EU governments compromise on energy deregulation

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Germany successfully persuaded its EU partners Friday to make the bloc’s gas and electricity distribution networks more open to foreign investment.

EU energy ministers also bowed to a Dutch demand to boost protection for gas and electricity sectors in the Netherlands, Britain, Denmark, Sweden and elsewhere from competitors in other EU nations less keen to deregulate their markets.

The decisions broke a deadlock after months of negotiations and were seen as boosting chances that a landmark EU climate change bill can be adopted by year’s end.

If endorsed by the European Parliament, the bill is designed to end gas and electricity monopolies in the 27-nation EU and stoke more energy efficiency and renewable energy use.

“We took a very big step in the right direction,” said Dutch Energy Affairs Minister Maria van der Hoeven.

Germany opposed a ban on outside energy providers such as Russia’s Gazprom — which accounts for 40 percent of Germany’s gas imports — from acquiring gas pipelines and power grids in EU unless they open their own networks to EU investors.

The energy ministers eased the so-called “Gazprom clause” saying outside suppliers must be open to EU investments and also meet an European Commission “security of supply” test.

Currently, the EU executive cannot stop outside investors but governments must take “utmost account” of its opinion if it is a negative one.

Given Germany’s significant reliance on Russian gas, Berlin did not want to upset Gazprom too much with an EU veto over Gazprom investments, officials said.

The EU as a whole gets a quarter of its gas from Gazprom. This is to rise significantly in the years ahead as German, French and Italian gas companies have signed long-term delivery contracts with Gazprom.

The “Gazprom clause” is a legacy of the company’s shaky reputation as a supplier of gas. In recent years it has halted deliveries to Western Europe because of pricing disputes with Ukraine.

In June, EU governments agreed to liberalize their energy markets without forcing gas and electricity companies in Germany and France to sell off their distribution arms.

They can continue to own distribution networks but must put them under outside supervision. In other countries energy giants will be “unbundled” by selling off their grids and pipelines.

That compromise has led to a debate how fully and partially deregulated companies can exist side by side.

The EU’s electricity and gas markets — valued at about euro340 billion (US$499 billion) — remain very fragmented by national borders.

France, Germany and six small EU nations are cool to energy deregulation but a larger group — including Britain, the Netherlands, Denmark, Sweden, Finland and Spain — favor the so-called unbundling of energy giants.

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