Dr. Dörte Fouquet, Rechtsanwältin/Partner Dr. Emmanuelle Raoult, Rechtsanwältin

The role of local public authorities in the networks management: legal situation in France, Germany

Die Rolle der kommunalen Ebene im Energiesystemwandel - Rechtliche

Situation in Deutschland und Frankreich

Dr. Dörte Fouquet, Rechtsanwältin/Partner

Dr. Emmanuelle Raoult, Rechtsanwältin

Becker Büttner Held

28 - 29 Januar 2013

Az/Dok.-Nr.Seminarkürzel21.04.23

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3Seminarkürzel21.04.23

Dr. Dörte Fouquet, Lawyer

Born in Recklinghausen in 1957 Married, 1 child Studies of Law at the Universities of Marburg and Hamburg 1982 Academic and Reasearch Associate, Junior Lecturer at the

University of Hamburg, Law Faculty 1988 Civil servant of the State of Hamburg, Ministry for the Environ-

ment and Energy 1991 Civil servant in liasion office of Hamburg and Schleswig-Holstein to

the European Commission in Brussels 1993 Partner in law firm Kuhbier, Brussels, specialising in European and

International law and consulting on European affairs in the fields of competition, energy, transport, environment

Since 2011 Partner in law firm BBH and head of the Brussels office of BBH

Memberships: Admittance to the German Bar of Berlin and to the Brussels Bar Green Budget Europe, FÖS Eurosolar BWE (German Wind Energy Association) Deutscher Juristinnenbund (German Female Lawyer‘s Association)

Practice areas: Energy, environmental and competition law

Dr. Dörte FouquetRechtsanwältin

Partner (since 2011)

Contact:[email protected].: +32 2 204 44-12

Dr. Dörte FouquetRechtsanwältin

Partner (since 2011)

Contact:[email protected].: +32 2 204 44-12


Germany


What role is played by municipalities in Germany?

Historical background

For decades it was standard practice that municipalities as grid-owners organised the provision of electricity and gas

The liberalisation of the energy markets in the late 1990s then led to privatisation and more competition.

One of the consequences were large scale sell-offs of municipal utilities (“pressure to privatise“)

However, since the past few years the trend changed to growing recommunalisation.


Reasons for the recommunalisation

Expiry of contracts In 2016 almost all existing concessions in the energy sector are up for renewal and about two

thirds of all German communes are considering buying back both electricity generators and the distribution networks.

Private sector failure as well as achievement of public service objectives Failures in performance, service and infrastructure maintenance are key reasons for

recommunalisation. Especially public service obligations require enormous investments and can only be successful if the long-term goal is sustainable economic success rather than short term profit maximization.

Efficiency and costs Cost savings and greater efficiency of in-house services as well as the possibility of cross-

subsidisation are an important factor in recommunalisation. One cost factor among others is the process of tendering and the need to monitor the performance of companies. These costs can be saved by municipalities by managing the work themselves

Many of the energy and climate policy targets planned at federal level require implementation at local level

Municipal utilities have the expertise, esp. regarding renewable power generation


Examples for recommunalisation in Germany

Already in 1996, the city of Nürnbrecht bought back energy networks from RWE and created the Gemeindewerk Nürnbrecht GmbH that today manages the newly renovated networks with an annual profit of up to EUR 200.000

Around the largest German lake, the Bodensee, seven communes have cooperated in the creation of the public Regionalwerk Bodensee, which already controls a third of the local energy market

In 2010, six communes in North Rhine Westphalia bought the fifth biggest German energy produces Evonik-Steag

In 2010, Baden-Württemberg bought back the 45% of EnBW shares from EDF

Since 2007 more than 44 local public utilities (Stadtwerke) have been set up and more than 100 concessions for energy distribution networks and service delivery have returned to public hands. This process is expected to continue.


Germany


BBH clients perspectives

Our clients generally consider recommunalisation as an option, but face several challenges:

Is the investment economically sensible?

How cooperative is the private counter-party?

What are the strategic options along the energy value chain?

What about political interference?

Legal challenges: How does the future regulatory framework look like? In particular, how will the framework for RES support develop? Does grid tariff regulation allow for reasonable profits? Does grid tariff regulation allow for the rollout of smart grids?


Germany


BBH services

BBH provides comprehensive advice, thereby ensuring that recommunalisation projects are a success story

Advice includes: Strategic aspects

Pure recommunalisation or cooperation? Establishing cooperatives?

Political aspects On local, regional and federal level

Economic aspects E.g. innovative funding models

And, of course, legal aspects Energy law (in particular, renewable energies) Regulatory questions Municipal business law Tax law …


FRANCE


Current situation in the Energy sector

Therefore the recommunalisation (or even an open-competitiveness) is not allowed by the French energy law.

Local public authorities’ role limited by law in the electricity sector

So far in France, local public authorities are not involved in networks management and electricity distribution.

The Energy law (art. L121-5 and L111-52) gives an exclusive right to ERDF to supply electricity (few regions – as established in 1946 – keep the distribution right).

ERDF (belonging 100 % to EDF) is managing 95% of the public electricity distribution network in France = 1,3 million network kilometres.

The network belongs to the public authorities. They have to give the management right to ERDF through a public services concession that cannot be open to competition.


Current development in the Hydro-electricity sector

In 2010, Environment Ministry launched the liberalisation of hydroelectric plants.

16 concessions contract are coming to an end in between 2011 and 2015.

In October 2012, the energy minister, Delphine Batho, spoke against this liberalisation and announced that the Government would look into other alternatives.

The current situation brings a lack of clarity on the Government’s position and all actors are waiting for the final decision.

It seems also unclear how legally the French Government could stop this liberalisation, as it is required by the European Law and such a decision might trigger the reopening of the 2006 proceeding of the European Commission against

the French administration.

This example shows the reluctance of France to open the management of electricity infrastructures to new actors.


Recommunalisation in the water sector

However, recommunalisation is happening in the water sector.

Veolia et Suez Environnement are managing 80 % of the water supply network through public services concession. Local public authorities own the infrastructures but delegate the management to those private companies.

For some years, some cities are taking back the control of those infrastructures. This has already happened in Paris and Grenoble in 2008 or in the Montbéliard urban area in 2011.

The Montbéliard urban area was the first to actually unilaterally stop an ongoing concession contract with Velia while the contract would have been valid until 2022. The other local public authorities waited for the end of the concession.


European Union

European Union


European Union

The European Commission proposed an Energy transition through the 2050 Energy Roadmap, committing to decarbonised the European power sector by 2050.

Similar challenges: Regulatory framework? Investment security?

The European Commission is more and more recognizing the fact that the energy turnaround will only be successful with proper involvement of municipalities and DSOs


European Union

Commission Communication on the Internal Energy Market (November 2012) Commission insists on the implementation of the 3rd legislative

package that require liberalisation. Infringement procedures have been started.

Development of transparent and easily understandable rules for demand response

Further roll-out of smart meters Reflection on the future role of DSOs required

Long-term, predictable and stable regulatory framework that incentivises and facilitates the transition of DSO networks, including adequate incentives for investment

Caveat: “framework should be conducive to competition“ Commission could limit the role of DSOs to balancing of the system

while the rest of their activities is open to competition (free market)

Thank you for your attention!

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www.bbh-online.dewww.DerEnergieblog.de

Contact partner: Lawyer Dr. Dörte Fouquet

Dr. Dörte Fouquet, Rechtsanwältin/Partner Dr. Emmanuelle Raoult, Rechtsanwältin

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