2. General Background

Richard J Green and David M Newbery, ‘Competition in the British Electricity Spot Market’ (1992) 100 Journal of Political Economy 929, 930; Severin Borenstein, James Bushnell and Frank A Wolak, ‘Measuring Market Inefficiencies in California’s Restructured Wholesale Electricity Market’ (2002) 92 American Economic Review 1376, 1377; Commission, ‘DG Competition Report on Energy Sector Inquiry’, SEC (2006) 1724 final, 10 January 2007, para 324.

Paul Twomey and others, ‘A Review of the Monitoring of Market Power: The Possible Roles of Transmission System Operators in Monitoring for Market Power Issues in Congested Transmission Systems’ (2005) 11(2) Journal of Energy Literature 3, 13; DG Competition Report on Energy Sector Inquiry (n 1) para 323.

Borenstein, Bushnell and Wolak (n 1) 1377; Twomey and others (n 2) 4; DG Competition Report on Energy Sector Inquiry (n 1) para 369.

Borenstein, Bushnell and Wolak (n 1) 1377; DG Competition Report on Energy Sector Inquiry (n 1) para 324.

DG Competition Report on Energy Sector Inquiry (n 1) para 370, Figure 40; Małgorzata Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (2011) 34 World Competition: Law and Economics Review 449, Annex. See also Fig. 2.1.

Green and Newbery (n 1) 930; DG Competition Report on Energy Sector Inquiry (n 1) para 324; Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (n 5) Annex.

DG Competition Report on Energy Sector Inquiry (n 1) para 369; Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (n 5) Annex.

Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (n 5) Annex; Philippe Chauve and others, ‘The E.ON Electricity Cases: an Antitrust Decision with Structural Remedies’ [2009] Competition Policy Newsletter (1) 51, 51. It is not possible to replace expensive technologies by investment in cheaper ones. In most electricity markets there is a scarcity of access to the cheapest technologies as well as other physical and political constraints. In addition, variations of demand that characterise the electricity market necessitate the existence of flexible plants which are usually the more expensive ones on a per MW basis. See also DG Competition Report on Energy Sector Inquiry (n 1) para 325.

Sven Bode and Helmuth Groscurth, ‘Incentives to Invest in Electricity Production from Renewable Energy under Different Support Schemes’ Arrhenius Institute for Energy and Climate Policy, Discussion Paper 1E, March 2008, 14 <www.​arrhenius.​de/​uploads/​media/​arrhenius_​DP_​1E.​pdf> accessed 1 December 2015.

They are low-cost power plants in the sense that nuclear fuel and lignite are low-cost fuels and so the marginal cost for electricity production is low. These power plants, however, require relatively large capital investments in comparison to generation technologies which use expensive fuels, like gas turbines, which have relatively low fixed costs. See DG Competition Report on Energy Sector Inquiry (n 1) para 368.

Ibid, para 369; Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (n 5) Annex.

Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity [1997] OJ L27/20; Directive 98/30/EC of the European Parliament and of the Council of 22 June 1998 concerning common rules for the internal market in natural gas [1998] OJ L204/1.

Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC [2003] OJ L176/37; Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC [2003] OJ L176/57. The Second Energy Package was completed by two Regulations concerning electricity cross-border exchanges and conditions for access to the natural gas transmission networks, namely Regulation (EC) No 1228/2003 of the European Parliament and of the Council of 26 June 2003 on conditions for access to the network for cross-border exchanges in electricity [2003] OJ L176/1, which addressed issues concerning the cross-border trading in electricity such as payments between transmission system operators and tariff setting, congestion management and allocation of cross-border capacity, and Regulation (EC) No 1775/2005 of the European Parliament and of the Council of 28 September 2005 on conditions for access to the natural gas transmission networks [2005] OJ L289/1.

Commission Decision of 13 June 2005 initiating an inquiry into the gas and electricity sectors pursuant to Article 17 of Council Regulation (EC) No 1/2003 [2005] OJ C144/13, para 4.

Ibid, para 3.

DG Competition Report on Energy Sector Inquiry (n 1) para 6.

Ibid, para 11.

Ibid, para 11.

For more information on the shortcomings identified see ibid, 7–11. See also Commission, ‘Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the European gas and electricity sectors’ (Communication) COM (2006) 851 final, 10 January 2007.

