Electricity Review Austria

7/28/2019 Electricity Review Austria

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Electricity Regulationin 28 jurisdictions worldwide

Contributing editor: Earle H ODonnell2011

Published byGetting The Deal Through

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Austria Christian Schmelz and Bernd RajalSchoenherr 3

Brazil Maria Aparecida Seabra Fagundes, Rafaella Ferraz and Flvia Pacheco

Arajo e Policastro Advogados 11

Bulgaria Shana Kaloyanova and Frank SchmitzCoeler Legal Consulting EOOD 18

Canada Chad EggermanWMCZ Lawyers-Mediators 24

Chile Jos Manuel Larran Ros Larran Rozas, Lackington, Rencoret & Urza Abogados 34

China Edward E Lehman and Aldo SettimioBoni de Nobili Lehman, Lee & Xu 41

Clmbia Andrs De La Rosa MartnezCavelier Abogados 49

Cratia Miroljub Macesic and Ivana ManoveloMacessic and Partners 57

Czech Republic Vclav RovenskKocin olc Balatk 62

Ecuadr Diego RamirezFabara & Campaa 71

Finland Hans Sundblad and Petri VesaPeltonen, Ruokonen & Itinen, Attorneys-at-Law Ltd 75

Germany Thomas FunkeOsborne Clarke 80

Greece Yannis Kelemenis and Konstantina SoultatiKelemenis & Co 86

Hungary Andrea Jdi Nmeth and Pter Garancsibpv Jdi Nmeth Attorneys at Law 93

Ireland Alex McLean, Patrick McGovern and Claire MaddenArthur Cox 100

Israel Uri Noy, Yehudit Libin and Michal MerlingErdinast, Ben Nathan & Co Advocates 108

Italy Marco Sella and Alessia MarconiMacchi di Cellere Gangemi 115

Mexic Rogelio Lopez-Velarde and Amanda ValdezLopez Velarde, Heftye y Soria 121

Nigeria Babatunde Irukera and Ikem IsiekwenaSimmonsCooper Partners 128

Panama Erika Villarreal Zorita and Nadia de HalmanAnzola Robles & Associates 137

Paraguay Luis A Breuer, Magali Rodriguez-Alcala and Hugo AlexanderBerkemeyer

Berkemeyer Attorneys & Counselors 144

Pland Jerzy Baehr and Jakub PokrzywniakWiercinski Kwiecinski Baehr Spk 148

Rmania Gabriela Cacerea and Mirela PredaNestor Nestor Diculescu Kingston Petersen 154

Russia Alexander Khrenov and Andrey LebedevYukov, Khrenov and Partners 163

Turkey Deger Boden Akaln and Seda GmsBoden Law Office 170

United Kingdm Peter Willis, David McGowan and Louise MacleodDundas & Wilson LLP 178

United States Michael S Hindus, Robert A James, Joseph H Fagan and Becky M Bruner

Pillsbury Winthrop Shaw Pittman LLP 188

Vietnam Tran Duc Hoai and Nguyen Thanh HaVietbid 199

Electricity

Regulation 2011

Contributing editor:

Earle H ODonnell

White & Case LLP

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Joseph Samuel

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Electricity Regulation 2011

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CoNTENTS


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ausChsn Schmelz nd Bend rjl

Schoenherr

1 Polcy nd lw

What is the government policy and legislative framework for the

electricity sector?

Since 1 October 2001, the Austrian electricity market has been fullyliberalised on the basis of the European electricity directives and reg-ulations (eg, Directive 2003/54/EC concerning common rules for theinternal market in electricity, to be repealed by Directive 2009/72/EC,and Regulation (EC) No 1228/2003 on conditions for access to thenetwork for cross border exchanges in electricity, to be repealed byRegulation (EC) No 714/2009). Until the liberalisation of the elec-tricity market in 2001, the electricity sector reflected the Austrianpost-war order. Public utilities acted on the Austrian market andprices were regulated by the state.

According to the Federal Constitution, the competence to regu-late electricity is divided between the federal state legislature and thefederal states. The federal legislature has the authority to enact regu-lations on common principles of electricity concerns. The states havethe authority to regulate electricity concerns on the basis of federallaw. Therefore, the Federal Electricity Management and Organisa-

tion Act 1998 (ElWOG), provides common principles concerning theelectricity sector, whereas the Electricity Management and Organi-sation Acts of the nine Austrian states (the state-level ElectricityActs) consist of detailed regulations on electricity (for example, theTyrolean Electricity Act 2003, as amended (TEG) or the ElectricityManagement Act 2005 of Vienna, as amended (WElWG)).

The ElWOG and the state-level Electricity Acts provide regula-tions concerning the organisation and management of the Austrianelectricity market. The main purposes of the ElWOG are: the provision of low-priced electricity in high quality to the Aus-

trian population and economy; the establishment of a market organisation in accordance with

European law; the use of the potential of power-heat coupling in order to save

energy and provide sustainable security of supply the implementation of a legal framework assuring sustainable

security of network operation and supply; the further development of electricity generation from renewable

resources; the safeguarding of network accessibility for electricity genera-

tion from renewable resources; and the imposition of public service obligations on electricity

undertakings.

