German Cartel Office: Activity Report 2013/2014

On June 30, 2015, the President of the German Cartel Office (“Bundeskartellamt”), Andreas Mundt, presented the Activity Report for the years 2013/2014. At the same time the authority also published its “Annual Report 2014“.

Below, we will summarise some key elements from the reports.

  1. Electricity

According to the results of the German Cartel Office’s energy monitoring, the competitive situation in Germany in general has continued to improve on the electricity markets, wholesale electricity markets and electricity end consumer markets in the reporting period. The authority welcomes that the new reform of the Erneuerbare-Energien-Gesetz (EEG 2014) promotes more competitive mechanisms (e.g. direkt marketing for new plants). However, the German Cartel Office voiced criticism about the potential introduction of a capacity market for conventional power generation: As the electricity market currently has significant overcapacity, the introduction would be difficult to reconcile with the European Single Market. National capacity markets could be responsible for significant new distortion of competition.

In the market of power generation, the aggregate share of conventional generation of the four biggest selling companies has declined noticeably, and is now down to only 67%. On the exchange and OTC wholesale electricity markets the authority observed high liquidity and falling prices in the last two years. Liquidity facilitated market entry opportunities for new entrants.

On the retail markets, commercial customers and household electricity customers have good possibilities to switch providers. Most of the household consumers with a basic supply contract (Grundversorgungskunden) can switch without problems. Changing remains difficult for customers who have a low credit rating.

  1. Gas

The German Cartel Office notes in its activity report that in the field of gas the liquidity of the wholesale markets has been rising, but is still remains significantly behind the liquidity in the wholesale electricity market. In the reporting period there were increasing signs of a disorganization of the delivery stages of the classical gas supply and a shift of market power towards producers. Investigations of the German Cartel Office revealed progressive penetration of the respective traditional supply areas. The market distinction between national and regional gas companies was therefore abandoned. The wholesale market and the market for the supply of industrial customers would now comprise the national territory. In the market for supply of household customers, the German Cartel Office now differentiates – similarly to the electricity sector – objectively between household consumers with a basic supply contract and consumers with special contracts (Sondervertragskunden).

  1. Concessions

In the area of concession agreements for the use of municipal property (Qualifizierte Wegenutzungsverträge gemäß § 46 Abs. 2 EnWG), the decisons of the German Cartel Office finding abuse of a dominant by several municipalities have been mainly upheld by the German courts. In particular, two decisions of the Cartel Senate of the Federal Court of Justice (Bundesgerichtshof, Urteile vom 17.12.2013 – KZR 65/12, KZR 66/12) have confirmed that municipalities have to choose a concessionaire for its electricity grid in a non-discriminatory and transparent procedure, also when they intend to grant the concession to a municipal undertaking (Eigenbetrieb).

The authority criticizes political aspirations tying to grant privileges to the energy companies of the municipalities as part of a reform of the EnWG. The danger here would be that such new regulation would prevent a “level playing field” of public and private sector operators in the award of concessions.

  1. District heating

The German Cartel Office still sees competitive deficits in the field of district heating. It does not expect this to change fundamentally in the foreseeable future. However, regulation and unbundling should not be necessary in the market for district heating. Unlike electricity and gas, heat cannot practically be delivered nationwide by one network to another. Also heating networks are fundamentally designed as closed systems. The authority assumes that random sampling checks and procedures against companies with very high prices will be required. The German Cartel Office initiated proceedings because of overcharged prices against seven utilities in spring 2013. System competition should be promoted as this would be exerted pressure on the price setting in the district heating sector.

  1. Water

In the monopolistically organized drinking water supply sector, the decisions of the German Cartel Office finding the abuse of a market-domination position have led to some significant reductions of the water price. When water supply was partially exempted from antitrust law in 2013, some providers (whose prices were considered by the authority as too high) reorganised their supply structure in such a way that are not longer subject to review by the German Cartel office. In this way the suppliers were able to maintain the high prices previously criticised by the Office. The federal government criticizes such attempts to avoid the anti-trust abuse control through “escape by public law fees”. The German Cartel Offices also warns that gains from the water supply may not be used for investments in the infrastructure for the water supply but e.g. for public transportation purposes by the municipalities.

  1. Market Transparency Unit for Wholesale Electricity and Gas Markets

In the reporting period the Market Transparency Unit for Wholesale Electricity and Gas Markets (Markttransparenzstelle) supported the implementation of REMIT and coordinated related activities with the Federal Network Agency (Bundesnetzagentur). Because of close interaction between the relevant players, incompatible data and increased burdens for market participants should be avoided. Another focus of the Market Transparency Unit was on technical input into the design of the IT system for the needs of the market power determination (Art. 102 AEUV).

Source: Bundeskartellamt

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