Europe's leaders have finally reached a deal on energy liberalisation, but nobody knows exactly what it is.

For about a year, the European Commission as well as countries such as the UK and Spain have been pleading for France and Germany to lift their opposition to measures to broaden liberalisation of the EU's gas and electricity markets.

The commission had formally proposed that markets for all domestic consumers should be opened up by 2005. At last month's Barcelona summit of European leaders, France - which had stood out from the rest of Europe as the least willing to liberalise its markets - agreed that the energy industry should be liberalised for all non-household users by 2004.

Brussels had also proposed giving "national regulatory authorities" extensive powers to approve prices, but Germany opposed the creation of an independent regulator which would be liable to break open its market.

Now all sides have agreed on a vague resolution to establish "in every member-state...a regulatory function...with a view to ensuring effective control of the tariff-setting conditions".

In practice, this means that the regulator's role can be given to a part of the German cartels office (the local competition regulator) and not to an independent entity. The country's market is legally 100 per cent open but its complexity and lack of clear rules makes it hard for new entrants to challenge the incumbent operators.

The Barcelona summit also agreed to boost the electricity inter-connections between countries to at least 10 per cent of capacity by 2005, so improving the situation of so-called electricity "islands" such as the UK and Spain, whose current inter-connections account for only about 3 per cent of capacity. Most of this improvement should be financed by the electricity companies themselves.

But there was one major breakthrough in the talks which had been on the table since last November. Loyola de Palacio, the EU energy commissioner, said in November that she was willing to agree on a compromise which would leave the regulation of domestic consumers to one side (thus satisfying French objections) while not insisting on the creation of a new independent regulator (so meeting Germany's concerns). This was agreed on by all EU members in Barcelona

In addition, Mario Monti, the EU competition commissioner, has been harrying the state-owned Electricite de France (EdF) about its monopoly ever since France and Germany first blocked the commission's proposals at a summit in Stockholm in March last year.

Mr Monti, who claims EdF has been benefiting from liberalisation elsewhere while its own market stayed all but closed, made it clear that it would be difficult for EdF to win approval for new acquisitions elsewhere in the EU if it carried on with this stance.

EdF has since scaled down its ambitions to buy foreign utilities, becoming a junior partner to Fiat in the purchase of Italy's Montedison and participating in the purchase of Spain's Hidrocantabrico only through its partly-owned German subsidiary, EnBW.

The commission is unsure how much it will have to amend its current proposals, or whether it will even have to provide a wholly separate proposal for domestic market liberalisation.

The Barcelona conclusions called for a decision "on further measures" - an oblique reference to the household market - before the next such summit in March 2003. The extent of the non-household opening is also unclear - despite the leaders' agreement that it "will amount to at least 60 per cent of the total market".

The EU leaders did not get round to thrashing out details such as whether small French farmers qualify as households. If the opening of the domestic market is indeed no more than 60 per cent, it will still represent a substantial increase on the 35 per cent of the electricity market due to be opened up next year.

The European parliament, which in March voted overwhelmingly for complete liberalisation, is bound to make its voice heard, while energy ministers will deliberate over the details at an "informal" meeting between April 26 and 28.

The legislation will be formally submitted for their approval in June after which it will return to the parliament. Since the French elections will have intervened, the debate may have entirely changed by then.

Also yet to be resolved is what, precisely, France has obtained in return for its change of heart. While it agrees on liberalising its market, it is also calling for all-purpose legislation on public services, to ensure that essential services meet their obligations to everyone at prices that do not penalise the poorest consumers.

France wants a European law to set up a template for public service obligations; while the UK will try to make sure that such legislation is as vacuous as possible. Its fear is that otherwise it could restrict future markets opening.

Barcelona made limited advances on energy liberalisation although the brunt of the work was done by the prime ministers' underlings weeks before the summit. The way forward will be decided in the weeks ahead - particularly as the voters in France go to the polls.