Deregulation debate in the German electricity supply industry - 1998 ...

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Deregulation debate in the German electricity supply industry - 1998 ...

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Articles

DEREGUL~ ION DEBATE IN THE GERMAN

I

ELECTRICI1'\' SUPPLY INDUSTRY

JENS PER1\lER, CHRISTO~ RIECHMANN, Institute of Energy Economics

at the University of Colpgne

Outline

Refonn of the legal fram~'ork governing the

Gennan electricity SUPPI \ industry has been

discussed for over a dec de, but the recent

Electricity Directive (EU Directive 96/92 on

common rules for an i internal European

electricity market) has $-ged policymakers

in Germany to conclu~e discussions and

advance with decisions.1 rrhis article aims at

describing the major issues of reform. First,

the status quo of electricity market regulation

and market structures is described. Based on

this, the main reform elEhnents will be outlined

and the main issues of debl\te will be

described. A separate section discusses briefly

private negotiations ~etween electricity

suppliers and large cons4mers on the conditions

of grid access and orj. the introduction of

an "essential facility" paragraph into the

Gennan Competition La~ (see below) which

would also form the legal framework for the

electricity supply industry.

t. 1998 John Wiley &: Sons, Ltd.

Under the Competition Law articles (§) with

reference to the ESI provide for exemptions of

electricity monopolies from the general prohibition

of cartels by allowing contracts that

grant exclusive rights (§103 Competition

Law).- With respect to the electricity framework

rules we distinguish regulation of

electricity retail supply and electricity generation

(including wholesale trade).2

Regulations at the retail level

At the level of retail supply §6 EnGW places

Public Electricity Supply Companies under an

obligation to connect and to supply all

customers at published rates - so called tariffs

(provided this is economically acceptable to

the supply company).3 The Federal Minister

of Economic Affairs has the authority to intervene

in electricity pricing (§7 En WG). In

practice, tariffs are developed by the utilities

and then authorised by the respective ministries

at the U"nder leve1.4 Broad princi r les of

tariff structuring and the process 0 tariff

Status quo in the Geban ESI

I

Legal framework

The legal framework go~ming the German

authorisation are laid down in the Federal

Electricity Tariff Decree (Bundestarifordnung

Elektrizittil, BTO Elt) in the current version of

1989. While for example §12 BID Elt requires

tariffs to be cost based, detailed principles

of cost assessment and valuation are laid

electricity supply indush)t (ESI) is laid down down in "work guidelines" (Arbeitsanleit-

in the Energy Law (Ene,rgietVirtschaftsgesetz, ungen) at the LAnder leve1.5 Large consumers

EnWG) of 1935 and the Law Against Restrictions

on Competition (Ges~tz gegen Wettbewerbsbesc1rffmkungen,

Competition Law) of 1957

(presumably with a consumption of around

150 MWh/a) are not supplied under

tariffs, but under standardised contracts

(last amended 1990). The ~nergy Law (which

equally applies to the gas industry) largely

outlines options for en~rgy political state

(Sonderoertrtige) developed by the individual

suppliers. These standardised contracts are

not subjected to regulatory oversight, but

interference and obligations of public electricity

supply companies in a regulated environ-

general principles of non-abusive pricing

under the Competition Law apply. In practice,

ment. The main objectives of the Energy Law

are listed in its introductiqn: energy supply is

yardstick measures have to be applied by the

(state) cartel authorities by comparing prices

to be secure and at low CO$t. Permitted federal

supervision of the energy sector (electricity

among monopolists. The line between tariff

and contract customers is not determined

and gas under §1 En We) has, in practice,

been transferred to the state (l.ti;lder) level

(under §16 EnWG). .

legally, and pricing schedules are laid out

such that customers self-select between contracts

and tariffs.6 Fragmented information

.'. 33


.......

exists for individually negotiated contracts,

which offer the larg~st consumers (e.g.

