UPDATE 1-Germany's RWE proposes European power grid-source

(Adds detail, background)

By Markus Wacket

BERLIN, March 17 (Reuters) - German utility RWE (RWEG.DE: Quote, Profile, Research) has suggested setting up a cross-border European power grid and is against selling off transmission networks individually, a government source said on Monday.

RWE Chief Executive Juergen Grossmann presented the idea to German Chancellor Angela Merkel's chief of staff Thomas de Maiziere at a meeting of utility bosses and top government officials, the source familiar with the talks told Reuters.

The proposal is a response to European Commission demands to split up power supply and the building and operation of gas and power networks.

The German government opposes the demands of the Commission which has been using a mixture of antitrust powers and legislative proposals to try to force a break-up of power supply and transmission networks known as "ownership unbundling".

The Commission suspects German and French utilities of using their dominant position to shut out rivals and keep prices high.

"Grossmann proposed a European solution for the networks," said the source, adding the RWE boss did not want individual grid sales but a company which brought together networks from France or the Benelux countries.

A European Commission spokesman said earlier he was not aware whether any plan by the German utilities to create a European Network Consortium to run their power grids had been submitted to the EU executive.