Increasing Competition

The discussion in Brussels has led some in the German energy sector to call the European Union's executive commission a bigger threat to EU energy companies than Russia.

"You are always talking about Russia but the real threat is coming from the European Commission," the chief executive of German energy giant EON Wulf Bernotat told the Financial Times on Monday, Nov. 12.

Many in Europe have rung alarms over what they see as Russian intentions to dominate the European energy sector through investments by groups such as the state-controlled gas monopoly Gazprom.

Bernotat added, however, that he did not think commission plans to increase competition by breaking up big power groups through a process called unbundling would succeed because they were opposed by major EU members.

"I am pretty sure unbundling is not coming," he said. "Such processes in Brussels take time especially if important member states such as France and Germany are against it."

Hesse minister joins calls for more competition

Meanwhile, the German state of Hesse's Minister for Economic Affairs Alois Rhiel called for Germany's Federal Cartel Office to have more power and to increase energy competition in Germany.

Rhiel called on the federal regulator to step up efforts to force the four big German energy groups -- E.ON, RWE, EnBW and Vattenfall -- to put power stations up for sale in a bid to allow other companies into the sector. Together the four firms own over 75 percent of Germany's power stations. E.ON and rival RWE have a particularly dominant position in the country.

He also called on Germany's Minister for Economic Affairs Michael Glos to extend the law against competitive restrictions, so that the Cartel Office could control the prices of the energy and gas groups more strictly.

A ministry spokesperson said separating energy production and delivery would be reserved as the last possible option in dealing with energy companies. The German Finance Ministry also does not have plans to break up German energy companies, ministry spokesman Torsten Albig told reporters.

But opening up the market to competition, energy prices in Germany could be reduced to by 10 percent to 15 percent, a target that the Hesse minister said he was pursuing in his own state

Commission concerned about energy prices in Germany

These views are shared by those in the European Commission who are concerned at the amount of market control exerted by the four German energy companies.

EU Competition Commissioner Neelie Kroes argued again over the weekend for liberalization measures, saying that "in Germany, prices are higher than you might expect in a market that was fully competitive."

The EU has started investigations into possible price fixing agreement between E.ON and RWE.

She added that the commission's plan to break-up the two key activities of production and distribution was "indispensable" if consumers were to benefit from the lower prices for gas and electricity that an open market could provide.

The German government has backed its big energy groups in the stand-off with EU officials, but Berlin has said that position could change if power groups did not make a bigger effort to increase competition and transparency within their operations.