in a process known as "unbundling" so that rivals can enter the scene.

"With the infrastructure in the hands of incumbent supply companies and electricity generators, opportunities for discriminating against competing suppliers abound," Ms Kroes said at an energy conference in Lisbon on Monday (30 October).

"An absolute priority must be to resolve the systemic conflicts of interest resulting from the vertical integration of the energy giants," she added.

The commissioner also promised more wide-ranging regulatory measures to increase competition on the European energy market by July 2007, with energy commissioner Andris Piebalgs set to propose a white paper on EU energy policy in January.

EU anti-trust and internal market experts have long criticised the market dominance of vertically integrated energy companies, but member states earlier this year poured cold water on proposals to set up an EU-level regulator for the sector.

"Europe has had enough of 'Chinese walls'," Ms Kroes said, adding that "customers are all too often locked in with their traditional supplier."

National protectionism

Meanwhile, Brussels has been at loggerheads with national governments such as Spain and France as they continue to ring-fence large domestic energy suppliers from foreign takeovers.

On Monday, French energy companies Suez and Gaz de France cleared one of the last significant hurdles in a €72 billion merger designed to block a takeover attempt by Italy's Enel.

The controversial merger is expected to be given the go-ahead by the commission on 14 November, but only on the grounds of concessions on asset disposals agreed with Ms Kroes' team.

But the EU executive is currently threatening legal action against Spain for trying to hinder a bid from Germany's E.ON for Spanish utility firm Endesa.

The Spanish government favoured a rival bid from Spain's Gas Natural, saying the country needs a home-based global energy player.

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