European energy giants would be forced to abandon their transmission networks under new European Union (EU) rules which became applicable on Thursday.
"Today, a full set of new rules for the liberalization of Europe's energy markets turns from paper into reality," EU Commissioner for Energy Gunther Oettinger said, referring to
the so-called third energy package, a series of legislations passed by the European Parliament in 2009 with the aim to make the energy market fully effective and to create a single EU gas and electricity market.
Thursday marked the deadline that EU member states had to transpose the third energy package into national law. "Today marks a historic milestone in Europe's single energy market," Oettinger said.
One notable and also controversial requirement in the EU's new energy rulebook is the effective unbundling of energy giants, i.e. the effective separation of activities of energy transmission from production and supply interests.
Unbundling could eliminate any conflict of interests between these activities and prevent network operators from favoring their own energy production and supply companies, the EU said, hoping this would promote competition in the energy markets across the 27- nation bloc and contribute to the security of supply.
The European Commission, the EU's executive arm, had initially proposed the most aggressive approach of ownership unbundling, which would require all integrated energy companies to sell off their gas and electricity grids. Due to opposition from Germany and France, which feared their national energy giants would be downsized, the final deal provided for three basic models for unbundling.
Besides ownership unbundling, EU member states could also choose the independent system operator model, under which the supply company can still own the physical network, but it has to leave the entire operation, maintenance and investment to an independent company.
The third choice is independent transmission system operator model, which allows the supply company to own and operate the network, but requires the management of the network to be done by a subsidiary of the parent company.

The unbundling rules have to be complied with by March 3, 2012. In case a transmission system is controlled by an entity from a third country, the deadline for certification is March 3,2013.
Although there is still one year to go, a number of large integrated companies in the EU have already proceeded in this way.
For instance in electricity both E.ON and Vattenfall Europe divested their high voltage grid in Germany, while Endesa divested its transmission assets in Spain. In gas, both RWE
and E.ON sold transmission assets in Germany, while again Endesa divested transmission and distribution assets in Spain.
Analysts said the EU's new energy rules, in particular the unbundling requirement, would significantly change the landscape of the EU's energy markets, previously fragmented along national borders.
In order to foster a single EU energy market, a new pan- European energy watchdog, named the Agency for the Cooperation of Energy Regulators (ACER), was also set up on Thursday to ensure effective cooperation between national regulatory authorities and to take decisions on cross-border
issues.
"ACER is a crucial element in this new architecture of Europe's internal energy market," Oettinger said at the opening ceremony of ACER, based in Slovenian capital Ljubljana.
But the EU's new energy rules provoked uproar from Russia, the EU's largest energy supplier.
Visiting Brussels last week, Russian Prime Minister Vladimir Putin clashed with his host, European Commission President Jose Manuel Barroso, over the unbundling requirement.
Putin bluntly criticized the EU's new rules of amounting to " property confiscation", fearing Russian energy companies,such as Gazprom, would be harmed.
Barroso insisted the new rules are non-discriminatory and should apply equally to foreign companies.