First results in proceedings against gas sector

The Bundeskartellamt has obtained first results in its various proceedings to enforce competition in the gas market. This concerns the proceedings on suspicion of abusively excessive prices charged to end customers (cf. attachment to press release of 21 December 2004) and the assessment of long-term gas supply contracts under competition law (cf. Bundeskartellamt press release of 28 January 2005).

Two of the abuse proceedings initiated against five gas suppliers in December 2004 could be discontinued due to concessions offered by the companies concerned. Thüga AG Erdgas Allgäu-Oberschwaben (E.ON) has agreed not to pass on the increase in its purchasing prices of 0.32 ct/KWh until 30 June 2005. In addition, by 1 October 2005 at the latest the company will offer a special fixed price tariff which will be independent of oil price developments and 0.1 ct/kWh below the current standard tariff. EnBW Ostwürttemberg Donau/Ries (ODR) AG has agreed not to pass on the increase in its purchasing prices of 0.33 ct/kWh on 1 April 2005 and not to undertake any further gas price rises at least until the end of the gas industry’s business year (30 September 2005). These concessions will lead to savings of approx. 90 Euro per year for a one-family house.

The President of the Bundeskartellamt, Dr Ulf Böge, stated: “Due to the concessions agreed with Thüga and EnBW the Bundeskartellamt has assured that the prices of these companies will correspond to a greater extent to a situation of effective competition. These effects will already be felt in the current heating period. This is not only in the short-term interest of the consumers but it also sends out an important signal for gas suppliers to adapt their business to a competitive market situation. The introduction of a fixed price as an alternative to a gas price which is influenced by oil price developments shows that the system of linking gas prices to the oil price is, other than claimed by the gas industry, by no means an indispensable safeguarding mechanism.”

The Bundeskartellamt still maintains its suspicion of abusive conduct in the proceedings against SWU (Ulm municipal utilities). The gas prices of this company have over a longer period been at up to 19 per cent above the prices of comparable companies. It cannot be ruled out that the Bundeskartellamt will issue a formal prohibition decision in this case. As regards MITGAS Mitteldeutsche Gasversorgung GmbH (RWE) the authority is currently considering suggestions offered by the company with a view to prevent a prohibition decision. The proceedings against MVV Energie AG (Mannheim municipal utilities) had to be referred to the Land competition authority of Baden-Württemberg which has discontinued the proceedings.

In addition to these five “old cases” of December 2004 the Bundeskartellamt has meanwhile also instituted proceedings on suspicion of abusive pricing against Rhenag Rheinische Energie AG, Siegburg, and against RWE Westfalen-Weser-Ems AG, Dortmund. The prices charged by these companies are up to 14 per cent above the prices of comparable companies. Rhenag has already agreed no to pass on the increase in its purchasing prices of 0.27 ct/kWh to end customers until 30 June 2005. The proceedings are currently suspended but further developments will be monitored until the end of the gas industry’s business year.

Several of the 16 Land competition authorities responsible for those gas suppliers whose transmission networks are confined to one Land (95 per cent of the approx. 700 suppliers in Germany) have also started examinations of individual companies on their territory in approx. 110 cases. An address list of all Land competition authorities is available on the Internet at: www.bundeskartellamt.de.

The discussion paper on the assessment of long-term gas supply contracts under competition law published by the Bundeskartellamt has met with strong resonance. The Bundeskartellamt has received in total 90 comments from gas transmission companies, municipal utilities, trade associations and experts. The comments treat inter alia the issues of security of supply, the effects of market liberalisation on prices and the scope of action remaining to market participants. The major points of discussion are explained in the attachment hereto. The Bundeskartellamt will presumably conclude the evaluation of the comments, some of which are quite extensive, by the end of April. It will discuss its conclusions with the parties to the proceedings and the European Commission and will then decide on adjustments, where necessary, of the general principles of evaluation. Where any of the gas transmission companies subsequently ignore these principles the Bundeskartellamt may prohibit their supply contracts.

The President of the Bundeskartellamt, Dr Böge, stated: “While abuse control of end customer prices can ultimately only be a means of combating symptoms, the liberalisation of gas supply contracts constitutes a fundamental prerequisite for effective competition in the gas markets. Though not all gas transmission companies and by far not all municipal utilities oppose the wider liberalisation of the market, it comes as no surprise that in particular well-established gas transmission companies and the Federal Association of The German Gas and Water Industry (BGW) are critical of such a liberalisation. However, I am confident that the Bundeskartellamt with its basic approach and its frequently praised transparency of action against market foreclosure will succeed in setting the course for more competition in this area. In order to ensure effective competition in the gas market, however, non-discriminatory access at reasonable prices is also indispensable. This is a responsibility for the new regulator.”