REUTERS - The European Union reached a deal on liberalising energy markets after lawmakers accepted a compromise over breaking up giant utilities in return for action to protect consumers' rights, a source at the negotiations said.

The deal between the European Parliament and EU member states late on Monday ends a year-long standoff.

The EU executive proposed separating suppliers of gas and electricity from the infrastructure that carries them in 2007, in a drive to help new market entrants gain a toehold and force down prices.

France and Germany led the opposition to any forced breakup of national energy champions like EDF and RWE, and other nations last year yielded to their pressure by giving giant energy companies alternatives to being broken up.

Those countries not enforcing a full split must appoint a powerful independent regulator to prevent any market abuse.

Parliament, which has joint powers of decision, also accepted that compromise deal after demanding the regulator be given additional powers, a source in the late-night negotiations said early on Tuesday.

Parliament won new rules to prevent the poorest families being made to pay high and discriminatory energy tariffs on "pre-payment meters", and demanded new rules to help consumers compare energy prices easily and switch between suppliers within three weeks, the source added.

European nations will also have to alleviate 'fuel poverty' -- the situation that occurs when gas and electricity bills eat up so much of a user's income they cannot afford other basics.

EU member states will also have to ensure "smart meters" are installed in 80 percent of homes by 2020, allowing households to choose the cheapest time to consume gas and electricity.

Although some countries will be allowed to keep their national energy champions intact, safeguards were introduced for liberalised countries that fear their networks may be taken over by overseas rivals with more financial fire power.

The so-called "Gazprom Clause" would prevent energy companies from outside the bloc -- such as Russia's state-owned Gazprom -- from buying up distribution networks without approval by governments, which would be guided by the EU executive on the potential impact on regional energy security.