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EU Panel Votes to Require Liberalization of Energy Companies

After months debating the "unbundling" of electricity providers, a panel of the European Parliament voted in favor of requiring power companies to split their generation businesses from their transmission networks.

High tension power lines

The EU wants energy firms to separate generation businesses from transmission lines

For years, the European Commission has spent years trying to increase competition in the electricity market and bring down prices. As part of those efforts, the European Commission in September proposed that integrated power and gas companies should spin off their retail distribution networks or allow them to be run by an outside operator.

Tuesday's vote confirmed that proposal, at least in the electricity market, and the bid now moves to the full parliament.

Consumers back in the driver's seat

Blue and yellow EU flag reflected in glass of EU building headquarters

The vote now moves to the EU's full parliament

British Socialist lawmaker Eluned Morgan, who shepherded the bill through the parliament's industry committee, heralded its victory.

"I think that the vote for us meant that we put consumers back in the driving seat on energy policy," she said.

She likewise expressed confidence that the panel vote indicates how the full parliament vote will vote eventually.

"I think that this vote will strengthen the hand of the majority of member states that for full ownership unbundling as the only option," Morgan said. "I hope that it's given confidence to the commission to pursue this very vigorously."

'A dangerous road'

German lawmakers, however, were not as excited about the results.

"Breaking up the energy companies leads us down a dangerous road," said Hans Jochen Henke, the Secretary General of the CDU's Economic Affairs Council. "Greater competition in the energy industry takes the security of urgently needed investments for granted. It may likewise thoughtlessly risk our energy supply, and along with it, the accomplishment of climate-change goals."

Henke further urged the European Parliament to oppose the liberalization of the energy companies. "A lasting energy policy must bring about more competition intensity while also providing security for investments," he said, before referring to two alternative proposals set forth by Germany several months ago.

Previous proposals

Red flag with EON written in white

Energy giant EON has already begun to divest

The first alternative was rejected by members of the EU parliament's industry committee because it was seen as watering down EU plans to boost competition. Germany then joined France in leading a group of eight nations to develop a so-called "third way."

That proposal, still heavily debated among the EU's energy ministers, was seen by some as a compromise that would avoid the break-up of these countries' vertically integrated utilities.

The proposition came too late for some companies, however. In February, German energy giant EON announced in February that it would sell its power grid -- its distribution lines -- to an operator that would have no interesting the supply or generation of electricity.

The EU hailed that response, saying it hoped other power firms might follow suit, though none have yet to announce a break-up, perhaps in anticipation of the full parliament vote, scheduled to take place in mid-June.

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