Germany Moves to Open Energy Market

The law will make it easier for smaller energy providers to enter the market as it sets up a mechanism to control fees charged by big companies for using their power lines. Four major concerns -- RWE, E.ON, Vattenfall Europe and EnBW -- have held a virtual monopoly so far.

"Germany's electricity and gas providers will be controlled by the state in the future," German Economics Minister Wolfgang Clement said before the bill was passed on Friday. "The new agency will help to make the actions of grid owners more transparent. We will now have a level of competition in Germany that has not existed before."

In general, opposition politicians support the new law, saying that Germany desperately needs cheaper energy as it is currently the country with the highest prices.

Changes still needed?

But Dagmar Wöhrl, the economic expert for the Christian Democrats, said the law needs to be modified in order to have any effect. She said that the current proposal required too much paperwork from companies, such as listing every source of energy separately in customer bills.

"I'm asking myself, 'What's the point'?" she said.

Industry representatives agreed that the law needed to be fine-tuned. Jürgen Thumann, president of the Federation of German Industries, said that the gas sector in particular still had to be made more competitive. Thumann did, however, laud profit incentives for companies who lower their prices.

Massive investment program

Government officials are hoping that the law will encourage companies to make investments. Clement said that energy executives have already committed themselves to spending 19 billion euros ($24.5 billion) on infrastructure upgrades.

"It's the biggest investment program that's happening in Germany right now," Clement said, adding that companies plan to invest 9.7 billion euros in power plants and 9.3 billion euros in power grids by 2010.

While the new law still has to get the approval of Germany's upper house, it is likely to take effect by July 1.