DG Competition Report on Energy Sector Inquiry (n 1) 7.

Ibid, paras 326, 403; COM (2006) 851 final (n 19) para 16.

The study was led by London Economics in association with Global Energy Decisions and a group of academic advisors. See London Economics, ‘Structure and Performance of Six European Wholesale Electricity Markets in 2003, 2004 and 2005’ February 2007 <http://​ec.​europa.​eu/​competition/​sectors/​energy/​2005_​inquiry/​index_​en.​html> accessed 1 December 2015 (London Economics Study). For the summary see DG Competition Report on Energy Sector Inquiry (n 1) paras 997–1020. See also Commission Press Release IP/07/522, 20 April 2007; Philippe Chauve and Martin Godfried, ‘Modelling Competitive Electricity Markets: Are Consumers Paying for a Lack of Competition?’ [2007] Competition Policy Newsletter (2) 18.

DG Competition Report on Energy Sector Inquiry (n 1) para 364. Spot markets, however, may also include, aside from day-ahead, intraday markets. In this work spot markets refer to the day-ahead markets unless if otherwise stated.

Ibid, para 375. The buyers’ willingness to pay for price certainty depends, inter alia, on the volatility of spot prices. The more volatile spot prices are, the fewer buyers will be likely to engage in spot transactions and turn to forward markets instead.

Gate closure is a set point before real-time delivery at which contracts are fixed. See The European Wind Energy Association, Creating the Internal Energy Market in Europe: A Report by the European Wind Energy Association, September 2012, 13 <www.​ewea.​org/​uploads/​tx_​err/​Internal_​energy_​market.​pdf> accessed 1 December 2015.

There is also the possibility to fine-tune an open contractual position in the balancing market which exists to settle real-time imbalances resulting from discrepancies between scheduled and actual electricity demand and production. The balancing market prices in some Member States, however, are highly unpredictable and are reported as economically punitive by market participants. See DG Competition Report on Energy Sector Inquiry (n 1) paras 327, 422.

The European Wind Energy Association (n 26) 14. As of September 2012 there were 15 Member States with intraday markets.

Price formation concerns the wholesale price, namely the price determined in the wholesale market where electricity is sold and purchased between suppliers, generators, non-physical traders and large end users. Electricity for spot and forward delivery can be traded either via bilateral agreements (over-the-counter contracts) or via a commercial power exchange. The volume of electricity which is traded day-ahead in power exchanges is often lower compared to what is traded bilaterally. In most countries the greatest volume of electricity is traded via forward bilateral contracts. See DG Competition Report on Energy Sector Inquiry (n 1) paras 325, 353, 356–357, 360, 366. See also The European Wind Energy Association (n 26) 10–11.

DG Competition Report on Energy Sector Inquiry (n 1) para 369. Short-run marginal costs consist of the fuel costs and some other insubstantial variable production costs.

Ibid, para 369.

Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (n 5) Annex.

DG Competition Report on Energy Sector Inquiry (n 1) para 370 footnote 218. Due to the significant discrepancies in production costs, the merit order curve is relatively steep on the right-hand side. See Chauve and others, ‘The E.ON Electricity Cases: an Antitrust Decision with Structural Remedies’ (n 8) 51.

Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (n 5) Annex.

Chauve and Godfried, ‘Modelling Competitive Electricity Markets: Are Consumers Paying for a Lack of Competition?’ (n 22) 19.

Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (n 5) Annex.

DG Competition Report on Energy Sector Inquiry (n 1) para 370.

Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (n 5) Annex. Variable costs refer to the sum of marginal costs over all units produced. Variable and fixed costs constitute the two components of the total costs of production.

Chauve and Godfried, ‘Modelling Competitive Electricity Markets: Are Consumers Paying for a Lack of Competition?’ (n 22) 19.

DG Competition Report on Energy Sector Inquiry (n 1) para 370.

Chauve and Godfried, ‘Modelling Competitive Electricity Markets: Are Consumers Paying for a Lack of Competition?’ (n 22) 19.

