German Cabinet Decisions on Nuclear Post Spin-Off Liability, Cross-Border Renewables Support and DSO Incentives

The German Federal Cabinet last week agreed on three energy projects items on its energy turnaround agenda. This included the (very limited) opening of tenders for the support of renewable energies for other EU Member States, the revision of the Incentive Regulation Ordinance amending incentives towards investments into distribution networks, and the decision to implement the KFK-proposal regarding the financing of the nuclear power phase-out, including post spin-off liability.

1. Cross-Border Renewable Energy Ordinance

The new Cross-Border Renewable Energy Regulation (Grenzüberschreitende-Erneuerbare-Energien-Verordnung – GEEV) shall contribute to implementing EEG 2014 targets and shall enable a somewhat enhanced European integration of the energy turnaround.

The opening of the EEG for electricity from other Member States is laid down in Sec. 2 para. 6 EEG 2014 and is based on an agreement between the Federal Government and the European Commission within the state aid approval on the EEG 2014. Even though the EEG support is restricted to plants located in Germany, this was considered to be in line with the European Renewable Energy Directive 2009/28/EG. To enable a better integration of renewable energies within the European electricity markets, the Renewable Energy Directive encourages the Member States to cooperate with each other.

The GEEV regulates cross-border tendering for freestanding PV power plants. As of 2017, tenders to support renewable energies shall be opened to plants from other Member States amounting to 5% of the annual new installed capacity based on reciprocity. In the first step, the regulation applies to pilot auctions for freestanding PV power plants. As of 2017 a proportionate opening for other technologies shall take place. First pilot projects are scheduled for 2016.

2. Incentive Regulation Ordinance

With the Revision of the Incentive Regulation Ordinance (Anreizregulierungsverordnung – ARegV) the investment framework for distribution system operators shall be modernised. Due to increased share of electricity from renewable energy sources, it is necessary to expand distribution networks in the next few years. At the same time costs to energy consumers shall be kept controlled.

Consequently, investment requirements for DSOs have changed. A modernised regulatory framework shall enable and encourage new investments. The aim is to combine investment incentives with a cost-efficient optimisation of the network operation. For further information on the Incentive Regulation Ordinance, in particular on the new investment framework, please see here.

The Incentive Regulation Ordinance will now be submitted to the Federal Council (Bundesrat) for approval.

3. Declaration on Implementing the KFK Proposal

The Federal Government also decided on a declaration (Erklärung der Bundesregierung) to implement the proposal of the Commission to Review the Financing for the Phase-out of Nuclear Energy (KFK proposal) regarding the financing of the nuclear phase-out. Procedurally, this declaration came as an annex 3 of a Cabinet proposal of the Federal Ministry for Economic Affairs and Energy. In the declaration, the German federal government said that is now reviewing the details of the proposal and is preparing a legislative initiative to implement the proposal.

The legislative initiative shall in particular cover the aspect of post spin-off liability of spun-off group parts (Nachhaftung von abgespaltenen Konzernteilen). It shall also establish a public law fund, including liability of spun-off company parts towards the public law fund. The Cabinet decision shall mark the temporal starting point of the legislative initiative. The declaration specifically states that spin-offs after 1 June 2016 shall be covered by the intended regulation. Reliance on the present legal situation continuing shall in this regard nor longer be protected (Ein Vertrauen auf den Fortbestand der bisherigen Rechtslage ist insoweit nicht mehr geschützt). It is probably not a coincidence that E.ON’s 2016 Annual Shareholders Meeting is taking place on 8 June 2016, and item 9 on the invitation for the meeting is the approval of the spin-off and transfer agreement between E.ON SE and Uniper SE dated 18 April 2016.

The idea behind the Cabinet’s decision is to avoid later legal arguments on the constitutionality of a retroactive adverse effect of the upcoming nuclear power liability regime, particularly in the case of reorganisations of energy companies that are active in nuclear power generation. The announcement to change the law in a specific way shall eliminate legitimate expectations that the liability regime will stay as it is.

It remains to be seen whether such a “government declaration” in an annex to a Cabinet decision can actually stop constitutionally protected legitimate expectations from developing (or eliminate existing expectations), and what the ultimate law will look like. After all, declarations of governments tend to be just that – declarations. They are not the law, and often government declaration do not make it into law, or not as originally planned. In this specific case, the government did not put together a worked out legislative proposal, and still needs time to elaborate a bill. Furthermore, the bill will have to go through parliament. Maybe this “Erklärung der Bundesregierung” will turn out to be another action in the area of nuclear power that will ultimately be reviewed by the Federal Constitutional Court, to the pleasure of future generations of lawyers.

Source: BMWi

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