aluminium smelters) p~rticularly favourable

conditions.7

Regulations at the generation and

wholesale level

Any comp3my engagin~ in the Public Supply

System (Offentliche Elektrizittilsil'irtsc1zaft) by

way of supply to a third party (i.e, other than

own premises) requird a licence under §5

EnWG. Investments irI the Public System

require authorisation wider §4 EnWG on the

basis of economic viabiliD',8 Autogeneration -

which is practically oNy viable for large

industrial customers - _s permitted if the

regional supplying utiijty is notified. Conditions

for the sale of ex~ess generation to the

regional grid operator from auto-generation

plants of a size up to 5 MW are laid down in an

#I Association Agreemen~" the latest \'ersion

dating from 1994. Although this agreement is a

private legal contract between the associations

of public electricity s+ppliers (Vereilligu1lg

Deutscher ElektrizittilstL'erke, VDEW) and the

association of industria~ consumers (\'erba1ld

der I1zdltstriellen Energi~J wzd Kraftswi/'tschaft,

VIK) it was initiated b)'1 the Federal Government.9

Recently, somet 'grid operators have

exhibited reluctance t compensate autoproducers

according to t e Association Agreement

and it is unclear hpw far the agreement

legally binds association ~nembers and not just

the associations themse ves. Renewable generation

sources obtain f \'ourable access conditions

with guaranteed prices above a\"oided

cost under the Electricit Feed Law (Stromei1lspeisungsgesetz)

of 19 (amended 1994).

Implicit subsidies (the argin between payable

price and avoided ~~ost) are to be paid

by the regional utility Fto whose grid the

power from a renewable~ource is fed. The cost

burden of implicit sub idies can be passed

through to customers (explicitly permitted

under tariff regulation).lf

Creation of regional mqnopolies

Electricity monopolies cte effectively created

through private legal agreements:

. between municipa1iti~s and distribution

companies over exc1\ilSive rights of way

(concession contracts~ KonzessionSt't?rtrd'ge)

which create retail mo~opolies; and

. between electricity suBPly companies not to

offer competitive supplies to each other's

customers (horizontal


.

and Energieversorgung 5chwaben, EVS»,

Bayernwerk/VIAG and municipal owners.

The interconnected utilities are represented

in the German Intercon1\ected Association

(DVG) which previously served to co-ordinate

investment and technical issues but which is

meanwhile also playing a political role.

Municipal utilities are ~ f resented by the

Treaty. Similar questions have been referred

to the European Court of Justice in the case of

a challenged (electricity) concession contract

between the city of Hordhom and RWE

Energie AG.

Electricity Directive and revised

Energy and Competition Laws

Association of Communa Utilities (VKU),

but also by the Assembly of German Towns Government proposal for a new

(Deutscher Sttiiltetag).

legal framework

In October 1996 the Federal German Government

(Bundesregierung: coalition of the

Competitive challenges in the existing

legal framework

The monopolistic status quo has been

challenged by the Federal Cartel Office

Christian Democratic Party (CDU/CSU) and

the Liberal Democratic Party (FOP» submitted

a revised proposal for a new legal framework

for the elestricity and gas supply industry in

(Bwzdeskartellamt) in a nuri-tber of cases. The

cases relate mainly to the gas industry,

but decisions could also be applicable to the

Germany.I:! The framework includes a completely

revised Energy Law and an abolition of

§§103 and 103a Competition Law. With this

electricity industry.14

legislation the German Government aims to

introduce competition in the electricity and

In a case of attempted gpd access, Wintershall

Erdgas HandelshauS (WIEH) tried to

gas supply industry. The general purpose of

the proposed law is to reduce electricity and

supply gas to the paper fi\ctory of Weissenborn

in East Germany. ! Grid access was

rejected by the respecttve grid owners

gas prices, especially for industrial energy

consumers, since industrial electricity and gas

rates in Germany appear to be above European

Verbundnetz Gas (VNG) and Erdgas

Siidsachsen (ESG). The irejection of grid

access was challenged by the Bundeskartellamt,

but -in a final decision the Federal Court

(Blmdesgerichtshof) in Novdmber 1994 turned

average. Furthermore, the new legislative

framework is considered as conducive to

sufficient security of supply, and an environmentally

friendly supply of gas and electricity.

down the challenge under consideration of The German Upper House of Parliament

the involved interests. !WIEH was not

ultimately hindered in supply as it was still

supplying VNG/ESG at the wholesale level;

