On February 14, 2019, the Commission published a decision, adopted on December 7, 2018,[1] accepting commitments offered by TenneT, an electricity transmission system operator (“TSO”), to remove restrictions on, and in the long term also to increase, the maximum capacity of the electricity interconnector between Germany and West Denmark (“the DE-DK1 interconnector”).
The Commission’s Concerns
The Commission found TenneT to have a natural monopoly on the market for high voltage electricity transmission[2] within its grid area in Germany. TenneT’s network covers around 40% of the German territory and extends from the border of Denmark to the Alps. The Commission was concerned that TenneT may have abused its dominant position in violation of Article 102 TFEU by systematically limiting, since at least 2011, the capacity in the southbound direction of the DE-DK1 interconnector. TenneT was found to have restricted the southbound capacity for 88% of the hours between 2011–2014 and in 100% of the hours between 2015 and June 30, 2016. As the capacity reduction limited electricity flows from Denmark to Germany, it resulted in higher electricity prices in the German, Luxembourg, and Austrian bidding zone and in hindering Danish wholesale electricity suppliers from competing on the wholesale supply markets in Germany, Luxembourg, and Austria. TenneT’s defense was that during hours of high wind-based electricity production the extra electricity flow via interconnectors from Denmark to an already congested network in Germany could have endangered the network’s safety. However, the Commission took the view that TenneT could have managed the congestion problem by, for example, counter-trading or re-dispatching, which are costly remedial measures. According to the Commission, a company may not infringe EU competition rules and impede the functioning of the internal electricity market[3] “on the basis that it would otherwise have to incur extra-costs.”[4]
Offered Commitments
In order to avoid the finding of an infringement and to address the Commission’s competition concerns, TenneT committed to make available a minimum hourly capacity of 1,300 MW at all times (approximately 75% of the interconnector’s technical capacity). Following the planned expansion projects of the interconnector in 2020 and 2022, TenneT will have to progressively increase the guaranteed hourly capacity to 2,625 MW by 2026.
Enforcement Context
The present decision is another example of Commission enforcement action aimed at attaining internal market and EU energy union objectives. In recent years, similar alleged violations of Article 102 TFEU required: (i) Svenska Kraftnät to manage internal congestion in the Swedish transmission system without limiting trading capacity on interconnectors;[5] (ii) the Bulgarian Energy Holding (“BEH”) to offer a certain guaranteed minimum volume of electricity on an independently-operated day-ahead market on a newly-created power exchange in Bulgaria;[6] and (iii) Gazprom to ensure free flow of gas on the upstream level in the Central and Eastern European gas market.[7] On December 17, 2018, in an unrelated case, the Commission imposed a €77 million fine on BEH for blocking access by electricity providers to key gas infrastructure in Bulgaria.[8] The Commission currently assesses commitments offered by Romanian TSO Transgaz concerning alleged restrictions on gas exports from Romania.[9] The Commission has also proposed an update to the current electricity regulation as part of the “clean energy for all Europeans”[10] package which, amongst other things, aims to improve the Union rules on cross-border capacity available to TSOs.
[1] DE/DK Interconnector (Case AT.40461), Commission decision of December 7, 2018.
[2] It involves transmission of high voltage electricity from generation plants to electricity distribution operators and large industrial electricity consumers
[3] In addition, under sector-specific EU regulations, TenneT was obliged to make available the maximum capacity of the cross-border interconnector and could not reduce the interconnection capacity as a means of solving congestion within its own control area. See Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003 (OJ L211, 14.8.2009, p.15), Article 16(3), which requires TSOs to maximize interconnection capacity: “the maximum capacity of the interconnections and/or the transmission networks affecting cross-border flows shall be made available to market participants, complying with safety standards of secure network operation.” Point 1.7 of Annex I to Regulation (EC) No 714/2009 states that “TSOs shall not limit interconnection capacity in order to solve congestion inside their own control area, save for the abovementioned reasons [cost effectiveness and minimisation of negative impacts on the internal market in electricity] and reasons of operational security.”
[4] DE/DK Interconnector (Case COMP/AT.40461), Commission decision of December 7, 2018, para. 67.
[5] Swedish Interconnectors (Case COMP/AT.39351), Commission decision of April 14, 2010.
[6] BEH Electricity (Case COMP/AT.39767), Commission decision of December 10, 2015.
[7] Upstream gas supplies in Central and Eastern Europe (Case COMP/AT.39816), Commission decision of May 24, 2018.
[8] BEH Gas (Case COMP/AT.39849), Commission decision of December 17, 2019, a public version of the decision is not yet available.
[9] Romanian gas interconnectors (Case COMP/AT.403350), decision not yet issued.
[10] See Commission Press Release IP/16/4009, “Clean Energy for All Europeans – unlocking Europe’s growth potential”, November 30, 2016.