Thursday, March 7, 2013

Germany's Exemptions of Electricity Charges for Industry Threatened in Courts and Commissions

Germany has, since 2000, exempted large power consumers for the EEG surcharge that recovers the cost of feed-in tariff programs (guaranteed rates for renewable generation).  More recently similar exemptions have been granted on the grid charges.
Two recent posts at the German energy blog indicate the grid charge exemptions are illegal.

OLG Düsseldorf Considers Grid Fee Exemption for Energy-Intensive Industry Void
OLG Düsseldorf also struck down implementing provisions concerning the grid fee exemptions issued by the Federal Network Agency (BNetzA).
The senate held that presently the German Energy Act (EnWG) did not constitute a legal basis for the grid fee exemptions...
Five regional and national grid operators had filed legal action against Section 19 para. 2 sent. 2 StromNEV, the provision allowing for the grid fee exemption. BNetzA had defended the provision saying it was covered by law. Besides, energy-intensive companies contributed to grid stability due to their large consumption.
I hope the rest of my household doesn't read that large consumption contributes to grid stability!
Commission Opens In-depth Inquiry into Potential State Aid for Large Electricity Consumers Exempted from Grid Charges in Germany
The Commission opened an in-depth investigation to find out whether exemptions for large electricity consumers from network charges granted in Germany since 2011 constitutes unlawful state aid. This comes in addition to the Higher Regional Court of Düsseldorf yesterday declaring these exemptions void on German constitutional law grounds.
If the exemptions are to be considered state aid, the Commission will further examine whether the exemption was likely to unduly distort competition in the EU or whether it could be justified, the Commission said, pointing out that opening an in-depth investigation did not prejudge its outcome.
The Commission said that since December 2011 it had received several complaints from consumer associations, energy companies and citizens alleging that Section 19 para. 2 sent. 2 StromNEV, which exempts large electricity consumers (on application) from paying network charges, constitutes unlawful and incompatible State aid. The exemption was estimated to amount to around €300 million in 2012, the Commission pointed out. It was financed by the final electricity consumers who must pay a special levy, the so-called § 19-surcharge, since 2012.
The Commission’s preliminary view was that the § 19-surcharge might constitute a State resource and that the exemption seemed to give the beneficiaries a selective advantage compared to their competitors in other Member States, the Commission said.  This was likely to distort competition within the EU internal market.
It seems likely that the grid exemption challenges are a precursor to challenging the EEG charge, which as soared recently.  That charge has not been considered a subsidy as it recovers the cost of contracted supply (ie. feed-in tariff contracts for renewables) from market participants.
However, it is now clear the design lowers the price of supply on the market, thus lowering the cost for Germany's exempted large industry.
It is a scheme to lower industrial costs by increasing consumer costs - the legality of which looks likely to be revisited by the Commission after dealing with the grid charge exemptions

Update: Reuters wrote on this topic: Time of the essence for Germany's energy switch: Merkel

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