GDF, E.ON face EU penalties

BRUSSELS, July 6 (UPI) -- The European Union is expected to impose harsh penalties on two of the largest regional gas utilities over illegal trade agreements.

The European Commission in 2008 charged Gaz de France-Suez and Germany's E.ON had illegal arrangements on gas sales from their Megal pipeline.

The Megal line is composed of two routes from the German-Czech and German-Austrian borders to the German-French border. It carries about 777 cubic feet per year.

Brussels claims the Megal deal includes provisions whereby each company had agreed not to sell significant volumes of gas in the other's domestic market.

E.ON Ruhrgas, a subsidiary of the German energy giant, said it expected to hear from Brussels "soon," while the Financial Times reports an announcement is expected following a regular meeting for the EU scheduled for Wednesday.

The German company says a 1975 agreement allows both to protect their investments in the pipeline through "agreements about distribution." They added, however, that deal was formally ended in 2004, insisting the relationship was legal.

"We vehemently reject any claim that we divided up the market," E.ON Ruhrgas stated. "Both companies never broke EU law."

GDF-Suez, for its part, said it would appeal any EU penalties.