DG Competition Report on Energy Sector Inquiry (n 1) paras 365, 371. On most power exchanges different blocks of hours can be traded as well. By contrast, forward products include weekly, monthly, quarterly and yearly products which can either be traded as ‘base’ or ‘peak’ contracts. A ‘base’ contract refers to a continuous delivery throughout the delivery period, whereas a ‘peak’ contract only involves a delivery on business days from 08:00 till 20:00.

Ibid, para 371.

Chauve and Godfried, ‘Modelling Competitive Electricity Markets: Are Consumers Paying for a Lack of Competition?’ (n 22) 19.

DG Competition Report on Energy Sector Inquiry (n 1) para 370.

Futures contracts are standardised forward contracts traded on exchanges. Depending on the contract specification of the power exchange in question, they can be settled physically or financially. In the latter case, no physical electricity delivery takes place during the delivery period of the contract but a difference is paid between the prevailing spot price and the contract settlement price. See ibid, para 366.

Ibid, paras 375–76. Thus, capacity withdrawals do not only raise spot prices but also have an effect on forward trading resulting in higher forward prices. Moreover, generators could increase the volatility of spot prices without changing their overall level. This would also lead to higher forward prices as it would increase the value of hedging spot prices in advance on the forward market and thus raise the premium of forward prices over expected spot prices. See also Commission Decision of 26 November 2008 in Case COMP/39.388 – German Electricity Wholesale Market, para 38; Monopolkommission, ‘Strom und Gas 2009: Energiemärkte im Spannungsfeld von Politik und Wettbewerb’ Sondergutachten 54, August 2009, paras 156, 160 <www.​monopolkommissio​n.​de/​images/​PDF/​SG/​s54_​volltext.​pdf> accessed 1 December 2015.

DG Competition Report on Energy Sector Inquiry (n 1) para 374.

Ibid, paras 366–367.

See the graph in ibid, para 367, referring to the prices for day-ahead base load delivery observed on the EEX, the German power exchange, and the German over-the-counter market.

Ibid, paras 326, 403, 437; Chauve and Godfried, ‘Modelling Competitive Electricity Markets: Are Consumers Paying for a Lack of Competition?’ (n 22) 25.

In other words, the withdrawal of capacity causes the supply curve to become steeper and intersect the demand curve at a higher price. See Chauve and others, ‘The E.ON Electricity Cases: an Antitrust Decision with Structural Remedies’ (n 8) 51; DG Competition Report on Energy Sector Inquiry (n 1) para 409.

Paul L Joskow and Edward Kahn, ‘A Quantitative Analysis of Pricing Behaviour in California’s Wholesale Electricity Market During Summer 2000: The Final Word’ (2002) 23 (4) The Energy Journal 1, 18.

Ibid 18; Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (n 5) Annex.

Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (n 5) Annex.

DG Competition Report on Energy Sector Inquiry (n 1) paras 404, 409.

Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (n 5) Annex.

DG Competition Report on Energy Sector Inquiry (n 1) paras 404, 409.

Chauve and others, ‘The E.ON Electricity Cases: an Antitrust Decision with Structural Remedies’ (n 8) 52.

Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (n 5) Annex.

Ibid, Annex; DG Competition Report on Energy Sector Inquiry (n 1) para 404 footnote 230.

Chauve and others, ‘The E.ON Electricity Cases: an Antitrust Decision with Structural Remedies’ (n 8) 52.

Ibid 52.

The categorisation of power plants into ‘incentive assets’ and ‘ability assets’ explains the logic behind capacity withdrawal. However, it should not be used in individual cases as it oversimplifies the picture and might lead to distorted categorisation of assets in the one or the other category, especially for the plants which stand in the middle of the merit order curve. These plants may belong to the one or the other category depending on the generator and the load level. See Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (n 5) Annex.

Ibid, Annex.

Ibid, Annex.

DG Competition Report on Energy Sector Inquiry (n 1) paras 326, 403, 405.

Ibid, para 405.

Ibid, para 426.

Ibid, para 405.

Ibid, para 405. See the example of the second largest operator in Spain at paras 408–410.

Ibid, para 428.

Ibid, para 428.

Ibid, para 410.

Gregory S Crawford, Joseph Crespo and Helen Tauchen, ‘Bidding Asymmetries in Multi-unit Auctions: Implications of Bid Function Equilibria in the British Spot Market for Electricity’ (2007) 25 International Journal of Industrial Organization 1233, 1235.

