The European Union should fully liberalise its electricity and gas markets, pursuing a controversial goal set by its executive last year, according to a report today by the International Energy Agency (IEA).
The EU's executive European Commission proposed dividing ownership of gas and electricity supply from pipelines and grids in a drive to help new market entrants and force down prices.
But European Union energy ministers yielded to pressure from France and Germany at a June summit, giving giant energy companies easier alternatives to being broken up.
The European Parliament, which has powers of co-decision alongside the energy ministers, stuck firm to the Commission's initial preference for full ownership unbundling of electricity networks but agreed to compromise on gas.
"We are concerned about the resistance against what we think is the right proposal by the Commission for full ownership unbundling," Nobuo Tanaka, the executive director of the IEA, told reporters.
France and Germany have spearheaded opposition to any forced breakup of national energy champions and proposed a "third way" allowing vertically integrated utilities to keep ownership of transmission networks under strict supervision by a regulator.
"While regulation can achieve much of the same outcome, it will always be a second-best solution," said Mr Tanaka. "It (unbundling) is critical for stimulating competition and it is also critical for achieving overall integration of the European grid."
The hand of Paris and Berlin appeared to be weakened in negotiations when German utilities RWE and E.ON were forced to sell parts of their transmission networks to settle antitrust cases brought by the Commission.
But Germany has stuck to its guns, and France has since taken over the rotating EU presidency and has stated its reluctance to advance the issue.
The European Parliament and member states are expected to enter negotiations in coming months to reach a final agreement on liberalisation.
"We encourage the Commission to pursue its original preferred option in debates with the other institutions," said Mr Tanaka.