Bundeskartellamt initiates abuse proceedings against RWE and E.ON on account of excessive balancing energy fees

After examining a complaint by the German Association of Industrial Energy and Power Management (VIK) the Bundeskartellamt has initiated price abuse proceedings against the RWE electricity providers RWE Power AG, Essen and RWE Rheinbraun AG, Cologne as well as E.ON Sales & Trading GmbH, Munich. These are suspected of charging excessive fees for the supply of balancing energy (primary and secondary balancing energy) in the RWE and E.ON transmission network areas.

Balancing energy, for which tenders are invited for a six-months period, is calculated into fees for the use of higher-voltage networks (so-called transmission networks).   The high fees for balancing energy considerably contributed to a 10 per cent rise in fees for the use of transmission networks in 2002. These fees for network use are passed on to all downstream electricity consumers (municipal utilities, electricity traders, industrial customers, households) and place a considerable burden on them.

In their balancing areas companies belonging to the RWE and E.ON groups hold a very strong position in the power station sector due to their own production capacities and long-term supply contracts with operators of power stations. They generally supply between 70 per cent and 100 per cent of the two expensive forms of energy.

VIK has calculated that compared with the first supply period from February to July 2001 prices for primary balancing energy in the RWE area increased in the following six-months period by more than 150 per cent. Prices for secondary balancing energy also rose by 60-90 per cent in the following phases compared with the first two six-month periods. 

In the E.ON area prices for primary balancing energy are more than 100 per cent higher than in the first phase in the RWE area. Prices also rose by approx. 4 per cent to 7 per cent from one tender to another. There has also been a considerable rise in fees for the supply of secondary balancing energy compared with the first procurement.

According to a preliminary assessment by the Bundeskartellamt the factors used by RWE and E.ON fail to explain the considerable increase in fees for the supply of primary and secondary balancing energy  All these factors (e.g. specific balancing energy costs, marketing costs) already existed in the first tendering period. No changes are detectable which would justify the significant price increases.

According to Bundeskartellamt President Ulf Böge the significant price increases could result from the extensive scope of action available to RWE and E.ON electricity providers in their own balancing energy zones. The scope for fixing prices is supported by the strict separation of the four German balancing energy zones of RWE, E.ON, EnBW and Vattenfall Europe.  The creation of a single German balancing area would reduce the overall requirement for primary and secondary energy (e.g. due to the effect of intermixing electricity surpluses in the RWE area and electricity deficits in the EnBW area). This would also bring about a significant improvement in conditions for supply competition.

Keyword „Balancing Energy“

As energy cannot be stored the difference between the amount of electricity fed in and the actual amount of electricity used by the customer must be balanced out on a short-term basis (so-called balancing or regulating energy). As network operators, each one of the four German grid companies (RWE, E.ON, Energie Baden-Württemberg (EnBW), Vattenfall Europe) fulfils this task within its respective balancing area by increasing and reducing available power at short notice.

The three forms of balancing energy, primary balancing energy, secondary balancing energy and minute reserve differ in terms of their activation and alternation speeds. Primary and secondary balancing energy, the focus of the proceedings, is automatically called off from power stations able to provide balancing energy by transmission network operators. In this case primary balancing must be provided to the volume required within 30 seconds and secondary balancing energy within 5 minutes if more electricity is consumed within the network than is fed into it. Vice-versa in the case of electricity surplusses a provider of balancing energy reduces its own production capacities in order to establish a power equilibrium in the network.

The third form of balancing energy, minute reserve, is not a subject of the proceedings. This is not called off automatically by the transmission network operator but by telephone or e-mail.