Brussels - The European Union's executive body, the Commission (EC), issued a massive challenge to the continent's energy companies on Wednesday with the release of a proposed market reform. "The status quo cannot continue... Without change, distortion of competition and fragmentation of the market will continue, (and) the consumer will continue to pay the penalty," the president of the EC, Jose Manuel Barroso, told reporters.
The reform is one of the most controversial proposals to come out of Brussels in years. Its aim is to boost competition by breaking up firms which control both the production and the delivery of energy.
"If a company sells electricity and gas and at the same time owns the networks, it has every incentive to make sure that its competitors do not get fair access to 'its' grid," Barroso said.
The package contains three key proposals. One - the strengthening of national energy regulators and the establishment of an agency in which they would discuss cross-border energy issues - is unlikely to ruffle many feathers.
But the other two, which strike directly at the power of energy giants within and outside the EU, respectively, are as potentially explosive as an electric spark in a gas silo.
Under the first proposal, companies which sell energy or gas to consumers within the EU would be forced to give up the control of any main-line gas pipelines or electricity cables which they own, to boost competition among energy suppliers.
"Without effective separation, effective competition won't take off," EU Competition Commissioner Neelie Kroes said.
Under the second proposal, meanwhile, companies from non-EU countries wanting to buy a stake in EU gas pipelines or electricity networks would only be allowed to do so if they are not involved in selling gas or electricity.
Non-EU companies wanting to obtain a controlling interest in an EU energy network would only be allowed to do so if they could prove that they had no involvement in producing or selling energy, and if their home country signed an agreement with the EU, officials said.
"This is simply to ensure that the unbundling rules will be respected. Once again, the aim is not to prevent these companies playing a greater role on EU markets - on the contrary, it is to make sure that all follow the same rules," Barroso explained.
Both proposals have been subject to fierce criticism. EU energy firms expressed outrage at the first clause, and Russian politicians threatened to take legal action if the EU implements the second.
The EU is becoming increasingly reliant on gas imports from Russia as European gas fields become exhausted - a situation which has sparked debate ever since Russia cut gas supplies to Ukraine during a pricing dispute in 2006.
Implementation is not likely to come for some time, however. The package must first be approved by the EU's member states, who would then have two and a half years in which to comply with it.