(Bundesrat) which represents the LAnder

governments and which is presently dominated

by the Social Democratic Party (SPD),

VNG did not act abusively as it stepped into

the supply conditions negotiated between

WIEH and the final customer.

rejected the pro})9sal for a new energy law in

December 1996.16 The Bundesrat criticised

several aspects of the legislative framework,

and required a wide range of amendments to

Other cases relate to the possible abusive- the government proposal. The laws have to

ness of demarcation contracts under EU legal

considerations (§47 GWB in conjunction

pass both legislative bodies: the German

Parliament (Bundestag) with a majority of the

with Art. 85(1) of the European Treaty). The

Bundeskartellnmt argues that at least in the gas

ruling coalition parties and the opposition

SPD and Green Par~ (Biindnis 90/Griine)-

industry, gas supply usually has a European

dimension since Germany has only scarce

dominated Bundesmt.

domestic gas resources. In particular, a case The main issues in the new legislative

has particularly been brought forward against framework for the electricity and gas supply

gas demarcation contracts between Ruhrgas

and Thyssengas. The concerned court in

industry proposed by the Federal Government

can be summarlsed as follows:

October 1996 referred several issues to the

European Court of Justice for further decision. 1. In addition to the objectives of security of

Open questions relate to the application of

cartel legislation, while an EU gas directive is

under negotiation, and the r OSSibility of

exemptions for restriction,s 0 competition

supply and low energy prices, the new

energy law will promote an environmentally

friendly electricity and gas supply.

A reasonable balance between these three

under Art. 85(3) and Art.90(2) of the EC objectives has to be established.

.r 1998 John Wiley &£ Sons, ltd.

35


:i

Articles

.

2. Horizontal and vertical demarcation

contracts between utilities engaged in

Uti!. law Rev" 9(1) Jan-Feb 1998

.

). s. The proposal for a new legislative framework

for the electricity and gas supply

electricity and gas supply and exclusive industry includes a number of deregula-

concession rights18 between munici~alities

and utilities will be forbidden. 9 The

tory elements. However, regulation and

administrative influence on the energy

utilities of the electricity and gas supply sector will be reduced, but not abolished.

industry will, in principle, be treated like The utilities which deliver electricity or gas

companies in all other sectors of the on low voltage/pressure level in a certain

economy. Nevertheless, non-exc1usive area to end users will still be obliged to

concession contracts between munici- connect and serve these customers under

palities and gas/electricity utilities (as published tariffs and under common

distributors) will still be explicitly allowed conditions (§4). The Federal Ministry of

(§§8 and 9). In future, as in current practice, Economic Affairs is entitled to regulate

municipalities will be able to collect energy prices for tariff customers (§5(1».20

concession fees from electricity and gas Furthermore, the Ministry is able to set the

utilities. Only the exclusivity of the con- common supply conditions of these

cession rights will be abolished.

customers (§5(2». The maximum length

3. The German Government intends to foster

competition in the line-bound gas and

of concession contracts between utilities

and municipalities is limited to 20 years

electricity industry by third party access to (§8(2». l\ew high voltage transmission

the transportation grids (transmission and lines ha,'e to be subject to planning con-

distribution) and by construction of direct sent and other fixed planning procedures

lines. The conditions and fees for the (§6). The Federal Ministry of Economic

access to the grid will be negotiated Affairs is entitled to order the electricity

between the network companies and the and gas supply companies to maintain

third party users (negotiated third party

access, NegTPA). There is no limitation of

stocks for up to 30 days' supply (§12).

access to the grid regarding customer size The proposal for a new legislative frameor

voltage/pressure level. An explicit ,vork of the line-bound energy supply industry

regulation of the network activities carried ,vas revised b,' the Government in March 1997

out by a specialised regulatory authority n the light of the EU Directive for a common

or commission is not foreseen, e\'en ~uropean electricity market, effective as from

though transportation and distribution ::"ebruary 1997. The Federal Government had to

of electricity and gas constitute natural ,djust the rules of the proposed German law to

monooolies (in most instances). Instead of neet the pro"isions of the Directive. Further-

explicit re~lation, the German Cartel nore the BlfndtSmt adopted its position paper

