Today the Bundeskartellamt has published a final report on its inquiry into the district heating sector launched in September 2009. The inquiry reveals clear competition deficits in the district heating markets. The locally established providers face practically no competition. There are no indications of a generally excessive price level in the district heating sector. However, differences between prices in the individual network areas are considerable and in some cases amount to over 100%.

Andreas Mundt, President of the Bundeskartellamt: "The established providers are without competition in their respective regional network area. District heating customers have no possibility to switch provider. With our sector inquiry we have been able to clarify key questions on market and competition processes in the district heating markets. We now have a useful basis for identifying the possible abuse of market power and, where necessary, to launch proceedings against particularly expensive providers."

The Bundeskartellamt now plans to take a closer look at those network areas earning the highest revenue in 2007 and 2008. The first step will be to update existing data for 2009 to 2011. Following this, it will endeavour to establish to what extent the partially substantial price differences can be explained by structural differences in the supply areas.

Installation and network infrastructure as well as the procurement of fuel are the major cost factors in the supply of district heating. On examining the cost factors, coal has proved the lowest cost fuel, whereas the use of gas or oil involves much higher costs.

The sector inquiry has also shown that the prices in areas where the municipalities make access to the district heating network mandatory tend to be higher. The Bundeskartellamt therefore recommends the general abstention from allowing such legal monopolies.

It also became clear from the inquiry that the supply of district heating in areas with large networks is considerably less expensive for customers than in areas with smaller networks. Average revenues also differ greatly in the individual federal states (Länder).

Before making his initial decision in favour of a certain heating system, the customer can choose between different heating systems such as oil, gas or other fuels apart from district heating. In order to increase competition between the different heating systems, district heating prices should be published in the Internet in future and shorter contract periods introduced.

It would be conducive to the Bundeskartellamt's surveillance practice if district heating were also subject by law to the stricter control of abusive practices which already applies to other energy forms.

The transmission of district heating by third parties proves technically and economically difficult on account of the closed heating circuit. Such transmission facilities will continue to remain the exception and therefore have little influence on competition. As a result, network regulation in this sector would be inappropriate.

Background:
District heating, which is used to heat approx. 14 % of housing stock in Germany, is of key economic significance. National turnover from business with private customers is in the reach of approx. € 3.5 billion.
In the inquiry, 74 companies were asked about their district heating business. In total, data was collected on networks, heat generation and sales structures in approx. 1,200 network areas for 2007 and 2008.

The final report is available on the Bundeskartellamt’s website.