Other relevant Acts providing regulations on electricity on a federallevel are: the Green Electricity Act 2002, as amended, which promotes

renewable energy; the Cogeneration Act, which promotes cogeneration plants

(combined heat and power); the Energy Directing Act 1982, as amended, providing regula-

tions on security of supply in times of crisis;

the Energy Control Act 2010 (E-ControlG), providing regula-tions on the regulatory authority (E-Control);

the Federal Act on Electricity Line Facilities 1968, providingcommon principles for construction and initial operation ofelectricity line facilities for the nine states;

the High Voltage Current Line Act 1968, as amended, regulating

electricity line facilities extending to more than one state; the Water Rights Act 1959, as amended, providing regulations

on water protection; the Federal Constitutional Act on the Ownership Structure of the

Electricity Industry 1998, regulating the ownership of specificelectricity undertakings; and

the Federal Constitutional Act for a Nuclear-Free Austria 1999,in connection with the Federal Act on the Prohibition of the Useof Nuclear Fission for the Energy Supply in Austria 1978, pro-hibiting the construction of any facility that produces electricityfor the energy supply by nuclear fission.

Until 2010, the electricity market was regulated by two regulatory

authorities on an administrative level, E-Control and the E-ControlCommission. In compliance with Directive 2009/72/EC the ElWOG2010 amended the regulatory authority system by stipulating a oneauthority system. Accordingly, as of 3 March 2011, E-Control,a public law institution, is in charge of energy market regulationon an administrative level (however, the regulatory tasks are stillfulfilled by different bodies of E-Control, ie, the responsibilities aredivided between the managing board (Vorstand) and the regulatorycommission (Regulierungskommission) of E-Control). Apart fromE-Control, the federal minister of economy, family and youth (thehighest administrative authority at federal level) and various otheradministrative authorities, such as the state governments, are com-petent in the electricity sector.

2 Ognson of he mke

What is the organisational structure for the generation, transmission,

distribution and sale of power?

Since the electricity market was liberalised in 2001, the Austrianenergy sector has changed and market economy structures havebeen implemented. Vertically integrated electricity undertakings hadto unbundle the operation of the grid, which can be considered as anatural monopoly, from the competition-oriented business areas suchas supply or generation, in terms of legal form and organisation (seequestion 13). Further substantial changes, in particular with regardto the organisational structure of energy companies, might resultfrom the release of the ElWOG 2010 which will enter into force on 3

March 2011. In compliance with Directive 2009//72/EC the ElWOGregulates that transmission system operators (TSOs) have to be eitherownership unbundled or be set up as an independent system operator(ISO) or independent transmission operator (ITO).


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The ownership unbundling entails a full separation between theoperation of gas and electricity transmission networks from gen-eration and supply activities. The network operator is required toown and control the network. However, the ownership unbundlingrequirements are fulfilled if two or more undertakings that owntransmission systems have created a joint venture acting as a TSOin two or more member states.

With the ISO system the vertically integrated utility (VIU) may

retain the ownership of their network assets, but the network is man-aged by an ISO that has to be fully separated from the VIU. TheISO may not hold any interest in a supply or generation undertak-ing (section 25 of the ElWOG). Furthermore, the ISO is obliged toexecute the network development plan, which has to be submittedto E-Control. Apart from that, the ISO model regulates that the net-work owning company has to disclose all agreements and contractsconcluded with the ISO to E-Control (section 25 paragraph 2 of theElWOG).

The ITO model preserves integrated supply and transmissioncompanies, but obliges the companies to comply with additionalrules to ensure that the two activities are operated independently (eg,separation of managing functions, cooling-off periods, establishment

of a specific supervisory body, review of network development andinvestment decisions, etc; compare sections 28 to 32 of the ElWOG).Within the ITO model the TSO must own and operate the network.The regulatory authority (E-Control) has extensive supervisory rightswith regard to the ITO and VIU.

As Austria has been one of the member states that have optedfor the third way approach to avoid implementation of ownershipunbundling, it is most likely that Austrian TSOs will choose eitherthe ISO or the ITO model (in any case, the TSO has to be certifiedby E-Control in accordance with section 34 of the ElWOG, by 2December 2010 at the latest). The new unbundling requirementshave to be fulfilled by 3 March 2012. In the case of non-compliancewith the unbundling requiremnts, network operators can be fined bythe administrative penal authority.

Transmission and distribution grids are subject to regulatoryintervention, for example, through fixed system-use tariffs set outby the regulatory authorities (see questions 11 and 15). For thecompetition-oriented business areas nevertheless, regulatory super-vision remains in place. Monitoring of compliance of supply andgeneration activities with competition rules falls within the compe-tence of E-Control. Another characteristic feature of state regulationis the fact that at least 51 per cent of the shares of certain Austrianelectricity companies, including the Austrian Electricity IndustryCorporation (Verbund-Gesellschaft), have to remain state-owned(see question 29). Verbund-Gesellschaft generates the vast majorityof electricity in Austria, followed by state or other utilities. The mainenergy sources used by Verbund-Gesellschaft are hydropower plants,which provide more than 60 per cent of Austrias energy output.Transmission system operations (380/220/110kV transmission lines)are solely performed by the TSOs: Verbund Austrian Power Grid AG (APG, a subsidiary of

Verbund-Gesellschaft); Tyrolean Grid AG (TIWAG Netz AG); and VKW Grid AG (VKW Netz AG).

