German power firms to cooperate on grid stability

FRANKFURT, Oct 27 (Reuters) - Three key German power grid operators announced on Monday they will cooperate more closely to keep high voltage grids across the country balanced in a move to align operations and ensure smooth flows of electricity.

Vattenfall Europe [VATN.UL] said in a statement it had struck a deal jointly with sector peers EnBW (EBKG.DE) and E.ON (EONGn.DE) to start with the new system within the remainder of 2008, promising savings for consumers running "into the high double-digit million euros."

If the country's fourth operator, RWE (RWEG.DE) was also integrated, the savings could be even higher, said Vattenfall.

The move entails the alignment of information and steering systems whilst stopping short of creating one sole zone for balancing power, which is used to iron out grid shortfalls or oversupply as electricity cannot be stored.

The transmission units of big German utilities are under regulatory pressure to demonstrate they act independently from their parent companies so as to avoid being forced to sell off the assets.

Balancing power has caught regulators' attention as the need to provide it can be swift and costly, thus making it an unpredictable, but potentially lucrative market, where access depends on information flows inside the power market.

Forces within the EU Commission aim to break up powerful utilities to help consumers and bring prices down.

The origin of Germany's four separate power grids lies in the former division of responsibilities between regional power utilities in monopoly times, which formally ended 10 years ago.

While other European countries typically have only one grid operator, there are also reasons for maintaining the current German structure.

The four groups control big regions already and a seamless power grid could become technically more vulnerable, as blackouts in countries such as the U.S. have shown. (Reporting by Vera Eckert)