Bundeskartellamt prohibits local gas supplier from charging abusively excessive concession fees

In a test case the Bundeskartellamt has prohibited a local gas supplier, GAG Ahrensburg in Schleswig-Holstein, from charging abusively excessive concession fees and ordered their reimbursement. The decision is not yet final.

Background:
Concession fees are agreed charges levied on gas grid operators for the right to use local transport routes and account for a considerable proportion of the gas procurement costs charged to end customers. The concession fees are passed on as costs to the gas suppliers and are ultimately paid by the end consumers.

The Ordinance on Concession Fees for Electricity and Gas (Konzessionsabgabenverordnung, KAV) sets municipalities limits for the levy of concession fees. The ordinance differentiates between tariff and special-contract customers. The concession fee for tariff customers is many times higher than the fee charged to special-contract customers and generally exceeds the profit margins achieved from gas distribution.

Currently a number of concession fee contracts for electricity and gas networks which were concluded for a twenty-year period are nearing expiry. Attempts are being made by several municipalities to award new concessions to public utility companies. This intensified engagement in the energy sector by the municipalities (key word “recommunalisation”) generally stimulates competition in the sector. However, inasmuch as the municipalities and local suppliers are abusing their monopoly position with a view to charging abusively high concession fees in the gas sector, this harms their own citizens and hinders competition.

The proceedings:
On the expiry of a concession contract in 2006 the municipality of Ahrensburg took over the local gas distribution network via GAG Gasversorgung Ahrensburg GmbH (GAG). From that point all previous special-contract customers were categorized as tariff customers. This measure increased revenue from concession fees six-fold. At the same time GAG charged new competitors the higher concession fee for tariff customers although these only had special-contract customers. In the Bundeskartellamt’s view this practice infringes the Ordinance on Concession Fees for Electricity and Gas and in this respect alone is abusive. Although its own distribution company also pays the high concession fee, the municipality can forgo the local supplier’s profit margin because the increase in the concession fee compensates for this. Rescheduling the profit margin into the concession fee is even more tax effective for the municipality. However, the increasing costs have a significantly negative impact on new competitors.

The Bundeskartellamt has established that in areas in which municipal grid operators charge the excessive concession fee, the number of customers switching to another supplier is lower and the municipal utility is exposed to less competitive pressure.

The Bundeskartellamt will further examine the abusive practice of the municipalities and local suppliers and initiate further proceedings if necessary. In its special opinion on electricity and gas in 2009 (Sondergutachten Strom und Gas 2009), the Monopolies Commission welcomed the Bundeskartellamt's action.

The decision (GAG Ahrensburg, ref.: B10 – 11/09), will shortly be available on the Bundeskartellamt’s website once business secrets have been obliterated. This also applies to a commitment decision reached in a further proceeding within the meaning of § 32 b ARC (ref.: B10-74/08), according to which a local supplier has abandoned the abusive conduct of its own accord.