Authorities (Brmdeskartellamt and La"des- m the proposed new energy law in December

IaJrtelkrmter) will supervise the network 1996, with the Federal Government accepting

companies, which must ensure that the iome of the proposed amendments. The main

conditions and fees for network access will ,mendments put forward by the Government

be non-discriminatory and will not consti- :an be summarised as follows:

tute an abuse of market power by the network

companies. In addition, the German I. 1. A new paragraph was introduced into

Government expects that the possible the draft law which clarifies that munici-

threat of direct line construction by potenpalities can refuse to sign concession

tial grid users will discourage network contracts if the utilities are not willing to

4.

owners from abusing their market power.

The supervision of the investments under-

pay the maximum concession fees set by

the Federal Ministry of Economic Affairs

taken in the electricity and gas supply (§8n». Current concession contracts will

industry carried out at ministerial level not be affected by the new legal frame-

will be abolished. According to the prowork. These provisions reflect the conposed

law only licensees are required to cerns of the Bundesmt. The purpose is to

engage in the energy supply business (§3). guarantee that the revenues of the munici-

Licences must be granted if the applicant palities borne by the concession fees will

is technically and economically able to

guarantee the supply according to the

not decline in future.

~. 2.

Companies engaged in electricity supply

objectives of the law and if the supply must separate the administration of

conditions of other customers will not generation/ distribution activities from

worsen.

transmission acth'ities (§3a). Furthermore,

<

36

~. 1998 John Wiley & Sons,.Ltd.


f Uti!,

Law Re\'" 9(1) Jan-Feb ~998 ., - .' Articles

these u~ilities must sepa!ate t~e i~te~al total cost would have to be shared by

accounting~ f?r generatIon, dIStrIbutIon

and transm1SSlon (§3~~ - .

3. Up to 31. Decembe~ ~D96 thud,party access

a smal~~r group. In ~ddition, small, non-

competItIve but environmentally friendly

CHP pl~nts owned by municipal utilities

by foreign electnClty i suppbers can be

refused by network owners if the supplied

customer in Germany 40uld not qualify as

an eligible client in the priginating country

had to dISappear under a liberalised legisla-

tive framework, so that the CO., emission

targets approved by the Germai, Go\'em-

ment23 could not be met.

of the supplier. Th~ purpose of this

provision is to promote the reciprocity of

market-opening with bther EU member

The municipal utilities, represented by VKU

and by the Association of the German Towns

states. .

4. The generation of el~ctricity in power

plants which use ligni~e from the former

East Germany (the five mew Lairder) will be

protected until the ~nd of year 2003.

Thereafter, third part)1 access to the grid

(Deutsche Std'dtetag),24 demand the protection

of the municipal energy supply structure.

They advocate the option of a !oca1 single

buyer (SB) at the municipallevel.23 According

to the VI


provisions with the neW legislative framework

for grid access to eXisting transportation

and distribution faciliti~ has given rise to

major debate. i

The political oppositio~ (SPD and Biindnis

90/Griine) fundamentcUIy criticises the

liberalisation model of' NegPfA. In their

own proposals for a ne\f energy law,29 they

prefer the grid access moPel of regulated TP A

(RegTP A) with transparent access conditions

and published grid access tariffs to existin~

electricity and gas tra~ortation facilities.

The purpose of these pr9visions is the introduction

of transparent anti non-discriminatory

access to the grid forL independent third

parties on equal terms. ~ fie Federal Government

has reacted by suggesting a clause in the

draft law which woulq allow the Federal

Economics Minister to i~pose more specific

regulations by decree !(e.g. based on an

"Association Agreement" - see below),

Environmental concerns

The draft energy law proposed by the Federal

Government contains three explicit provisions

for the promotion of environmentally friendly

generation facilities such as wind power, solar

or small sized CHP plan~s: I

. licensing of supply activities is not necessary

if the delivered electricity is generated

in CHP plants or by rElnewables and if it is

not part of public supply;

. generators which prqduce electricity by

renewables or in CHpl plants up to 30 kW

for auto-consumption

I can require connection

to the grid and s~pply of top-up and

stand-by power und~r common supply

conditions from the l~al supplier;

. energy suppliers are I n:funded for costs

arising from econ~cally reasonable

integrated resource pla~g ORP) activities

undertaken in order i to promote energy

efficiency. These exp~nditures can be

integrated in the calcp1ation of electricity

prices for tariff custoniers.

