Friday, September 3, 2021

ECJ: Germany Federal Network Agency must obtain more independence

 In a groundbreaking decision, the European Court of Justice ruled that the german Federal Networg Agency (Bundesnetzagentur) must gain more independence from political directions of the german government. A verdict with far-reaching consequences writes WELT:

Who is allowed to use the electricity and gas lines and when? How much are the transfer fees? How strong and where are the networks being expanded? In Germany, the Federal Network Agency regulates these questions, which are crucial for the energy transition and the supply of German citizens - but not alone.

Politicians had given themselves a say in Paragraph 24 of the Energy Industry Act: Whatever the Bonn regulatory authority decides, has followed strict government guidelines and regulations ever since. But that's over now.

In a groundbreaking ruling, the European Court of Justice (ECJ) ruled that the Federal Network Agency's lack of political independence violates European law. The Luxembourg judges found that the authority must be able to make decisions completely free of federal requirements.

This is the only way to ensure that the authority's decisions are "impartial and non-discriminatory, which precludes the possibility of preferential treatment of companies and economic interests associated with the government, the majority or at least political power." , which accused the federal government of inadequate implementation of European law in a total of four cases.

The legal representatives of the federal government had argued in Luxembourg that a completely independent regulatory authority would lack “democratic legitimation” and that the principle of democracy and the rule of law would be violated.

The judges did not accept this objection, as their decision explains: The fact that the European regulatory authorities “have a position independent of the general state administration is not in itself capable of depriving these authorities of democratic legitimacy unless they are parliamentary The possibility of influence are withdrawn. "

The consequences of the decision are far-reaching, because the federal government has to revise almost all of its energy market regulation. The independence of the Federal Network Agency demanded by the ECJ makes the authority headed by FDP man Jochen Homann a power factor of its own that can hardly be controlled.

Jurists warn of a blatant break in the separation of powers if the ECJ decision is implemented: Ultimately, an authority would arise that creates its own law and also applies it.

"With this ruling, the Federal Network Agency will be placed in the position of a legislative body and will gain great independence from general requirements of the political legislature and parliament," believes Wiegand Laubenstein from the Essen law firm Rosin Büdenbender. "This path is wrong and, moreover, incompatible with the rule of law."

Because the energy turnaround is a central political project - its success in expanding renewable energies and the network infrastructure is "fundamentally dependent on the requirements of the legislature", says the lawyer at the law firm specializing in energy law: "Regulation based on standards, laws and ordinances can cannot simply be withdrawn from the will of the legislature and replaced by administrative regulation. "

The Association of Municipal Enterprises (VKU), in which most of the German public utilities are organized, also has no good news. It is now hardly possible for the legislature to “create further investment incentives for the energy transition without violating EU law,” warns VKU boss Ingbert Liebing: are necessary for the further expansion and renovation as well as the digitization of the municipal electricity and gas networks. "

The law firm BBH in Berlin, which specializes in energy law, sees it similarly: "Implementing the decision of the ECJ raises important constitutional questions," comments attorney and BBH partner Christian Theobald. Accordingly, the Federal Network Agency would be “a kind of super agency that would ultimately set and apply its own law largely free of the legal requirements of the German legislature and ordinance,” warns Theobald: “The legal protection options for the companies addressed by the regulation would then tend towards zero . "

The lawyer therefore advises the Federal Government to push for clarification in the European Parliament and Council, i.e. to change the EU law on which the Luxembourg decision is based as soon as possible. "We now need an unambiguous European regulation that clearly defines the interaction between national legislators and regulatory authorities."

The electricity and gas network operators, who have to submit their spending plans to the regulatory authority for approval, must fear that their wishes may come across granite more often with a fully autonomous regulatory authority in the future. This is currently shown by the dispute over the level of return on equity.

The Federal Network Agency is already largely independent when it comes to setting this “equity interest”, which is used to feed the network operators' profits. To the grief of the network operators: The Federal Network Agency recently announced that it would reduce the equity interest rate in the next five-year regulatory authority from 6.8 to 4.59 percent and thus curtail its profit opportunities. The ruling chamber of the authority considers this reduction to be acceptable in the current zero interest rate environment. This also relieves consumers' electricity bills.

However, the electricity network operators fear that they will no longer be able to finance the multi-billion dollar tasks of the energy transition if the Federal Network Agency should suddenly push the equity interest rate down to a European low. “This trend stunned the network operators”, says the auditor and tax advisor of the BBH law firm, Rudolf Böck: “On the one hand, they should make their networks suitable for the energy transition and future-proof, but on the other hand they have less and less budget available. That is paradoxical. "

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