DG Competition Report on Energy Sector Inquiry (n 1) para 429.

Ibid, paras 429, 432.

Ibid, para 434.

Ibid, paras 435–436.

Chauve and others, ‘The E.ON Electricity Cases: an Antitrust Decision with Structural Remedies’ (n 8) 51.

Ibid 52. It takes years between deciding to construct a new power plant and putting it on line. The lead time varies from a minimum of five years for a new gas-fired plant to approximately seven years for a coal-fired plant and approximately ten years for a nuclear power plant. Investments in base load plants which produce cheaper electricity on a per MW basis and so can exert a downward pressure on prices do not only take longer but they may also be encumbered by environmental, political and legal restrictions (e.g. nuclear plants for legal reasons, hydro plants for availability reasons).

Robert A Greco, ‘When is Routine Maintenance Really Routine? A Proposed Modification to the EPA’s New Source Review Program’ (2004) 88 Marquette Law Review 391, 391.

Ibid 391.

Steffen Rebennack and others, ‘Short Term Portfolio Optimization for Discrete Power Plant Dispatching’ (IEEE Power & Energy Society General Meeting, July 2009), 2 <http://​ieeexplore.​ieee.​org/​stamp/​stamp.​jsp?​tp=​&​arnumber=​5275614> accessed 1 December 2015.

Ibid 2.

DG Competition Report on Energy Sector Inquiry (n 1) para 443.

The benefits of cogeneration with regard to saving primary energy, reducing carbon emissions of heating and contributing to the security of energy supply and the competitive situation of the European Union and its Member States have led the European Union to incorporate cogeneration in its energy policy. The aim is to promote and develop high efficiency cogeneration by facilitating network access for electricity produced from cogeneration. See Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC [2012] OJ L315/1.

The EU ETS was established by Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC [2003] OJ L275/32, as subsequently amended by Directive 2008/101/EC of the European Parliament and of the Council of 19 November 2008 amending Directive 2003/87/EC so as to include aviation activities in the scheme for greenhouse gas emission allowance trading within the Community [2008] OJ L8/3, and Directive 2009/29/EC of the European Parliament and of the Council of 23 April 2009 amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community [2009] OJ L140/63. For further information see A Denny Ellerman and Barbara K Buchner, ‘The European Union Emissions Trading Scheme: Origins, Allocation, and Early Results’ (2007) 1 Review of Environmental Economics and Policy 66; Judson Jaffe, Matthew Ranson and Robert N Stavins, ‘Linking Tradable Permit Systems: A Key Element of Emerging International Climate Policy Architecture’ (2009) 36 Ecology Law Quarterly 789, 791–793. The system is based on the ‘cap and trade’ principle. This means that there is a cap on the amount of certain greenhouse gases that can be emitted by power plants, factories and other installations which participate in the system. Within the cap, companies receive or buy emission allowances. If a company exceeds its emission allowances, it can buy emission allowances from other companies which have not used all their permits. It is also possible to buy limited amounts of international credits from emission-saving projects around the world. See also Commission, The EU Emissions Trading System (EU ETS), October 2013 <http://​ec.​europa.​eu/​clima/​publications/​docs/​factsheet_​ets_​en.​pdf> accessed 1 December 2015, where the EU ETS is explained as it stood in October 2013.

Directive 2001/80/EC of the European Parliament and of the Council of 23 October 2001 on the limitation of emissions of certain pollutants into the air from large combustion plants [2001] OJ L309/1, as amended by Directive 2009/31/EC of the European Parliament and of the Council of 23 April 2009 on the geological storage of carbon dioxide and amending Council Directive 85/337/EEC, European Parliament and Council Directives 2000/60/EC, 2001/80/EC, 2004/35/EC, 2006/12/EC, 2008/1/EC and Regulation (EC) No 1013/2006 [2009] OJ L140/114. Directive 2001/80/EC will be replaced by Directive 2010/75/EU of the European Parliament and of the Council of 24 November 2010 on industrial emissions (integrated pollution prevention and control) [2010] OJ L334/17 with effect from 1 January 2016.

Office of Gas and Electricity Markets (Ofgem), ‘Transmission Constraint Licence Condition Guidance’ October 2012, 11 <www.​ofgem.​gov.​uk/​ofgem-publications/​40377/​tclc-guidance.​pdf> accessed 1 December 2015.