Distribution systems are operated by more than 130 distributionsystem operators (DSOs) in Austria, among which are the provincialelectricity companies. The supply branch of some of the provincialelectricity companies is confederated in the Austrian Energy Alliance(Energie Allianz Austria).

Regulation of electricity utilities power generation

3 auhoson o consuc nd opee geneon fcles

What authorisations are required to construct and operate generation

facilities?

On the basis of section 12 of the ElWOG, the state-level Electric-ity Acts provide authorisation and notification requirements for theconstruction and operation of electricity generation facilities.

According to the regulations at state level, an authorisation fromthe respective Austrian state is generally required for the constructionand operation of electricity generation facilities; nevertheless, specificfacilities may be notified to the authority only (compare TEG, sec-tions 2 and 3).

Basically, the competent authorities for authorisations accord-ing to the aforementioned state-level Acts are the various state gov-ernments, and, for notifications, the district governments (compareTEG, sections 2 and 3).

Additionally, other authorisations may be required dependingon the specific facility (for example, authorisation on the basis of therespective Building Act, the Environmental Impact Assessment Actor the Water Rights Act 1959).

4 ineconnecon polces

What are the policies with respect to interconnection of generation to

the transmission grid?

According to the provisions of the ElWOG in connection with thestate-level Electricity Acts, network operators have to conclude civilcontracts for connection to their network with all individuals, legalpersons or groups of persons who off-take or supply electricity fromthe system; see also question 9.

5 alenve enegy souces

Does government policy or legislation encourage power generation

based on alternative energy sources such as renewable energies orcombined heat and power?

The long-term development of Austrian energy production andstructure shows an increase of renewable energy: 60 per cent of thegross domestic electricity consumption comes from renewable energysources. Water power, which constitutes more than 60 per cent ofrenewable energy sources used for power generation, is the mostimportant among renewable energy sources. However, the Renew-able Energy Sources (RES) Directive 2009/28/EC, sets a nationaltarget of a 34 per cent share of RES in Austria. As the current shareof RES in Austria ranges below 30 per cent (2005: 23.4 per cent and2008: about 28 per cent), Austrian energy policy shows essentialefforts to expand RES. To ensure that the national overall target

of 34 per cent is achieved, the federal minister of economy, familyand youth and the federal minister of environment released politi-cal guidelines titled Austrian Energy Strategy, published in March2010. The Austrian Energy Strategy (AES) provides the basic princi-ples of the energy policy for the upcoming 10 years. The AES calls fora rapid but sustainable expansion of energy generation from renew-able resources. Accordingly, the national renewable energy actionplan (NREAP), which, under Directive 2009/28/EC, had to be noti-fied to the European Commission by June 2010, sets out the aim ofincreasing energy generation from hydropower, wind power, biomassand solar. Moreover, the NREAP states that wind power, biomassand solar shall benefit from the green electricity promotion scheme.

Provisions concerning renewable energy can be found in theElWOG and the Green Electricity Act. In compliance with Direc-

tive 2009/72/EC, the ElWOG stipulates that, in case of grid capacityshortfalls that are linked to the necessity of dispatching generationinstallations, TSOs have to give priority to installations using renew-able energy resources (section 23 of the ElWOG). By February 2010,


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the Green Electricity Act had been amended. Inter alia, the amend-ments of the Green Electricity Act provide for a raise of the feed-intariff for energy generated by wind parks located in Austria. TheCogeneration Act contains provisions on the promotion of combinedheat and power plants. This promotion regime was formerly part ofthe Green Electricity Act.

6 Clme chnge

What impact will government policy on climate change have on the

types of resources that are used to meet electricity demand and on

the cost and amount of power that is consumed?

The most relevant measure regarding climate protection is the provi-sion concerning renewable energy in the Green Electricity Act. Theshare of energy from renewable sources (excluding water power) ingross final consumption of electricity (55.4TWh) was 8.1 per cent in2008 (7.7 per cent in 2007). Wind power had the biggest share with3.6 per cent, followed by power from biomass (3.4 per cent) andbiogas (0.9 per cent). In all, 4.5TWh have been provided throughmeasures by the Green Electricity Act. Also, 0.9TWh of small water-power plants have been purchased by the Green Electricity Settle-ment Centre.

Compared to the average market price (approx 6.4 eurocent/kWh) in 2008 the minimum price for electricity from wind powerwas 22 per cent higher (7.8 eurocent/kWh), from biomass 110 percent higher (13.6 eurocent/kWh) and from photovoltaics 840 percent higher (60 eurocent/kWh) than the market price.

In 2008 in Austria, 56.8kWh of green electricity were produced.The biggest share was water power (57 per cent of gross final con-sumption). The green electricity supported by the Green ElectricityAct amounted in 2008 to 4.5kWh (excluding water power). This is9.6 per cent of the produced electricity from renewable sources.

7 Govenmen polcy

Does government policy encourage development of new nuclear power

plants? How?

