Bundeskartellamt examines price adjustment clauses in district heating

The Bundeskartellamt has initiated proceedings against a total of six municipal utilities and district heating suppliers on the suspicion of abusively excessive price increases in the period from January 2021 to September 2023. In particular, the authority is examining the concrete implementation of so-called price adjustment clauses. District heating suppliers adjust their prices based on such clauses in order to account for both the general market development and the costs they incur for the energy actually used in their own heat generation.

Andreas Mundt, President of the Bundeskartellamt: “District heating suppliers have a monopoly position in their network area. It is not possible for consumers to switch supplier. This is also why district heating suppliers are subject to the prohibition of abusive practices under competition law. In the proceedings, we are examining in particular whether the price adjustment clauses used in the specific cases violated legal requirements, resulting in increased consumer prices. District heating prices must be set based on the development of the costs actually incurred by suppliers as well as the general price development in the heat supply sector. For example, there are questions when a company adjusted its district heating prices based on the gas price development although in fact it also used other, cheaper alternatives for heat generation.”

In general, price adjustment clauses are used in conjunction with publicly available, energy-specific price indices. The energy used may be generated from gas or coal, for example, but also from wood, waste, renewable sources or waste heat.

The proceedings initiated by the Bundeskartellamt focus on cases which raise the suspicion that companies have chosen price indices which do not adequately reflect but clearly exaggerate the actual development of the costs they incur. For example, there are individual clauses which exclusively refer to a gas index while in fact suppliers generate heat to a substantial extent from other energies such as renewable energies. The authority is also following up on the suspicion whether and to what extent an insufficient weighting of the general price development in the heat sector was another reason why the specific price adjustment clause used in the individual case ultimately resulted in excessive price increases.

Suppliers have to structure their price adjustment clauses in such a way as to comply with the legal requirements set out in the Ordinance on general conditions for district heating provision (Verordnung über Allgemeine Bedingungen für die Versorgung mit Fernwärme). Violating these requirements may also constitute an abusive behaviour within the meaning of competition law. Typically, district heating suppliers are dominant within their heat network as it is not possible for final customers to switch supplier once they have chosen district heating as their heating system. This is also why district heating suppliers are subject to the prohibition of abusive practices under competition law.

The proceedings which have now been initiated against six companies concern a total of nine district heat networks in four different federal states. The application of abuse control provisions in the district heating sector generally lies within the responsibility of the competition authorities of the federal states (Länder) as heat networks are always located within one specific federal state. In the present case, however, the competition authorities of the federal states have, at the Bundeskartellamt’s request, referred the matter to the Bundeskartellamt since the relevant issues are of general importance beyond the level of individual federal states.

Background information:

Price adjustment clauses in contracts with private final customers for the provision of district heating are governed by the legal requirements set out in Section 24(4) of the Ordinance on general conditions for district heating provision (Verordnung über Allgemeine Bedingungen für die Versorgung mit Fernwärme – AVBFernwärmeV). Section 24(4) AVBFernwärmV only allows price adjustment clauses which duly take into account both the cost development in the generation and provision of district heating incurred by suppliers (“cost element”) and the conditions in the heat market at the given time (“market element”). Over the last few years the Federal Court of Justice has handed down various decisions clarifying these requirements. According to the court, it is only possible to have the cost element tied to an index if the development of the actual energy costs incurred by the supplier corresponds by and large – with certain deviations being allowed – to the development of the index (see Federal Court of Justice, judgment of 13 July 2011, VIII ZR 339/10, para. 25). As a general rule, the market element, which is supposed to reflect the costs final customers have to pay for a mix of different energy sources or heating sources, must be given the same importance as the cost element; gradations are only possible in the context of ensuring reasonableness (see Federal Court of Justice, judgment of 18 December 2019, VIII ZR 209/18, para. 22).

Independent of the proceedings conducted by the Bundeskartellamt, private customers for district heating can also always take cases of violations of the requirements set out in Section 24(4) AVBFernwärmeV to the civil courts.