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A Potemkin Division of Gazprom

Does the new EU package of energy policies really have any teeth? The Wall Street Journal doesn’t think so, and argues that the open loophole to escape unbundling by appointing Independent System Operators (ISO) to manage gas and electricity transmission and distribution assets can easily be exploited by the current energy monopolies. As for Gazprom’s fulfillment of the new regulations, the WSJ writes the following:

Anticipating an unbundling backlash from Paris and Berlin, the Commission offered a second option that effectively undermines its entire unbundling plan. This alternative allows a power company to maintain ownership of its network as long as it appoints a so-called Independent System Operator to run it. The EU says it would mandate a certain level of neutrality for these ISOs to make sure they grant grid access and plan investments in a way that fosters competition. But member states are adept at shaping these sorts of laws to protect their national interests. One can hardly imagine the state-owned distribution arm of, say, Electricité de France being run in a way that truly threatens the 90% market share of its state-owned generating business. This little opt-out is good for Russia, too. If necessary, Moscow will be able to make a Potemkin-style division of Gazprom to get around any future EU restrictions. A Commission spokesman says the EU will insist on verifying the separation of production and distribution units before signing a bilateral deal. But that will be difficult to enforce as long as Europe’s own members are allowed to bend the rules.