The Federal Constitutional Act for a Nuclear-Free Austria 1999, inconnection with the Federal Act on the Prohibition of the Use ofNuclear Fission for the Energy Supply in Austria 1978, provide fora general prohibition on constructing any facility that produces elec-tricity for the energy supply by nuclear fission. A change of Austrianenergy policy towards nuclear is not expected.

Regulation of electricity utilities transmission

8 auhosons o consuc nd opee nsmsson newoks

What authorisations are required to construct and operate

transmission networks?

Whereas the ElWOG regulates, in connection with the state-levelElectricity Acts, the construction and operation of electricity lineson the property of the constructor and operator of the electricityline, the Federal Act on Electricity Line Facilities in connection withthe state-level Electricity Line Facilities Act, provides regulations forthe construction and operation of electricity lines on properties ofother persons.

Generally, an authorisation or notification of the competentauthority (state government, district government) for the construc-tion and (initial) operation of electricity lines may be required.Additionally, other authorisations may be needed depending on thespecific facility.

Furthermore, in order to operate a transmission network, TSOshave to be certified by E-Control in accordance with the procedurerules as laid down in section 34 of the ElWOG. The designation of aTSO has to be notified by E-Control to the European Commission.

9 Elgbly o obn nsmsson sevces

Who is eligible to obtain transmission services and what requirements

must be met to obtain access?

Pursuant to section 15 of the ElWOG, in connection with the state-level Electricity Acts, system operators shall grant access to all partiesentitled to system access (producer and customers) to their systems.This has to be granted on the basis of approved general terms andconditions and also according to specific charges regulated byE-Control.

The conditions for system access may neither be discriminating(no abusive practices, no unjustified restrictions), nor endanger thesecurity of supply or quality of service; discriminatory behaviour,in particular behaviour which is conducted in favour of the VIU,can be fined (section 99 and 104 of the ElWOG); in specific casessystem access may be denied (compare with sections 20 and 21 ofthe ElWOG).

Access may be refused for the following reasons: extraordinary grid conditions (incidents); insufficient grid capacity; if grid access is refused for electricity supplies to a customer who

is not deemed to be an eligible customer in the grid from which

these supplies are effected, or are to be effected; and if electricity from district-heating-oriented, environment and

resource conservations as well as economically and technicallyefficient cogeneration installations, or from plants using renew-able energy, would otherwise be crowded out despite compliancewith current market prices (section 21 of the ElWOG).

The reasons for such refusal shall be communicated to the party enti-tled to grid access. If access to the system is refused by the operator,E-Control has to decide upon the request of the affected party withinone month whether the refusal of system access was justified.

10 Govenmen ncenves

Are there any government incentives to encourage expansion of thetransmission grid?

The legal framework does not provide for rate or tax benefits, butnew direct interconnectors (transmission lines that cross or spana border between member states and that connect the nationaltransmission systems of the member states) may be exempted fromthe regulated regime under the conditions of EC Regulation No.714/2009, article 17, on conditions for access to the network forcross-border exchanges in electricity. Significant increases of capacityin existing interconnectors also fall within the scope of the provision,which is directly applicable in all member states. As of 2011, TSOsare obliged to elaborate a 10-year network development plan whichhas to be submitted for approval before E-Control (section 37 of

the ElWOG). E-Control supervises the execution of the approvednetwork development plan and may require the TSOs to amend theirplans if the development activities seem to be insufficient in light ofthe development goals.

11 res nd ems fo nsmsson sevces

Who determines the rates and terms for the provision of transmission

services and what legal standard does that entity apply?

The rates for the provision of transmission services are determinedby E-Control (competent body regulatory commission) throughlegal ordinance. The ordinance is based on the network costs andquantity structure of the network operators. Both network costsand quantity structure are determined through an administra-tive decision of E-Control. Network operators have the right toappeal against this decision. The terms for the provision of trans-mission services are authorised by E-Control through individualadministrative decisions.


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12 Enes esponsble fo ssung elbly

Which entities are responsible for assuring reliability of the

transmission grid and what are their powers and responsibilities?

Generally, the Austrian transmission system is divided into three dif-ferent control areas. Each control area is operated by an independentTSO, who performs as a control area manager (however, it is likelythat the system will be changed in future and the control areas willbe operated by one control area manager). The three control areamanagers in Austria are: VKW Grid AG for the province of Vorarlberg; TIWAG Grid AG for the province of Tyrol; and Verbund Austrian Power Grid AG (APG, a subsidiary of Ver-

bund-Gesellschaft) for the area of Eastern Austria (which con-sists of the seven remaining states).

In connection with the operation of transmission systems, precau-tions have to be taken to avoid the system schedule falling apart fromthe purchased amount of energy. Balancing the difference betweensystem schedule and purchased energy is performed within virtualbalance groups by the balance group representative. Such balancegroups consist of producers, other suppliers of electricity and cus-

tomers. The balance of electricity of each balance group is clearedand settled by settlement agencies (balance group coordinators),which are responsible for the coordination of system operators andbalance groups with respect to the supply and demand of energy ina specific control area. There are two settlement agencies in Austria:Austrian Power Clearing and Settlement AG for the area of EasternAustria, and the Balance Energy and Balance Group ManagementAG (Ausgleichsenergie und Bilanzgruppen-Management AG) forTyrol and Vorarlberg.

