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Antitrust: Commission opens German electricity market to competition

European Commission - IP/08/1774   26/11/2008

Other available languages: FR DE

IP/08/1774

Brussels, 26th November 2008

Antitrust: Commission opens German electricity market to competition

The European Commission has adopted a decision that renders legally binding commitments offered by E.ON to address concerns raised in the course of an investigation under EC Treaty rules prohibiting the abuse of a dominant market position (Article 82, see MEMO/06/483). The Commission had concerns that E.ON may have withdrawn available generation capacity from the German wholesale electricity markets (to raise prices), and have deterred new investors in generation. Furthermore, the Commission had concerns that E.ON may have favoured its production affiliate for providing balancing services, while passing the resulting costs on to final consumers, and prevented other power producers from exporting balancing energy into its transmission zone. Subsequently, E.ON offered to divest around 5 000 MW of its generation capacity to address the concerns regarding the generation market. E.ON also committed to divest its extra-high voltage network to meet the concerns on the electricity balancing market. In the light of the commitments offered by E.ON, the Commission has now closed its investigation.

Competition Commissioner Neelie Kroes commented: "This unprecedented set of remedies will fundamentally change the landscape of German electricity markets and bring the prospect of more competition and more customer choice. For the first time in European antitrust history, a company is divesting very significant assets to address competition concerns. More than 20% of generation capacity will be available for competitors and newcomers and should have a positive impact on electricity prices to the direct benefit of consumers. The divestiture of the network will remove the ability of E.ON to use control of the network to favour its own production affiliate over its competitors. On 12 June 2008, the Commission consulted interested parties on the commitments proposed by E.ON to address the Commission's concerns of anticompetitive behaviour on the German electricity markets (see MEMO/08/396). The respondents confirmed that the commitments were necessary and proportionate to remedy the concerns.

In 2006, as a follow up to the energy sector competition inquiry, the Commission initiated investigations into the German electricity market (see MEMO/06/483).

In the course of its investigation, the Commission came to the preliminary view that E.ON might have infringed EC Treaty rules on the abuse of a dominant market position (Article 82) in two ways:

  • First, as a wholesaler on the electricity market, by deliberately not offering for sale the production of certain power plants that was available and that it would have been economically rational to sell, with a view to raising prices. Moreover, the Commission had concerns that E.ON devised and implemented a strategy to deter third parties from investing in electricity generation.
  • Second, as a transmission system operator, on the secondary electricity balancing market. Balancing energy is last minute electricity supply to maintain the frequency of the current in the network. The Commission had concerns that E.ON was favouring its own production affiliate, even if it charged higher prices, passing on the increased costs to the final customer, and that E.ON prevented other power producers from selling balancing energy into the E.ON markets. This second case exemplifies the general concerns the Commission expressed in the sector inquiry on the consequences of vertical integration in this sector.

To address the concerns in the first case, E.ON proposed to divest about 5 000 MW of generation capacity from different types of technologies and fuels, i.e. hydro-electric, lignite, hard coal, gas, pump storage and nuclear, in Germany. These sales will not only remove the ability of E.ON to withdraw capacity in order to raise prices but also provide generation capacity to competitors. To remedy the Commission's concerns in the second case, E.ON proposed to divest its transmission system business consisting of an Extra-High-Voltage (380/220 kV) line network and system operations currently run by E.ON Netz. This will remove the incentive of the operator of that network to favour a particular supplier.

E.ON will carry out the sale of its assets under the supervision of a trustee, who will verify in particular that none of the acquisitions would raise competition concerns. A number of further requirements have to be met by the potential buyers of the assets to be divested. All buyers have to be approved by the Commission.

Background

The Commission's decision (a so-called "commitment decision") is based on Article 9 of Regulation 1/2003 on the implementation of the EC Treaty's competition rules. It takes into account the results of the market test launched on 12 June 2008 (see MEMO/08/396). This decision, which does not come to a finding on an infringement, legally binds E.ON to the commitments it offered and ends the Commission's investigation. If E.ON were to break its commitments, the Commission could impose a fine of up to 10 percent of E.ON´s total turnover without having to prove any violation of the EC Treaty's competition rules.


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