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Competition in European Electricity Markets

Competition in European Electricity Markets

A Cross-country Comparison

Edited by Jean-Michael Glachant and Dominique Finon

This book focuses on the diversity of electricity reforms in Western Europe, drawing evidence from ten European Union memberstates plus Norway and Switzerland as associate members. The contributors analyse the various ways of introducing competition in the European electricity industries, and consider both the strategies of electricity companies and their behaviour in electricity marketplaces. They also offer an explanation of the differences of reforms by the institutions and the industrial structures of each country which shape the types of marketrules, industrial restructuring and public service regulations which have been adopted.

Chapter 8: New Corporate Strategies in the German Electricity Supply Industry

Lutz Mez

Subjects: economics and finance, competition policy, energy economics, industrial organisation


Lutz Mez At the end of the twentieth century, the German electricity supply industry was faced with a serious challenge, caused by fundamental changes in the sector’s framework conditions. Global issues such as deregulation, energy and/or CO2 taxes, privatization and competition have forced the sector to alter its strategy. The immediate cause was the European Internal Electricity Market (IEM) directive 96/92/EG of February 1997, as a consequence of which the Act Reorganizing Energy Business Law came into force in Germany on 29 April 1998, making competition possible at all stages of the energy sector’s value creation chain. As the stable monopoly has been removed, the sector is facing new kinds of risk. The electricity supply sector in Germany has, for decades, been an economic and political cartel, which effectively obstructed attempts to change the direction of energy policy at all levels of decision-making. It is considered to be the most influential group of companies, a ‘state within a state’. German electricity regulation traditionally consisted of a mix of public and private law. The Energiewirtschaftsgesetz, adopted in December 1935 and laying down the framework conditions for cheap and secure electricity supply, defined German state control of the sector for more than 60 years. The other important piece of public legislation for the sector was the Monopolies Act, which exempted electricity supply. There have been numerous attempts at reforming the electricity supply industry, but both bottom-up and top-down approaches failed. Huge profits, the state’s complete failure to check...

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