EU outlines plans to open energy market

The European Commission has unveiled radical plans to break up Europe's energy giants to open the gas and electricity markets to greater competition while also placing strict curbs on foreign ownership of power assets across the Continent to secure supply.

The continental energy giants E.ON and Électricité de France will come under pressure to separate structurally or sell off their transmission networks from power-generating facilities if the European Parliament votes in favour of the proposals.

The commission said if Europe's power giants refuse to sell their networks, they will be forced to hive off those operations into an independent company under different management, a system similar to that used to separate BT's network from its retail operations in the UK telecoms market to stimulate competition.

The situation was welcomed by Centrica, which trades under the British Gas brand, that was itself split off from its transmission network in the 1990s. Sam Laidlaw, the chief executive of Centrica, said: "The proposals are welcome and are an important step in providing more competitive energy markets for the benefit of Europe's energy customers." He described the European energy market as a "closed shop" and said the proposals would deliver better supply security but added that regulation of the independent service operators in charge of the networks would have to be "watertight".

John Mogg, the chairman of the UK regulator Ofgem, said the proposals, if enacted effectively, would put downward pressure on energy prices.

The commission has also proposed limitations on foreign ownership of European power assets, a move likely to antagonise Russian energy giants looking to snap up smaller rivals. Alexander Shokhin, the head of the Russian Union of Industrialists and Entrepreneurs, said: "Such limits ... could lead to serious damage for Russian companies that have long-term contracts with European consumers."