The east German energy system is in a process of being completely rebuilt. Unfortunately, the huge investments are not used for implementing a technical and institutional restructuring, which is needed in order to achieve energy efficiency. The energy system will, among others, maintain its inefficient structure with separate production of heat and power, The ongoing changes are limited to improvements of power plant efficiency in combination with a change from a system based on brown coal for both heat and power into a system in which the electricity production is still based on brown coal and heating is produced on oil and natural gas. This rebuilding will bring the CO2-emission down from 20 t/inhabitant in 1989 to 13 t/inhabitant in year 2010, which is still much higher than the EU average on 8 t/inhabitant, This article describes how a restructuring could bring the figure below 7 t/inhabitant. The lack of ability to implement this restructuring of the energy system is, among others, due to an ownership structure, where networks of companies own the entire production and distribution chain from oil and coal to electricity. In this ownership structure, energy restructuring strategies which decrease the consumption of oil and coal will reduce the profits. At the same time the potential regulator, the parliamentary system, is politically and economically interlinked with and dependent upon the established energy companies. Consequently, it is difficult to establish the regulation reforms which are necessary for restructuring of the energy sector. There is still a lot to be gained from a restructuring of the east German energy sector. This restructuring requires institutional reforms, where the public regulation processes become independent of the industry which should be regulated.