In addition, the Federa~ Government argues

that the objective of enviIjonmental protection,

as mentioned in the f~t paragraph of the

draft law, could be takeni into account when a

cartel authority or a coutt has to judge a grid

access refusal by a network owner.

The political oppositiop (SPD and Biindnis

9O/Griinen) and enviro~mental associations

doubt that these provisiPns are sufficient to

promote environmental friendly electricity

38

generation and energy efficiency. Surprisingly,

environmental associations require a

fuller implementation of competition. Therefore,

fundamental structural unbundling of

generation, transmission and distribution

activities of vertical integrated supply companies

should be mandated, and equal and

transparent grid access in order to ensure

favourable market conditions for renewables

and CHP plants should be guaranteed.

In addition, according to environmental

organisations, the Law on Electricity Access

(Stro11leinspeisungsgesetz), which is currently

under severe criticism due to its undesirable

effects on the competitive standing of electricity

suppliers in regions with a high concentration

of renewable generation, should be

reformed in favour of renewable energy

technology.

Stranded investments in lignite plants

Following the German reunification in 1989,

significant investments were undertaken in

lignite power plants in East Germany by

VEAG. These investments were induced

mainly under regional political and employment

considerations. The Federal Government,

as well as the SPD opposition, expect

that electricity generated by some East

German lignite plants will not be competitive

in a deregulated electricity market,31 In contrast,

East German regional and municipal

suppliers (who are currently obliged to

purchase from VEAG) doubt that protection

of East German lignite power is necessary.

They argue that the East German interconnected

utility VEAG made profits of

around DEM4.4 billion (£1.5 billion) between

1991 and 1996.

The Federal Government envisages special

provision in the new energy law that would

enable East German network owners (effectively

VEAG, which also operates most plants

to be protected) to refuse third party access to

the transmission and distribution 2rids on the

ground that electricity delivered by third

parties endangers generation of Eastern

German lignite plants. The provision will be

valid up to the year 2003. Critics are concerned

that real competition will not emerge, and

that electricity prices in East Germany will

remain at high levels. Furthermore, East

German municipalities fear that they will

not be able to sell surplus power generated

in their CHP plants due to restricted access to

the transmission grid.

~ 1998 John Wiler & Sons, Ltd.


Uti!. Law Rev., 9{1) Jan-Fet11998 I Articles

Other important deV~lopme~is

Negotiations over an Association Agreement

The proposed reform of energy and competition

legislation does not provide much

guidance with respect to details of TPA,

particularly in relation to general access

conditions and to access pricing. The

German Government has Itherefore welcomed

negotiations between th~ industry associations

of suppliers (V°GW and, indirectly,

DVG, ARE, VKU) and corsumers (VIK, BOD

!' of a "negotiated"

over the detailed rules

access regime. The ad,. ntage of such an

Association Agreement cl . arly lies in its likely

proximity to energy in~stry practice. The

pivotal issue, however, isJ whether policy has

really created a level p~aying-field so that

~egotiations ~~ on eqlfal ter~. Considermg

that negotiations usuaJ1y end m a compromise,

the danger is that tre compromise will

lie somewhere in between the status quo and a

reference level PlaYing-fier (since consumers

initially cannot claim mor than level playingfield

competition that ould result from

further political intervenf n).

Indeed, observations o~ the status of debate

seem to underpin this fear. The supplying

side has begun from the extreme position that

access charges should, in each case, equal the

average cost of constnkting a new line

between the points of I entry and exit.32

Power flows compensat~ each other in an

integrated grid (at least ~o some extent) so

that, on average, eleCtrici t physically travels

for much less distance th n that fixed in the

underlying commercial ontracts. Distancerelated

pricing without explicit capping of

grid operators revenues1 0Uld guarantee the

grid operators high mon poly profits.33 The

supplying side has mea ,while accepted the

distinction between the commercial contract

distance and the average physical supply

distances in the integrateq grid.