Regulation of electricity utilities distribution

13 auhoson o consuc nd opee dsbuon newoks

What authorisations are required to construct and operate distribution

networks?

According to ElWOG, section 42, paragraph 1, the operation of adistribution system within a state requires a licence. The procedureand conditions are regulated by the legislature of the nine Austrianstates. Therefore, for example, the TEG provides the procedure, andpersonal and material conditions for the person (entity) applying fora licence in the state of Tyrol. Section 41 of the TEG regulates thatthe competent authority is the state government. A licence is onlygranted, inter alia, if nobody holds a licence in the area for which alicence is applied and the existing and planned facilities of the distri-bution system are principally suitable.

DSOs serving more than 100,000 connected customers and beingpart of a vertically integrated undertaking that is, an undertaking or

a group of undertakings whose mutual relationships are defined inEC Merger Regulation 139/2004, article 3(3), and where the under-taking or group concerned is performing at least one of the functionsof transmission or distribution and at least one of the functions ofgeneration or supply of electricity have to be independent at leastin terms of their legal form, organisation and decision-making fromother activities not relating to distribution.

Licences may also be leased (TEG, section 48); the authorisationof the state government is required for such demises. Depending onthe distribution system (facilities), various authorisations for con-struction and operation may be required (see question 8).

As of 2011, DSOs have to comply with the unbundling require-ments as set out in Directive 2009/72/EC. In particular, vertically

integrated distribution system operators are not allowed to createconfusion in respect of the separate identity of the supply branch ofthe vertically integrated undertaking, for example, by using identicalor similar branding.

14 access o he dsbuon gd

Who is eligible to obtain access to the distribution grid and what

requirements must be met to obtain access?

According to the ElWOG and the state-level Electricity Acts, DSOsshall grant customers and producers access to their system underapproved general terms and conditions as well as specified chargesfor system use, which are approved by E-Control; DSOs may notconduct any discriminatory behaviour towards network users. Dis-criminatory behaviour may incur a fine in accordance with section99 and 104 of the ElWOG; nevertheless, system access may be deniedin certain circumstances (see question 9).

15 res nd ems fo dsbuon sevces

Who determines the rates or terms for the provision of distribution

services and what legal standard does that entity apply?

The rates for the provision of distribution services are determined byE-Control through legal ordinance. The terms for the provision ofdistribution services are authorised by E-Control through individualadministrative decisions.

Regulation of electricity utilities sales of power

16 appovl o sell powe

What authorisations are required for the sale of power to customers

and which authorities grant such approvals?

According to the ElWOG, the sale of power does not require anauthorisation. However, the state-level Electricity Acts provide vari-ous regulations on electricity traders. The WElWG provides thatelectricity traders delivering power to final customers are obligedto notify the commencement of their trading activities to the stategovernment and that they have to inform the authority in their busi-ness seat.

17 Powe sles ffs

Is there any tariff or other regulation regarding power sales?

ElWOG, section 80, obliges suppliers to prepare general terms andconditions for the supply of customers, whose demand is not meteredby a load profile meter. The general terms and conditions and anyamendments are subject to approval by the regulatory authority.

The ElWOG also contains rules regarding the transparency ofthe retail price. The energy price, as a component of the electric-ity price (others are the grid tariff and taxes) has to be disclosedseparately in general terms and conditions, contracts, invoices andmaterial directed to customers (ElWOG, sections 80 and 81). Thenetwork operator is obliged to forward the consumption data to theconsumer at any time on the request of the consumer and, in case ofprior consent of the consumer, to a third party (eg, other energy sup-ply company). This service must be provided by the network opera-tor without additional charges. Furthermore, as of 2011, consumershave the right to make monthly payments. In case of breach ofcontract by the consumer, network operators are allowed to cut theconsumers network connection, provided that the network operatorhas considered the specific debt collection requirements as set out insection 82 paragraph 3 of the ElWOG.

Traders and other suppliers supplying end-consumers in Austriaare also obliged to disclose in the annual electricity invoice the sharesof all the primary energy carriers in the energy sources mix thatthe trader used in the preceding year (power labelling ElWOG,sections 78 and 79). Furthermore, consumers have the right to change

supplier at any time. Such change must be effected by the operatorwithin three weeks.


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18 res fo wholesle of powe

Who determines the rates for sales of wholesale power and what

standard does that entity apply?

There is no mandatory determination of rates for sales of wholesalepower.

19 Publc sevce oblgons

To what extent are electricity utilities that sell power subject to publicservice obligations?

On a federal level there are several obligations imposed on electricitytraders with regard to the promotion of power generation based onrenewable energy sources (see question 5). Electricity traders are,inter alia, obliged to purchase the amounts of electricity allocated tothem by the OeMAG (Green Energy Clearing Centre).

Additionally, apart from the public service obligations providedby the ElWOG (see question 1), the implementing legislation of eachstate imposes public service obligations on companies acting in theelectricity sector. The WElWG, for example, determines, inter alia,that system operators have to perform in accordance with public serv-ice regulations and must not discriminate against final customers.

Section 77 of the ElWOG and the implementing legislation of thestates contain a universal service obligation.

