ECJ finds lack of independence of German Bundesnetzagentur

In future, German Federal Netzwork Agency (Bundesnetzagentur) will have to set grid fees for electricity and gas independently and free from political influence. This is the conclusion reached by the ECJ in a landmark judgement of 2 September 2021 (Case C-718/18), fully upholding a corresponding complaint by the European Commission. The role of the regulatory authority based in Bonn is likely to be strengthened by the judgement. The industry is reacting cautiously.

Extensive changes required to German energy law

The energy law of the Federal Republic of Germany will have to be changed extensively. In a judgment issued yesterday, the ECJ finds a lack of implementation of the EU Internal Electricity Market Directive (Directive 2009/72/EC) and the EU Internal Gas Market Directive (Directive 2009/73/EC) into German law. In essence, the court criticises the remaining political influence on the Bundesnetzagentur when setting grid fees. According to the current German legal framework, the Bundesnetzagentur determines the grid fees for electricity and gas on the basis of regulations adopted by the government. In the opinion of the European Commission, this does not allow the Bundesnetzagentur to make a decision at its own discretion. Therefore, it lacks the independence explicitly required by European law. The judgement fully endorses the European Commission's position, making changes to the legal framework for grid fee calculation on the national level necessary.

In addition, the ECJ also found further violations by the Federal Republic of Germany, in particular regarding the definition of the term "vertically integrated undertaking" (VIU). In contrast to the current approach stipulated in the German Energy Industry Act (EnWG), according to the ECJ, the activities of a company outside the territory of the European Union must also be consindered when determining whether a VIU exists.

Mixed reactions from the energy sector

Now, it is up to the national legislator to adapt the provisions of energy law in accordance with the ECJ's judgement. During the transitional period, the German law currently in place will continue to apply. For the time being, the ruling has no direct consequences for end users. In the medium term, however, they could benefit from possibly falling grid fees. The importance of the Bundesnetzagentur is likely to be strengthened by the ruling, as the grid operators concerned will in future have to deal directly with the regulatory authority about the level of their remuneration. The ruling provoked mixed reactions in the energy sector and among municipal associations.