E.ON's move to break up its network hands EU a major victory

E.ON sent shockwaves through the European power industry yesterday when it became the first major continental power company to propose a break-up of major parts of its network, handing a victory to the European Commission in its efforts to break the stranglehold the Continent's dominant players have on the market.

The British energy regulator, Ofgem, called the proposal by Germany's largest power company to sell its electricity transmission network and some of its power plants a "breakthrough" for UK consumers, who have seen their bills skyrocket partly because of the exposure to the anti-competitive European market.

"This is great news for British consumers and represents a big breakthrough in the European Commission's fight to bring about a competitive energy market in continental Europe," an Ofgem spokesman said.

Unlike the UK's utilities, Europe's big players own the transmission networks needed to pipe power and gas to its customers, in addition to the power plants that generate it. So while they take advantage of the liberalised UK market and buy gas here, such a market does not exist in Europe, where supplies are horded, leading to higher gas and power prices here and on the continent.

E.ON's proposal, which must be approved by the European Commission, would be a boost for the commission's anti-trust chief, Neelie Kroes, who has waged a fierce campaign to force Europe's large energy players to unbundle generation from distribution. The Continent's largest utilities, including Electricité de France and Germany's RWE and E.ON, have vigorously opposed the plan, and have enjoyed the backing of their respective governments.