Traders and other suppliers who provide household customerswith electricity have to act as a supplier of last resort. The compa-nies concerned have to supply household customers and small-scaleenterprises on their request, on the basis of their relevant generalterms and conditions and a general tariff, which has to be publishedby the relevant company. The implementing legislation of the statesshall provide detailed rules on the reasonability of the universalservice. Therefore, for example, section 58 of the TEG states thatthe general tariff for supply of last resort has to be oriented at thetariff for supply of household customers of the relevant companyconcerned. As of 2011, the supplier of last resort must not requirea deposit or install a prepay meter. However, the supplier of lastresorts may terminate the contract for good cause or suspend itscontractual obligations in the case of major and constant violationsof the contract.

Regulatory authorities

20 Polcy seng

Which authorities determine regulatory policy with respect to the

electricity sector?

The regulatory authority with respect to the electricity sector is E-Control, a public law institution comprising the following bodies:managing board, regulatory commission and supervisory board. Theresponsibilities and tasks are shared between these bodies.

The federal minister of economy, family and youth is the highestauthority in electricity matters at a federal level. The federal stategovernments are responsible for the monitoring of compliance withlegal and organisational unbundling rules in the electricity sector(section 88 of the ElWOG).

21 Scope of uhoy

What is the scope of each regulators authority?

The managing board of E-Control is competent for all tasks that areassigned to the authority as far as they are not in the competence ofthe regulatory commission of E-Control. The later competencies arelisted in section 12 of the E-ControlG. The regulatory commission

of E-Control has the right to issue both individual administrativedecisions (section 12 paragraph 1 of the E-ControlG) and ordinances(section 12 paragraph 2 of the E-ControlG). The Regulatory Com-mission of E-Control is also in charge of the approval of generalterms and conditions of network operators and the determination

of tariffs for system use. Furthermore, the Commission is competentin disputes between market players and disputes involving the settle-ment of imbalances. In specific cases, the Commission is the appealsauthority for decisions of the managing board of E-Control (eg, sec-tion 48 of the ElWOG).

The supervisory and control tasks of E-Control are, inter alia, themonitoring of compliance with competition rules and the drawingup and publishing of comparisons of electricity prices. If E-Control

detects any infringements of competition rules, it may take adequatecountermeasures. Other regulatory tasks comprise, for example, pro-posals for market arrangements or technical and organisational rulesfor operators and users of networks. Additionally, E-Control hasa duty to furnish opinions concerning the market and competitionsituation in the electricity area.

The federal minister of economy, family and youth does not actas a regulatory authority. However, the minister has to right to beinformed by E-Control on all regulatory activities performed by themanaging board and regulatory commission.

The state governments act as regulatory authorities in terms ofmonitoring compliance with legal and organisational unbundlingrules.

22 Esblshmen of egulos

How is each regulator established and to what extent is it considered

to be independent of the regulated business and of governmental

officials?

E-Control is a public law institution which, in principle, is actingfully independent of the state and its governmental bodies (section5, paragraph 2, of the ElWOG). For instance, the federal minister ofeconomy, family and youth must not give instructions to E-Control(however, there are some exemptions from this general rule, see sec-tion 5 paragraph 2 of the ElWOG).

E-Control comprises three bodies: managing board, regulatorycommission and supervisory board. The managing board consists of

the managing directors who are both appointed by the federal minis-ter of economy, family and youth. The term of office of the managingdirectors is five years and is renewable once. The regulatory commis-sion of E-Control consists of five members who are appointed bythe federal government. Section 10 of the E-ControlG stipulates thatone member must be a judge. The term of office of all five membersof the regulatory commission is five years and is renewable once.The supervisory board of E-Control consists of three members whoare appointed by the federal government. The term of office is fiveyears and renewable. Apart from specific exemptions (see above),all members of E-Control must not be bound to any instructions indischarging their functions.

23 Chllenge nd ppel of decsons

To what extent can decisions of the regulator be challenged or

appealed, and to whom? What are the grounds and procedures for

appeal?

Some of the decisions of the managing board of E-Control can beappealed to the regulatory commission of E-Control. Decisions ofthe regulatory commission of E-Control may be challenged at theAdministrative Court of Justice for legal or procedural reasons (E-ControlG, section 9, paragraph 4). Infringements of constitutionalrights by decisions of the regulatory commission of E-Control mayalso be filed with the Constitutional Court of Justice.

Additionally, some decisions of the E-Control Commission inconnection with its competence to resolve disputes can be referred

to the competent court of law, which will render the decision of theE-Control Commission ineffective (compare section 12, paragraph4 of the E-ControlG) by making a new decision.


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Acquisition and merger control competition

24 responsble bodes

Which bodies have the authority to approve or block mergers or other

changes in control over businesses in the sector or acquisition ofutility assets?

Mergers, acquisition of assets or ownership interest of 25 per centor more, as well as other forms of change in control in undertakings,are subject to pre-merger notification to the Federal CompetitionAuthority (BWB), if the companies involved realised certain turnoverthresholds (see question 25 for more detail).

The notification is initially assessed by the BWB and the federalcartel attorney, who represents the public interest in competitionmatters (phase I). If the planned transaction gives rise to competi-tion concern the BWB and the federal cartel attorney (the officialparties) may request an in-depth investigation (phase II) by the CartelCourt.