There are three types of transmission constraints: thermal, voltage and stability constraints. There may be alternative options available to manage them. See, for example, JH Grundy, HP Johnson and C Proudfoot, ‘Transmission Constraint Management on the National Grid System and the Effect Upon the Commercial Market Place’ (4th International Conference on Power System Control and Management, April 1996) 31 <http://​ieeexplore.​ieee.​org/​stamp/​stamp.​jsp?​tp=​&​arnumber=​637754&​isnumber=​13841&​tag=​1> accessed 1 December 2015. The economic dispatch of power generating units refers to the determination of the optimal output to meet demand at the lowest possible cost. It is interesting to note that in the US Energy Policy Act of 2005 (Pub.L. 109-58), section 1234, the term ‘economic dispatch’ is defined as ‘the operation of generation facilities to produce energy at the lowest cost to reliably serve consumers, recognizing any operational limits of generation and transmission facilities’ (emphasis added).

Ibid 31.

Severin Borenstein and James Bushnell, ‘An Empirical Analysis of the Potential for Market Power in California’s Electricity Industry’ (1999) 47 Journal of Industrial Economics 285, 301.

DG Competition Report on Energy Sector Inquiry (n 1) para 370 footnote 217; Chauve and Godfried, ‘Modelling Competitive Electricity Markets: Are Consumers Paying for a Lack of Competition?’ (n 22) 19 footnote 15.

See Sect. 2.3.

DG Competition Report on Energy Sector Inquiry (n 1) para 370 footnote 217. See also Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ Abschlussbericht gemäß § 32e GWB, Januar 2011, 127 <www.​bundeskartellamt​.​de/​SharedDocs/​Publikation/​DE/​Sektoruntersuchu​ngen/​Sektoruntersuchu​ng%20​Stromerzeugung%20​Stromgrosshandel​%20​-%20​Abschlussbericht​.​html?​nn=​4143254> accessed 1 December 2015. The executive summary is available in English at <www.​bundeskartellamt​.​de/​SharedDocs/​Publikation/​EN/​Sector%20​Inquiries/​Sector%20​Inquiry%20​Electricity%20​Generation%20​and%20​Wholesale%20​Markets.​pdf?​_​_​blob=​publicationFile&​v=​2> accessed 1 December 2015. In reality, however, the situation might be different. In a given market there are both new and old plants and the latter do not need contributions to their fixed costs if they are fully amortised. The plants on the far right of the merit order curve are usually old and, therefore, do not need contributions to their fixed costs once they are fully amortised. See Chauve and Godfried, ‘Modelling Competitive Electricity Markets: Are Consumers Paying for a Lack of Competition?’ (n 22) 19 footnote 15. This is related to the issue of scarcity rents that should be contained within peak prices for electricity. If peak electricity prices never rose above the short-run marginal costs of the marginal peak plant, there would be no way to recover the fixed costs of the peak plant and no one would invest in them. The revenue forgone when electricity pricing rules omit the scarcity rents creates a ‘missing money’ problem. See NERA Economic Consulting, ‘Electricity Market Reform: Assessment of a Capacity Payment Mechanism’ Report for Scottish Power, March 2011, 8–10 <www.​nera.​com/​content/​dam/​nera/​publications/​archive2/​PUB_​ScottishPower_​0311.​pdf> accessed 1 December 2015.

London Economics Study (n 22) 177; Chauve and Godfried, ‘Modelling Competitive Electricity Markets: Are Consumers Paying for a Lack of Competition?’ (n 22) 22.

See the example of France in the London Economics Study. Contributions to fixed costs generated in the simulation model applied in the study were not sufficient for operators in the theoretically competitive French market to amortise their fixed costs. Therefore, the applied theoretical model did not yield reliable results on France. See London Economics Study (n 22) 255; Chauve and Godfried, ‘Modelling Competitive Electricity Markets: Are Consumers Paying for a Lack of Competition?’ (n 22) 22 footnote 29.

Ludwig Kuntz and Felix Müsgens, ‘Modelling Start-Up Costs of Multiple Technologies in Electricity Markets’ (2007) 66 Mathematical Methods of Operations Research 21, 21.