As agreed in the Assodation Agreemenpl

of August 1997, grid acce$S charges are to be

unrelated to distance at the distribution level.

Only at the transport level will a distancerelated

element enter the pricing system. Grid

access will have to be negotiated by third

parties only at the points (>f access to the grid

and at the point of ofHake, A clearing of

transport revenues is to take place between

the companies operating the transmission

grid, It is unclear what }1Iractical impact the

Association Agreement "'ill have on grid

It) 1998 John Wiley & Sons, Ltd.

access. Reference can be made to current

complications with respect to the existing

Association Agreement governing the sale of

excess power from auto-producers, especially

the reluctance of some grid operators to

co-operate. The Association Agreement on

grid access is far less specific than previous

Association Agreements and leaves much

room for interpretation and thus dispute,

but it represents an initial step in the market

opening.

Adjustment of German competition law

to European competition law:

"Network Article"

Another tier of reform - surprisingly much

neglected among energy industry representatives

- is the harmonisation of general

German competition law with EO competition

legislation. Such harmonisation would

allow the "essential facility doctrine", implicit

in several EC] decisions, e.g. on sea harbours,

to enter explicitly into the German competition

law (as amendment to the existin£

§22 Competition Law}. Although the existing

Competition Law implicitly covers the

"essential facility" idea, as commentators

close to the Bundeskarellamt have convincingly

argued,35 the major innovation would be to

make the essential facility idea. explicit. In

particular, the special role of "networks"

(Netze) for access to final customers would be

stressed. The "network article" would restrict

considerations for grid foreclosure to technical

requirements. The official explanation to the

proposed energy law (of 17 March 1997)

points out that the commercial interest of the

grid owner could no longer serve as justification

for network foreclosure. It is somewhat

surprising that the "network article" has been

largely neglected in the debate. This is

especially so because the "network article"

would widen the scope of abusive practices

comp.ared to the amendments to Competition

Law36 which have been specifically discussed

in the energy context.

Conclusion

In order to conform with the ED Electricity

Directive it is intended to introduce a system

of negotiated third party access (NegTP A) in

the electricity (and gas) industry. Currently,

no explicit regulation of the natural monopolies

of electricity and gas grids is foreseen.

This is in strong contrast to new framework

rules, for example, for grid access in

39


~

'-"

Articles . Util Law Rev., 9(1) Jan-Feb 1998

.

telecommunications or the railroad industry

in Germany, where explicit regulation has

:>een introduced. Far-reaching reform has so

far been hindered by political opposition

it municipal level (through their personal

Influence on representatives of Parliament

md government members) and Ltt'nder level

:through the Bundesmt), The optional, parallel

ntroduction of SB systems at regional level is

ughly disputed,

1. In principle, similar rules are to apply to the

electricity and gas supply industries 50 that we

will frequently also make reference to the gas

industry.

2. See also Mirrlees-Black, Wendt and Anker, The

Nt![(' Gennall Eltetricity Market (Klein wort Benson

Research, london: November 1996) for a concise

oveniew,

3. General conditions of supply are laid down in the

Regulation on General Conditions for the Supply of

Electricity to Tariff Customers (Verordmmg ti'ber

allgemeine BedillgulIgm {iir die Elektrizitd'tswrsorgung

0011 Tnriflcundm, ABVElt) of 1980.

4. We therefore cannot speak of politically independent

regulatory authorities.

S. Primarily, "work guidelines" bind only the regulatory

authority, but do not provide for a recourse

by regulated utilities.

6. Smaller customers typically select tariffs instead of

contracts as the latter comprise high fixed charges.

7, This may imply some discrimination among customers

that could - although never legally challenged

- be in violation of the Competition Law.

8. Subsequently, authorised assets can be included in

the rate base for tariff calculation. This type of

investment regulation has pro,'ed ineffective.

9. The German Industry Association (BwldtStTtrmlld

der Delltscheu Illdusirie, BDI) is also represented in

the contract on the consumers' / auto-producers'

side.

