Malta exempted from new energy liberalisation rules

The EU has accepted a request by the Maltese government for a derogation on new rules governing the simultaneous ownership of energy production and transmission by the same energy company or group.

The new rules form part of a new package of laws aimed at further opening the energy sector to competition. The Commission's proposals aim at reducing energy costs for consumers.

According to the original proposals, energy monopolies like Enemalta could not continue to produce and distribute energy at the same time, as this is considered by the EU as harming competition. Instead, the Commission wanted energy companies to sell off their electricity grids to third parties in order to have more competition in the distribution network of energy.

Malta argued that although in principle it agreed with more openness and liberalisation, the island's situation dictated otherwise as it was not possible for Malta to have different operators for the production and distribution of energy.

"Malta is too small to have different power stations and to have more than one electricity grid. That is why we had to negotiate a derogation," a government spokesman told The Times.

Following bilateral discussions held between the minister responsible for energy, George Pullicino and Energy Commissioner Andris Piebalgs in Brussels last month, the Commission accepted to grant Malta a special status in which the new rules will not apply to it.

During a Council meeting of EU energy ministers held last Friday, all EU member states agreed to back the Commission's proposal for Malta to be given a derogation. The text of the new rules in fact will include reference to the specific status of Malta. The state-owned monopoly Enemalta will therefore continue to have total control on energy production and its distribution in the coming years.

Known as "ownership unbundling", the Commission's proposal turned out to be quite controversial for the other member states, particularly the larger ones such as France and Germany who opposed the new rules due to the dominant position of their former energy state monopolies.

In fact, France, Germany and six other member states vehemently resisted the unbundling plans and tabled an alternative proposal which would guarantee a similar result without forcing energy firms to split their energy production and transmission businesses.

Following hours of horse-trading at the Council, EU ministers agreed on a compromise deal allowing former state monopolies such as in France and Germany to retain ownership of their electricity grids.

However, according to the new agreement, they would have to leave their management to an independent transmission operator with "effective decision-making rights" over day-to day activities such as network operation and maintenance.

The alternative model should be subjected to a review by the Commission two years after entry into force of the directive, according to the agreement.

This agreement now needs to be approved by the European Parliament which will vote on this dossier in July.