Chauve and Godfried, ‘Modelling Competitive Electricity Markets: Are Consumers Paying for a Lack of Competition?’ (n 22) 20 footnote 16.

DG Competition Report on Energy Sector Inquiry (n 1) para 428 footnote 247. Start-up costs are independent of the production scale and so they add a fixed cost component. See Kuntz and Müsgens (n 101) 22. High start-up costs could also be a reason for not running a plant if the spread is not substantial enough for the generator to incur the start-up costs. In this regard, there may also be restrictions included in Power Purchase Agreements on the number of starts a power plant can have in any one calendar year. Such restrictions could limit the ability of a plant to run during periods of positive spread. See Office of Gas and Electricity Markets (Ofgem), ‘Transmission Constraint Licence Condition Guidance’ (n 92) 12.

DG Competition Report on Energy Sector Inquiry (n 1) para 428 footnote 247.

Joskow and Kahn (n 55) 17. The authors consider the unilateral case where only one generator withdraws capacity whereas all the other generators behave competitively and bid at prices equal to their marginal cost. They show that the rational capacity withdrawal is a unilateral exercise of market power and does not require collusion among generators.

Crawford, Crespo and Tauchen (n 77) 1258 footnote 48.

Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (n 5) 456.

The third liberalisation package consists of two Directives and three Regulations, namely Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC [2009] OJ L211/55, Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003 [2009] OJ L211/15, Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC [2009] OJ L211/94, Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005 [2009] OJ L211/36, Regulation (EC) No 713/2009 of the European Parliament and of the Council of 13 July 2009 establishing an Agency for the Cooperation of Energy Regulators [2009] OJ L211/1.

Commission, ‘Sector Inquiry Pursuant to Article 17 of Regulation 1/2003 EC in the European Electricity and Gas Markets’ (Communication by Commissioners Neelie Kroes and Andris Piebalgs) 2005, para 6 <http://​ec.​europa.​eu/​competition/​sectors/​energy/​2005_​inquiry/​communication_​en.​pdf> accessed 1 December 2015; Commission decision initiating the inquiry (n 14) para 9.

Council Regulation (EC) No 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty [2003] OJ L1/1 (Regulation 1/2003). The antitrust investigations that have been carried out so far in the aftermath of the energy sector inquiry are the following: Commission Decision of 11 October 2007 in Case COMP/37.966 – Distrigaz; German Electricity Wholesale Market (n 49); Commission Decision of 26 November 2008 in Case COMP/39.389 – German Electricity Balancing Market; Commission Decision of 18 March 2009 in Case COMP/39.402 – RWE Gas Foreclosure; Commission Decision of 8 July 2009 in Case COMP/39.401 – E.ON/GDF; Commission Decision of 3 December 2009 in Case COMP/39.316 – GDF Foreclosure; Commission Decision of 17 March 2010 in Case COMP/39.386 – Long Term Electricity Contracts in France; Commission Decision of 14 April 2010 in Case COMP/39.351 – Swedish Interconnectors; Commission Decision of 4 May 2010 in Case COMP/39.317 – E.ON Gas Foreclosure; Commission Decision of 29 September 2010 in Case COMP/39.315 – ENI; Commission Decision of 18 June 2012 in Case COMP/39.736 – Siemens/Areva; COMP/39.387 – Long Term Electricity Contracts in Belgium (closure of proceedings, 28 January 2011); Commission Decision of 5 March 2008 in Case COMP/38.700 – Greek Lignite and Electricity Markets. In order to comply with the 2008 decision, Greece proposed measures which were made binding by the Commission in 2009. The case was subsequently re-opened in 2011. Following changes in Greek national energy policy, the Greek government proposed an alternative set of measures in 2011. The General Court annulled the Commission’s decision in 2012. On appeal by the Commission, the ECJ set aside on 17 July 2014 the judgement of the General Court. See also footnote 153; COMP/39.442 – French Electricity Wholesale Market (inspections, 11 March 2009); Commission Decision of 10 April 2013 in Case COMP/39.727 – ČEZ and Others; Commission Decision of 18 December 2013 in Case COMP/39.731 – Deutsche Bahn II; COMP/39.816 – Upstream Gas Supplies in Central and Eastern Europe (opening of proceedings, 4 September 2012); Commission Decision of 5 March 2014 in Case COMP/39.952 – Power Exchanges; COMP/39.767 – BEH Electricity (opening of proceedings, 4 December 2012); Commission Decision of 5 March 2014 in Case COMP/39.984 – OPCOM/Romanian Power Exchange; COMP/39.849 – BEH Gas (opening of proceedings, 5 July 2013).