O. 10. Economic reasoning suggests that utilities may not

be able to roll over cost equally to tariff and contract

customers when there is danger of auto-production

by contract customers, but there is a legal obligation

under the Competition Law to offer standardised

contracts.

1. n. On national a"erage, the concession levy amounts

to 3.18 Pf/kWb (1.06 p/kWh) for supply to tariff

customers and some 0.2 Pf/kWh (0.07 p/kWh) for

supply to contract customers. Annually, approximately

DM6 billion (£2 billion) are raised through

the concession levy.

2. 12. The ownership of grid assets always lies with the

concession holder. The transferral of a concession -

recently to municipal utilities - has frequently led

to disputes over compensation for the asset value.

30 13. The recent merger of Badenwerk and Energieversorgung

Schwaben (EVS) recently reduced the

number of interconnected utilities to only eight.

14. .. For conciseness we neglect related merger cases

(e.g. Stadtwerke Bremen/Preussen Elektra, &wag/

Preussen Elektra) and cases of abusive pricing

(Spreegas).

15. ). The proposed law was worked out by the Federal

Ministry for Economic Affairs (BllltdeslI/illislerillll/

40

16.

21.

.

trior Wirt$d:17ft) after years of broad internal and

external discussion (see Bundesregierung "Entwurf

eines Gesetzes zur Neuregelung des Energie-

\\;rtschaftsrechts, Bllndestagdrucksnche 13/7274;

23 March 1997),

Bundesrat, "Stellungnahme des Bundesrates vom

19 Dezember 1996", 707, Sitzung; Bunckslag-

dmcksacllt 13/7274, 23 March 1997, Anlage 2),

That means if there is no agreement between the

Federal Go"emment and the Bllndesmt the new

energy law will not be passed, In addition, if the

new energy law is not passed this year things

become e"en more complicated since the next

General Election of the Federal Go"emment will

take place in the middle of 1998, There are also

moves to amend the draft law in a way that consent

by the B/III.1esmt would not be required,

18. In the German framework, concessions grant a

right of way, The ownership of energy industry

assets is go"erned separately through private legal

contracts, i.e, if the concession holder changes, the

old and new concessions holders will privately

ha"e to agrt?e on the transfer of assets and adequate

compensation, Basic principles for this procedure

have been established by recent court ruIings.

19. These contracts in the electricity and gas supply

industry will no longer be exempted from the

provisions of §§1 and 15 Competition Law. In

contrast, demarcation contracts and exclusive concession

rights for the water supply industry will

continue to be allowed,

20. I.e" regulation of prices to small customers (Blllfdestariiordllllll~

Ell!ktri:ifct?, BTO Elt) remains in place,

21. The municipality can also raise concession fees

from its own utilih',

22. VKU, Rrf~"111 d/!$ 'El/trgit"U'irt$Clraftsrtellts (Position

paper of the Association of municipal utilities;

Cologne, ~ovember 19%). Representatives of the

Ministry of Economic Affairs ha"e persistently

pointed out that company failure/take-over due

to inefficiently (small) size is in line with the general

objectives or del'e1n1lation.

23. The FederAl GO\;mment intends to reduce CO2

emission down to the level of 1990 by the year 2010.

24. Associations engaged in energy policies, as well as

academics. had the opportunity to represent their

positions \,"ith respect to the reform of the

legislative framework for the linebound energy in

a hearing organised by the Federal Parliament in

June 1997 IDeutscher Bundestag "Wortprotokoll

der Offentlichen Anhorung zum Thema

'No\'ellierung des Energiewirtschaftsgesetzes' des

Ausschusses fUr Wirtschalt" (9 Ausschu8/58 Sitzunst>.

VKU, 2 Das June Alleil;lIbllebl1lmvstem

1997: Pmtn1cn1l Nn- AA\ - ill der Strom-

25.

VtrsorgulIg (Cologne; January 1997); VKU, VKU-

Stell/mgnlll/II/e zIIr Botvllierllng des Energiewirtschaftsgesd:e5;

lIuM""'g des WirtschaftsallsschuSStS

des Dtutsclrm Blludestllges 1111/ 2 Tune 1997.

