Bundeskartellamt and Stadtwerke Leipzig agree on lower prices for district heating

The Bundeskartellamt has agreed with the Leipzig municipal utility, Stadtwerke Leipzig GmbH (SW Leipzig), that the latter will lower its district heating prices by a volume of a good 8 million euros per year over a period of five years. The total volume of the price reduction therefore amounts to around 40.8 million euros. In March 2013 the Bundeskartellamt had initiated abuse proceedings against several district heating suppliers, including SW Leipzig (see press release of 7.03.2013), after the Sector Inquiry into District Heating had provided indications of excessive prices.

Andreas Mundt, President of the Bundeskartellamt: "In spite of the difficulties of comparison and the complexity of district heating supply, we were able to successfully conclude the first abuse proceeding in the district heating sector. According to the agreed commitment, SW Leipzig will lower its prices for district heating as of 01.01.2016 until 31.12.2020 within the planned new price system. Due to the commitments of Stadtwerke Leipzig, consumers in Leipzig will benefit directly and promptly from cheaper heating prices."

SW Leipzig is also making further amendments to the structure of its basic prices and kilowatt hour rates. Notwithstanding these amendments it is ensured that taken as a whole the district heating customers of SW Leipzig will benefit from the agreed reduction.

In the present case the Bundeskartellamt has accepted future price reductions as compensation for possibly excessive prices in the past because the promised price reductions will reach the same customers. In addition, this compensation will not lead to a greater customer lock-in effect. In the district heating sector established suppliers are usually without competition in their respective local network area and this is also true of Leipzig. Consumers have no possibility to switch to another district heating supplier. Switching to another heating system (e.g. gas) – if at all possible – involves major switching costs.

In the period under review from 2010 to 2012 the average revenue per kWh of SW Leipzig exceeded revenue earned by the district heating networks of other cities which were used as reference values. A comparison of district heating suppliers is very complex because they are vertically integrated in terms of generation, network and distribution and the local networks are very different, e.g. with regard to customer and usage structure, number and size of house connections, length and distribution density. Moreover, the heating supplied is usually generated based on power-heat cogeneration. The examination within an abuse proceeding therefore involves a wide range of economic and technical correlations and raises questions of cost and revenue allocation within a company.

During the proceeding SW Leipzig claimed a number of justifications for its higher prices. However, according to the Bundeskartellamt's preliminary assessment, these do not justify the entire difference in revenue to the comparison companies. Further extensive investigations, on e.g. investments or differences in quality, would be necessary to precisely evaluate the justifications given. With SW Leipzig's commitment to lower its district heating prices, further investigations and an ensuing long-term legal dispute can be avoided.

The commitment decision under § 32b of the German Competition Act (GWB) will be published on the Bundeskartellamt's website once business secrets have been obliterated.