Several German utilities have reportedly put forward proposals to merge their networks with those of foreign competitors as an alternative to divesting these operations. This shows that vertically integrated utilities are changing their recusant stance towards the European Commission's proposal of strict asset unbundling, in an effort to mitigate the proposals and preserve network ownership.
Brussels acknowledged the importance of transformation and distribution assets in promoting European energy competition in its Directive 2003/54/EC, which called for the legal separation of the distribution and transmission systems. Intuitively, the directive included the possibility of future amendments if its rules were inadequate. This is now indeed the case, as the European Commission is debating stripping vertically integrated utilities of their network assets outright.
According to reports, a number of German utilities seem to be shifting from their recalcitrant positions to a more accommodating one, in an apparent effort to derail the law or mitigate its effects. They are proposing merging their networks with other foreign competitors to create a regional network transmission and distribution system, encompassing Germany, France, and the Benelux countries. Allegedly, the networks would be administered independently, without involvement from the utilities.
To achieve successful asset unbundling, Brussels must promote a climate of investment and regulatory security. Utilities would need assurances that they are to be compensated at a rate reflecting the opportunity cost of divestment; as divesting network assets would negatively affect the utilities' cost of capital.
As is, the utilities proposals are unfeasible within the current regulatory framework. A supra-regional network system brings the question of final jurisdiction to the fore. Presently, no entity exists that has the authority to implement decisions on a regional basis; forcing one region to abide by rules that are not followed elsewhere. Thus, the role of national regulators needs to be expanded.
The markets in question would also have to be relatively homogenous, especially regarding market infrastructure and competitive landscape, to facilitate cohesion among energy regulators.
Since network assets play an extremely vital and strategic role in the electricity supply chain, any amendments to the present system should be defined by independence, transparency and reliability. Independence would mean that they are unaffiliated entities where decisions, such as tariff administration, are transparent and non-discriminatory. This would further enhance the reliability or security of energy supply, by encouraging good faith among the energy participants.