EU Parliament Committee Backs Gas Unbundling Compromise

The Vote

The European Parliament's Industry Committee, which is responsible for making recommendations to members of the European Parliament (MEPs) on the EC's third legislative package for the energy sector, on Monday (19 May) voted on proposals to increase the independence of network operations in the European Union (EU)'s gas markets. In a move indicative of the broader direction of opinions on the matter, the Committee rejected the EC's proposal to require gas producers to sell their transmission networks—a process known as ownership unbundling—or to hand over operation of their grids to an independent company. Instead, the Committee backed a compromise text based on the "third way" proposal put forward by ownership unbundling opponents Germany and France. The amended third-way plan was tabled by the EC earlier this month in the face of ongoing opposition to its original ownership unbundling approach. It would allow gas utilities to retain ownership of their networks, but under stringent conditions and heavy regulation (see European Union: 15 May 2008:EC Tables Compromise Proposal on Gas Unbundling).

The Committee's vote suggests that the new compromise should be included as an alternative option to full ownership unbundling in place of the originally proposed alternative, the Independent System Operator (ISO) model. The EC had sought to have the compromise included as an additional alternative to the ISO approach. However, in a somewhat unusual move, the Committee postponed a final vote on the matter to allow its members further time to assess the available options. A parliamentary press release stated: "Given the very short time since the Commission presented its new compromise plan, the Committee decided…not to hold the final vote on the report to allow time for further discussions with a view to finding a broader consensus on some key issues." A further discussion and vote is now expected to take place on 28 May.

Gas and Power Solutions Diverge

The delay of the final vote on the matter is an indication both of the complexity of the issue and of an ongoing division of opinions on the best way to progress with increasing network independence. The Committee's deliberations also indicate that a varying approach is emerging between the gas and power sectors. Earlier this month, the Committee backed the EC's unbundling proposals with respect to power markets, rejecting the Franco-German third-way approach (see Europe: 7 May 2008:EU Committee Backs Utility Unbundling Proposals). The EC had always argued that it saw no reason why gas and power markets should be treated differently with respect to unbundling. However, the view emerging from the Committee appears to disagree, with a greater concern begin expressed over the compulsory split-off of gas networks versus identical moves in the power sector.

Indeed, the varying views on gas and power unbundling may go straight to the heart of concerns from countries such as France and Germany over the unbundling moves. With much of Europe highly dependent on imports to meet gas demand, energy security in the gas sector is considered of paramount importance. The retention of gas infrastructure under large national players is seen by some governments as one way of maintaining some control over the delivery of gas to and within a national market. With most countries producing the majority of their own power generation, such concerns are less evident in the electricity sector. Member states opposed to ownership unbundling may therefore be prepared to concede more in relation to the separation of power networks, provided they are able to avoid the compulsory sale of gas networks. As such, the Committee's differing approaches for the two sectors present a strong basis on which to build widespread support for a network independence solution.

Outlook and Implications

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