Bundeskartellamt orders Berliner Wasserbetriebe to cut drinking water prices by a total of 254 million euros for the period 2012-2015

05.06.2012

published on: 05.06.2012

Today the Bundeskartellamt has issued its final decision against Berliner Wasserbetriebe (BWB) ordering the utility to lower its excessive drinking water prices. In its decision the Bundeskartellamt ordered that the utility's revenue (excluding taxes and duties) from the supply of drinking water in Berlin must be reduced by 18% for 2012 and by 17% on average for the period 2013-2015, as compared to 2011.

Andreas Mundt, President of the Bundeskartellamt, stated: "For the period 2012-2015 BWB must reduce its sales revenue by a total of approx. 254 million euros. This will directly benefit water customers in Berlin, which includes both household and industrial customers. In order to achieve this as soon as possible we have ordered the immediate enforceability of the decision. We have also expressly reserved the option to order the reimbursement of excessive water prices charged in the period 2009-2011. The result of the proceedings shows how important consistent monitoring by the competition authorities is in the water sector. If, as is obviously the case in monopolised sectors of the economy, competition cannot solve the problem, the effective control of abusive conduct by the competition authorities is indispensable."

How the price cuts will be distributed among customer groups is at BWB's discretion, provided the distribution is non-discriminatory. The respective price cuts are to be implemented together with the final annual statement for consumers of the following year. For the year 2012, for example, this means until 31 December 2013 at the latest. This has been ensured by the order of immediate enforceability issued by the Bundeskartellamt. The price cut applies to the net revenue per sale, i.e. the average prices per cubic metre across all tariffs and excluding taxed and duties. The percentual cut in gross prices will therefore be slightly lower.

In a comparison of revenues generated by the comparable water providers HamburgWasser, Stadtwerke München and RheinEnergie Köln, the Bundeskartellamt established that the water prices charged by BWB and its resulting revenues are excessive. In its assessment the Bundeskartellamt took account of the additional expenses incurred by BWB after reunification (inter alia for the restoration of the East Berlin water system). These expenses were recognized as deductible additional costs.

Compared to the previous - second - statement of objections issued on 30 March 2012 that demanded a total price cut of 292 million euros for the years 2012-2015 (cf. Bundeskartellamt press release of 2 April 2012), the price cut ordered in the final decision is slightly lower. In its comments on the second statement of objections, BWB had claimed that in the survey on its investments (including maintenance and restoration costs) that had been part of the Bundeskartellamt's proceedings, it had significantly underestimated its personnel expenditures. The Bundeskartellamt has therefore adjusted its calculation on the basis of the new data submitted by BWB.

BWB may file an appeal against the order with the Düsseldorf Higher Regional Court and apply for interim relief against the immediate enforceability of the order.

Background
Berliner Wasserbetriebe is Germany's largest water provider which is responsible for water supply and waste water management in Greater Berlin. BWB charges prices under private law, which means that competition law is applicable. Water providers have a monopoly position in Germany because customers cannot switch to other providers. In Berlin this natural monopoly is also legally protected by way of compulsive connection and use.

The proceedings against BWB were opened in March 2010. The Bundeskartellamt subsequently carried out extensive investigations into urban water supply and requested the relevant data from every town or city in Germany with a population of more than 200,000 (in all 38). Finally, the authority took the prices of water providers in Hamburg, Munich and Cologne as a benchmark for the water prices in Berlin as the conditions of supply in these cities are comparable in structure with those in Berlin. It discovered that BWB's sales returns were significantly higher than those of the water providers in the other three major cities.

In the course of its investigations the Bundeskartellamt examined in detail costs and conditions of supply in the different cities. In particular, it looked at the costs involved in the maintenance of the very good quality of drinking water in Germany. All the water providers undertake every effort to guarantee this high quality. In the authority's view, necessary expenditure in this area is no higher in Berlin than in Hamburg, Cologne or Munich. Berlin has ample resources of premium quality water which is easily accessible. Water distribution conditions are also very favourable in Berlin.