Abuse control relating to energy price relief measures: proceedings to examine district heating sector initiated

The Bundeskartellamt has initiated further examination proceedings based on the laws on energy price relief. The proceedings now initiated focus on companies that have filed applications for advance payments with regard to the supply of heat under the German laws on energy price relief.

The laws’ prohibitions of abusive practices aim to prevent companies from charging customers prices which result in the companies obtaining unjustified relief payments from the state. The Bundeskartellamt is already conducting examination proceedings against gas suppliers (see Press release 15 May 2023) and is planning to initiate further proceedings in the electricity sector.

Andreas Mundt, President of the Bundeskartellamt: “In the second round of proceedings we are examining a number of heat suppliers that have applied for advance payments under the energy price relief laws. As in the gas sector, the proceedings initiated in the heat sector cover about 15 per cent of the relief payments so far claimed for the first quarter of 2023. This affects well over a hundred heat networks of all sizes in various regions of Germany.”

Before initiating the proceedings the authority analysed all application and registration data provided in nearly 1,400 applications, from which in particular information on pricing, supply volumes, relief amounts and the number of customers could be gathered. In the course of its proceedings the Bundeskartellamt will first conduct a systematic and data-based survey of those companies that have been identified as raising questions.

The initiated proceedings concern the supply of heat to different customer groups. This includes the supply to small and large customers as well as supply methods using water or steam as the heat-carrying medium. The examination also covers the various business models to be found in the district heating sector. The companies in question include not only municipal utilities and regional suppliers but also industrial suppliers which within their corporate group and/or as location managers serve customers of all sizes in their immediate locality. Some heat suppliers also offer “contracting”, which next to the supply of heat often involves additional services such as tenant billing services.

This diversity of cases is but one of the reasons why abuse control relating to price relief measures in the heat sector is a field with unique conditions. For instance, district heating markets remain one of the last unregulated natural monopoly markets in Germany, meaning that in contrast to electricity and gas there are no officially controlled network costs or legal unbundling requirements. This makes abuse control more laborious. In addition, the law on heat price relief accepts price adjustment clauses, which are commonly used in this sector, as a general justification. This limits the possibility of verifying applications for relief payments that are based on prices resulting from such price adjustment clauses.

If infringements are found to have occurred, reimbursement payments that have been unlawfully obtained must be repaid to the Federal Republic of Germany. The imposition of fines is also possible.

Background

When the laws capping the prices of electricity (StromPBG) and pipeline-based natural gas and heat (EWPBG) entered into force, the Bundeskartellamt’s tasks were expanded to include the energy-specific control of abusive practices under these laws. In contrast to abuse control under competition law, the Bundeskartellamt’s intervention based on the energy price relief laws does not require companies to have a dominant position. If companies apply for reimbursement under the energy price relief laws, they are subject to the new abuse control provisions.

The Bundeskartellamt already provided information on the background of the energy price relief laws after the new laws had entered into force in December 2022 (see Press release 20 December 2022).

The energy price relief measures are intended to ease the burden of gas, heat and electricity price increases on customers by capping these prices for a set quota (normally 80 per cent of the previous year’s consumption).

Customers only pay the statutory capped price per kilowatt hour until their quota is used up. As long as customers do not exceed their quota, they will not have to pay higher energy prices exceeding the price caps while the price relief measures are in force. The government will compensate energy suppliers for the difference between the contractually agreed unit rate per kilowatt hour and the statutory price cap. The price relief laws prohibit the exploitation of the rules which are meant to ease the financial burden on consumers (Section 39 StromPBG and Section 27 EWPBG). In particular, this is to prevent a situation where energy suppliers could obtain higher statutory reimbursement payments by raising their (end customer) unit rates for gas, heat or electricity without any objective justification resulting from increased costs.