The obligation to notify merger activities to the European Com-mission, if they fall under the EC Merger Regulation, remains un-affected by the Cartel Act 2005.

Additionally, E-Control, inter alia, has to ensure the regulationof the electricity sector in Austria; this includes, the supervision ofcompetition between the market players and system operators in theelectricity sector, especially regarding the equal treatment of all mar-ket players, which also comprises the monitoring of merger activitiesin the electricity sector. There is close cooperation between the BWBand E-Control with respect to this matter.

25 revew of nsfes of conol

What criteria and procedures apply with respect to the review of

mergers, acquisitions and other transfers of control? How long

does it typically take to obtain a decision approving or blocking the

transaction?

The BWB must be notified of a concentration if, in the last businessyear prior to the transaction, the undertakings concerned (for exam-ple the buyer and the target company and their respective groups ofcompanies) meet the following turnover thresholds: a combined turnover exceeding e300 million worldwide; a combined turnover exceeding e30 million in Austria; or at least two of the undertakings concerned each achieved a

worldwide turnover exceeding e5 million.

However, even if these turnover thresholds are met, the concentration

is exempt from notification if only one of the undertakings concernedachieved a turnover exceeding e5 million in Austria, whereas thecombined worldwide turnover of the other undertakings concerneddid not exceed e30 million.

After the notification of a concentration, the BWB and the Fed-eral Cartel Attorney have four weeks to assess the concentration and in the event of competition concern request an in-depth investiga-tion of the case before the Cartel Court. If the concentration does

not give rise to competition concern, the BWB will confirm to thenotifying party that no move for an in-depth investigation was madeand that the undertakings concerned may complete the transaction(clearance communication).

In case of a request, phase II takes a further five months withinwhich the concentration will be assessed in-depth by the CartelCourt. The Cartel Court will prohibit a concentration if it creates orstrengthens a dominant position. A dominant position is deemed toexist if an undertaking: is subject to marginal or no competition; has a superior market position in relation to its competitors,

taking into account its financial strength, its relations to otherundertakings and its access to suppliers and customers; or

is in such a superior position with respect to its customers or sup-pliers that such parties are dependent on their business relation-ship with the dominant undertaking as an economic necessity.

Even if a dominant position is created or strengthened, the CartelCourt may authorise the concentration if: the concentration is also likely to result in an improvement of

competitive conditions that outweighs the negative effects of themarket dominance; or

the concentration is necessary for the preservation or improve-ment of the international competitiveness of the undertakingsconcerned and is justified for reasons of national economy.

A review of merger activities at the Cartel Court does not affect thecompetencies of E-Control, which can be heard at the Cartel Court

if the reviewed merger activities affect the Austrian energy sector.E-Control can issue orders to a market player in the electricity sectorwho has failed to uphold certain stipulations. If the party in ques-tion does not meet the deadline set out in such orders, E-Controlmay render an administrative decision to restore the legal status.E-Control can also issue any orders to uphold the legal interests ofmarket players needed to restore and ensure the legal status in theelectricity sector.

26 Pevenon nd posecuon of n-compeve pcces

Which authorities have the power to prevent or prosecute anti-

competitive or manipulative practices in the electricity sector?

The Law on Unfair Competition (UWG) constitutes principles inorder to ensure fair competition in Austria. Alleged violations ofthese principles may be filed with the courts in commercial matters.

It is expected that a new Electricity Act (ElWOG 2010) will enter

into force in 2011. At the time of drafting this chapter, the ElWOG

2010 has not yet been released. However, it is most likely that the

draft provisions, which have already been considered in preparing

this chapter, will be adopted as they stand. Therefore, references

to the ElWOG in this contribution are references to the draft version

of the ElWOG 2010. The release of the ElWOG 2010 might resultin substantial changes to the organisational structure of vertically

integrated undertakings. As of 2012, TSOs have to be either

ownership unbundled or be set up as an ISO or ITO. Furthermore,

the draft of the ElWOG provides for an amendment to the regulatory

regime. The new regulatory authority (E-Control) will be set up in the

form of a public law institution acting independently of state and

governmental bodies. Moreover, the ElWOG 2010 stipulates that

network operators should be obliged to introduce smart metering

systems. This obligation still has to be defined by ordinance of the

federal minister of economy, family and youth.

In 2010, the Verbund-Gesellschaft has decided on a capital

increase representing the companys first equity transaction since its

IPO in 19. The total amount of the increase, more than f1 billion,

will allow Verbund to more rapidly realise the companys investment

plan. This will mainly focus on domestic hydropower projects and themodernisation of the transmission grid.

One of the Austrian TSOs, the Verbund Austrian Power Grid

(APG), a subsidiary of Verbund-Gesellschaft, obtained the final

decision of the Austrian Administrative High Court to go ahead with

the replacement of the existing 220kV line from Salzach to St. Peter

(Salzburgleitung 1). Salzburgleitung 1 is part of the largest grid project

for many years (Salzburg line) which is aimed at closing existing

transmission grid gaps.