The load factor of a plant is the ratio between the amount of electricity a plant produced (i.e. the effective production) and the maximum amount of electricity it could have produced in a certain period, all market terms remaining equal. To calculate the maximum potential output of a plant the number of hours during which the plant was generating electricity is multiplied with the plant’s maximum capacity. The load factor is then equal to the effective production during the period divided by its maximum potential output. See DG Competition Report on Energy Sector Inquiry (n 1) para 440.

Ibid, para 443.

London Economics Study (n 22) 389–394; Chauve and others, ‘The E.ON Electricity Cases: an Antitrust Decision with Structural Remedies’ (n 8) 51.

Chauve and others, ‘The E.ON Electricity Cases: an Antitrust Decision with Structural Remedies’ (n 8) 52.

Ibid 52.

Ibid (n 49) para 26.

Ibid, para 37; DG Competition Report on Energy Sector Inquiry (n 1) para 443; London Economics Study (n 22) 389–394.

Ibid, paras 13–22.

Ibid, paras 14–15.

Ibid, para 23.

Ibid, para 23 footnote 13, citing OLG Düsseldorf, Beschl. v. 6.6.2007, Az. VI-2 Kart 7/04 (V) “E.ON/Stadtwerke Eschwege” and BGH, Beschl. v. 11.11.2008, Az. KVR 60/07 “E.ON/Stadtwerke Eschwege”. The higher regional Court of Düsseldorf found E.ON and RWE to be collectively dominant due to their structural similarities (they had the largest shares of electricity generation and generation capacity on the German electricity wholesale market and they were both characterised by a high degree of vertical integration) and the lack of any competition between them. This was confirmed by the German Federal Court of Justice (Bundesgerichtshof – BGH).

Chauve and others, ‘The E.ON Electricity Cases: an Antitrust Decision with Structural Remedies’ (n 8) 51; Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (n 5) 452.

In the case of nuclear assets the divestiture concerned drawing rights in the plants. See German Electricity Wholesale Market (n 49) para 57 and Annex. In the language of the Commission’s officials, the divestiture included plants which provide the ‘ability to withdraw’ as well as plants which provide the ‘incentive to withdraw’. See Sect. 2.4.1.

Ibid, paras 41–44.

Ibid, para 80.

Ibid, para 85.

See, for instance, Case 15/83 Denkavit Nederland v Hoofdproduktschap voor Akkerbouwprodukten [1984] ECR 2171, para 25; Case T-260/94 Air Inter v Commission [1997] ECR II-997, para 144; Case T-65/98 Van den Bergh Foods v Commission [2003] ECR II-4653, para 201.

See, for instance, Case C-174/05 Zuid-Hollandse Milieufederatie and Natuur en Milieu [2006] ECR I-2243, para 28; Air Inter v Commission (n 133) para 144; Case 265/87 Schräder v Hauptzollamt Gronau [1989] ECR 2237, para 21.

Ibid, para 82.

Ibid, para 84.

Ibid, para 85.

Commission Press Release IP/08/1774, 26 November 2008.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (n 98).

Ibid 2.

Ibid.

Ibid 13.

On the RSI see Sect. 3.​2.​2.

Bundeskartellamt, ‘Sektoruntersuchung Stromerzeugung und -großhandel’ (n 98) 106–109.

Ibid 113.

Ibid 123–125, 208–210.

Ibid 135–137.

Ibid 157–159 and Sect. 3.​3.​1.

Ibid 159–160, 208–210.