26. The consistency of the local SB and the EU

Electricity Directive is an issue of broad discussion.

Ho\\'ever, Professor Dr Bauer. Gutachten Jiber die

tllropnnx:l/tliclre ZIIltt"ssigkeit eiues Alleillllbnehmersystell/s

firr Elektrizitdl:5lli/'$Org/lI/g-suutemehmen 11111

der Elldl'trteilestufr (study commissioned by Association

of Communal Utilities (VKlJ), Institute of

Energy Law at the L'niversity of Cologne, Cologne

15 April 1997), Director of the Institute of Energy

Law at the l'niversity of Cologne, states in a report

written on behalf of the YKU that there is no

t 1998 John .Wiley & Sons, Ltd.


j'

\ I

\ I

'-/

Utll. Law Rev., 9(1) Jan-Feb r998 1 .. : Articles

.

co!'~r:adiction betw~n t~e prr>posal.of th~ mu~icipal

utilities and the ~JIeCtive. Mr Fnede~c~ Kinder-

Gennany have not yet been depn.>Oilted. Cilpit,ll

costs ~~ the ~ew plants are effccli\"t~ly intl!gr.lted in

mann, representative of the EO Comm1SSlon, at the electnclly pnces In ordt?r to reClwer till! in\"t.'Stmcnt

hearing of the German Parli,ment in June 1997 (op. costs.

cit, n. 24) stated that the loc--i S~ could, in principle, 31. This approach im'oh'es se\'eral probll!miltic pricing

be accepted by the CommissIon. In contrast, a patterns, e.g. distance-sensith'e price ell!mcnt.

cascade of SBs (e.g. on regional and local level) 33. Therefore, strong merits lie in pricing unrelated to

contradicts the intention of the Electricity Directh'e.

27. The VKU expects a reduction of municipal revenues

distance as practised in the UK ESI.

34. Verbdildt>t't>reillbarrmg li~'r Krilt>rim zllr Bt'Stil/ll/llll/g

based on concession fees horn DEM 6 billion at lIOn Dllrcll1eitllllgseutgeltell.

present to approximately OEM 3 billion per year 35. Markert, K., "Die Verweigerung des Zugangszu

after the abolition of exclusive concession rights. 'wesentlichen Einrichtungen' als Problem der kar-

28. The maximum concession fte is set by the Federal te11rechtlichen lvfiBbrauchsaufsicht"; WirtsclUllt wId

Ministry of Economic Affairs.

29. SPD, "Entwurf eines Gesetzes fiber die ElektrizitfHs-

WettbewerblAbIUllldlllngen 7 and 8/1995, pp.56O-

571; Klaue, S. "Zur Rezeption der amerikanischen

wirtschaft"; B/lndestagsdrucksnche 13/7425, 15 April 'essential facility doctrine' in das europaische und

1997' Biindnis 90/Die Griinen, "Entwurf eines deutsche Kartelirecht"; Recht der Energiewirtschaft

Ges~tzes fiber die Neuotdnung der Energie- 2/%, pp.51-57.

wirtschaft (EnergieG)"; Bundestagsdr/lcksnc1re 13/ 36. These alterations mainly related to the omission of

7274' 23 March 1997). §§103 and 103a for electricity and gas, while §22 was

30. In ;ddition, the Greens propose a mandatory to remain as it stood, which might have given the

electricity pool on wholesale level. grid owner some scope for grid foreclosure if grid

31. In contrast to most generation sites located in West access infringed on his other businesses, e.g.

Germany, the new lignite power plants in eastern generation or retail supply.

is primarily on the relatio hip between the

regulator and the compan , which is perhaps

inevitable given the ethodology and

a certain amount of dis plinary bias. This

underestimates the compl 'ty of the regulators'

task, a point Tony, sser has discussed

i() 1998 John Wiley & Sons, Ud.

recently at length in Law and the Regulators

(Clarendon Press, 1997). Nevertheless, the

book is a worthwhile piece, giving a good

succinct explanation of a number of the

current debates.

COSMO GRAHAM

41

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