RIGA - The European Commission said that the reorganization of the state-owned electricity utility Latvenergo was in line with EU requirements, the Economy Ministry reported last week.
The commission explained that power transmission and power distribution operators must be legally separated from Latvenergo, though the latter may keep ownership of the transmission and distribution systems' assets.
According to the EC, power transmission and distribution operators must be separated from the head company as independent entities with their own identities unrelated to Latvenergo, even though ownership of the assets may not necessarily pass on to the new entities.
In March, the Economy Ministry sent a letter to the European Commission's directorate general for energy and transport, requesting detailed explanations of the EU directive in regards to separation of power transmission and distribution operators.
The Economy Ministry said it was pleased with the clear answer from the commission and would decide on a further course of action after analysis of the information from Brussels, said ministry spokeswoman Evita Urpena.
The government has discussed various options for restructuring Latvenergo in line with EU requirements but so far hasn't been able to agree on a solution. Two likely options were considered - namely, whether Latvenergo should be transformed into a concern with several affiliated companies or split up into several completely independent businesses.
The Economy Ministry and Latvenergo itself favored the option of a concern, since this would smooth the reorganization process. In this case, however, the separation of energy production and distribution would be only formal.
In case of a split-up, the reorganization will be lengthy and complicated. There may be problems with creditors, who could insist on the repayment of loans issued to Latvenergo as a whole.
Several years ago the government decided to privatize the company. But the parliamentary opposition bitterly objected to the idea and collected signatures from the population to initiate a referendum on the subject. The ruling coalition was ultimately forced to give up its plans and even legalized Latvenergo's state-owned status.