See footnote 111. The five investigations that did not follow the commitment route are Case COMP/39.401 – E.ON/GDF (n 111); Case COMP/38.700 – Greek Lignite and Electricity Markets (n 111); Case COMP/39.952 – Power Exchanges (n 111); Case COMP/39.984 – OPCOM/Romanian Power Exchange (n 111), which followed the infringement procedure, and COMP/39.387 – Long Term Electricity Contracts in Belgium (n 111), where the Commission decided not to pursue the case. According to Recital 13 of Regulation 1/2003 ‘commitment decisions are not appropriate in cases where the Commission intends to impose a fine’. This suggests that hardcore restrictions to competition and the realisation of the Single Market like market-sharing cartels (E.ON/GDF, Power Exchanges) and discrimination on grounds of nationality or place of establishment (OPCOM/Romanian Power Exchange) require finding an infringement and thus warrant an infringement decision. With regard to the Greek Lignite and Electricity Markets case, the investigation is not a regular antitrust case but an action against Greece under Article 106 (1) TFEU in combination with Article 102 TFEU. The Commission accused the Greek state of breaching competition rules by securing privileged access to lignite to PPC, its state-owned electricity supplier. Following an appeal from PPC, the General Court annulled the Commission’s decision in 2012. See Case T-169/08 Dimosia Epicheirisi Ilektrismou AE (DEI) v Commission [2012] ECR I-000, 12 September 2012. On appeal by the Commission, the ECJ set aside on 17 July 2014 the judgement of the General Court. See Case C-553/12 P European Commission v Dimosia Epicheirisi Ilektrismou AE (DEI) [2014] (not yet published).

In fact the preliminary assessment is drafted and communicated to the parties after the Commission is convinced that they are willing to offer satisfactory commitments. See Commission Notice on best practices for the conduct of proceedings concerning Articles 101 and 102 TFEU [2011] OJ C308/6 (Commission Notice on best practices), paras 118–119, 121. Para 121 reads ‘Once the Commission is convinced of the undertakings’ genuine willingness to propose commitments which will effectively address the competition concerns, a Preliminary Assessment will be issued.’

For the benefit of commitments decisions both for the Commission and the undertakings see Case C-441/07 P Commission v Alrosa [2010] ECR I-5949, para 35. See also Wouter PJ Wils, ‘The Use of Settlements in Public Antitrust Enforcement: Objectives and Principles’ (2008) 31 World Competition: Law and Economics Review 335, 343ff; Heike Schweitzer, ‘Commitment Decisions under Article 9 of Regulation 1/2003: The Developing EC Practice and Case Law’ in Claus-Dieter Ehlermann and Mel Marquis (eds), European Competition Law Annual 2008: Antitrust Settlements under EC Competition Law (Hart Publishing 2009), 547–549; Heike Schweitzer, ‘Commitment Decisions: An Overview of EU and National Case Law’ e-Competitions, 26 July 2012, N° 48150 <www.​concurrences.​com> accessed 1 December 2015.

See Art 9 para 2 Regulation 1/2003.

See Recital 13, Regulation 1/2003. Avoiding a formal finding of an infringement is particularly beneficial for the undertakings concerned as such a finding could be used in actions for private damages in the Member States’ courts.

See Recital 13 and Art 9(1) second sentence, Regulation 1/2003.

Piero Cavicchi, ‘The European Commission’s Discretion as to the Adoption of Article 9 Commitment Decisions: Lessons from Alrosa’ Europa-Kolleg Hamburg, Institute for European Integration, Discussion Paper No 3/11, 7 <www.​econstor.​eu/​dspace/​bitstream/​10419/​45859/​1/​660701413.​pdf> accessed 1 December 2015.

Sadowska, ‘Energy Liberalization in an Antitrust Straitjacket: A Plant Too Far?’ (n 5) 451; Małgorzata Sadowska and Bert Willems, ‘Power Markets Shaped by Antitrust’ (2013) 9 European Competition Journal 131, 141–143.

See Małgorzata Sadowska, ‘Committed to reform? Pragmatic antitrust enforcement in electricity markets’ (PhD thesis, University of Bologna 2013).

The assertion that commitments decisions serve as a substitute for infringement decisions is also supported by the wording of Article 9 of the Regulation 1/2003, which states that proceeding through a commitment decision may be chosen ‘where the Commission intends to adopt a decision requiring that an infringement be brought to an end’. The commitment route may therefore be taken into consideration only when the Commission would be able to make an informed choice about proceeding to a formal finding of an infringement through an Article 7 decision. See Cavicchi (n 160) 5.