Update and trends


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Schoenhe auStria

The BWB may investigate (upon a complaint of another marketparticipant or ex officio) anti-competitive practices (including abusesof market dominance). The investigative powers of the BWB includerequests for information as well as on-the-spot investigations at thecompanys premises. Furthermore, the BWB can investigate entireindustry sectors and has only recently conducted a sector enquiry(in close cooperation with E-Control) of the Austrian electricity andgas sector. After its investigation the BWB may apply to the Car-

tel Court and request the Cartel Court to establish or remedy theanti-competitive practice (including imposing fines). Furthermore,the Cartel Court can also decide on alleged anti-competitive practiceupon the request of the federal cartel attorney, the regulators (includ-ing E-Control) or companies having a legal or economic interest in adecision by the Cartel Court.

Additionally, each market player in the energy sector may filecomplaints with E-Control if disputes with other market playersarise. In such cases E-Control may try to achieve a settlement that isacceptable to both parties within six weeks. This procedure is con-ducted on a voluntarily basis only.

27 Deemnon of n-compeve conduc

What substantive standards are applied to determine whether conduct

is anti-competitive or manipulative?

The (UWG) and the Cartel Act 2005 apply to any anti-competitive (manipulative) behaviour in the Austrian market. Thevarious principles set out in those Acts determine basic principles suchas, inter alia, that no party may resort in the course of business tocompetitive practices that are contrary to public policy. There are nosector-specific criteria for the energy sector under Austrian or ECcompetition law and therefore the general provisions (in particularthe prohibition of an abuse of a dominant position) apply.

In connection with the prevention of anti-competitive conductespecially in the electricity sector, the provisions of the ElWOGgranting access to systems under special terms and conditions and

at regulated charges for system use are of special importance, asthese provisions shall prevent abuse of significant market power inthe electricity sector and are in practice a more efficient tool thanenforcement of the competition rules.

28 Pecluson nd emedy of n-compeve pcces

What authority does the regulator (or regulators) have to preclude or

remedy anti-competitive or manipulative practices?

The commercial courts may issue cease-and-desist orders or imposepayment of damages, including damages for loss of profits on a mar-ket player conducting anti-competitive practices.

The Cartel Court can issue orders to make companies refrainfrom anti-competitive conduct (especially from the abuse of a domi-nant position) and impose fines on the companies involved (up to 10per cent of the companys total annual turnover).

Notwithstanding the jurisdiction of the Cartel Court and thecommercial courts, fines may be imposed on companies performinganti-competitive practices in the energy sector (profiteering) by thedistrict governments.

International

29 acqusons by foegn compnes

Are there any special requirements or limitations on acquisitions of

interests in the electricity sector by foreign companies?

Generally, the ElWOG does not distinguish between foreign anddomestic companies in the strict sense. Therefore no special require-ments or limitations are imposed on foreign companies in the electric-ity sector. However, the ElWOG 2010 sets out a specific certificationprocedure for TSOs that are controlled by persons from third coun-tries (section 35 of the ElWOG). Therefore, it is most likely thatthe transfer of control over a TSO to persons from third countries

may require prior approval by E-Control. Furthermore, on a consti-tutional level, it is set out that at least 51 per cent of the shares ofcertain listed Austrian electricity companies, among them Verbund-Gesellschaft (see question 2), have to remain state-owned.

30 Coss-bode eleccy supply

What rules apply to cross-border electricity supply, especially

interconnection issues?

Capacity expansion and tariff classification in connection with cross-border transport of electricity are regulated by EC Regulation No.714/2009/EC. According to the ElWOG, the legislature of the ninestates provides for adequate sanctions for the infringement of the ECRegulation on cross-border electricity trading.

Additionally, under the provisions of the ElWOG, electricity sup-ply contracts involving the purchase of electric energy from thirdcountries that are producing parts of their electricity requirement inplants that are not state-of-the-art or that threaten the life or healthof persons, animals or plants are not permissible. Also, the purchaseof electric energy from third-party countries or from countries failingto furnish proof of the proper disposal of waste resulting from thegeneration of electric energy, or failing to draw up a plan for the dis-posal of waste resulting from future generation is not permissible.

Chsn Schmelz c.schmelz@schoenhe.

Bend rjl b.jl@schoenhe.

Tuchlauben 1 Tel: + 0

1010 Vienna Fax: + 100

Austria www.schoenherr.eu


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10 Geng he Del though Eleccy regulon 2011

Transactions between affiliates

31 rescons

What restrictions exist on transactions between electricity utilities and

their affiliates?

Under the provisions of the ElWOG, integrated electricity compa-nies have to ensure that their activities as operators of transmissionsystems are independent of those as producers and distributors (see

question 2). Additionally, integrated electricity companies have tokeep separate accounts, within separate accounting systems, fortheir activities in generation and trade, transmission and distribu-tion of electricity. Generally, the ElWOG obliges network operatorsto refrain from granting cross subsidies.

Transactions with a performance, consideration or other eco-nomic advantage exceeding the value off1 million with affiliatedcompanies according to section 7 paragraph 1 subparagraph 72 haveto be listed separately in notes to the annual accounts.

32 Enfocemen nd sncons

Who enforces the restrictions on utilities dealing with affiliates and

what are the sanctions for non-compliance?

If a company fails to comply with its obligation of listing transac-tions in notes to the annual accounts as described above, the respec-tive district government may impose a fine of up to e50,000 on therespective company.


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