The sharp increase in electricity prices is putting energy production and wholesale trading in the focus of competition authorities.

According to the Monopolies Commission, there is a growing danger that large providers could abuse their market power to further increase prices.

The main focus is on the energy giant RWE.

Last week, the Federal Cartel Office had already warned that the Essen-based supplier had attained a "dominant position".

Helmut Buender

Business correspondent in Düsseldorf.

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In the period under review from October 2020 to the end of September 2021, RWE accounted for around a quarter of electricity production.

However, what is decisive for the competition law assessment is that the RWE power plants were indispensable for many hours in order to secure the demand for electricity.

The Cartel Office warns that the market position of the Essen-based energy company will continue to strengthen as a result of the phase-out of coal and nuclear power.

The authority does not see any initial suspicion of misuse, for example through the withholding of power plant output.

RWE is now subject to stricter behavioral controls when controlling its power plants.

examination necessary

That's not enough for the Monopolies Commission, which advises the federal government on competition issues.

She recommends taking a closer look at the market and the behavior of RWE.

"The risk of abuse of market power in wholesale electricity trading is increasing," says a brief analysis.

The chairman of the commission, Jürgen Kühling, therefore considers it sensible to carry out a more detailed examination "whether there are any indications that antitrust investigations should be initiated".

To this end, the Cartel Office should first examine the situation in winter 2021/22.

In addition, the Monopolies Commission demands that the suppliers promptly provide additional data on the operational planning of their power plants and the electricity feed-in.

The Ministry of Economic Affairs is to examine a legal regulation proposal for this.

RWE, on the other hand, is already questioning the cartel office's market power investigation.

The group has not built any new conventional capacities, but will reduce them by around 7,000 gigawatts from 2020 to 2022 alone, said a spokesman.

In addition, the company refers to special effects such as the weather-related decline in renewable electricity generation with a simultaneous increase in electricity demand.

Smaller providers against the corporations

In addition, it accuses the Cartel Office of methodological flaws because it does not adequately take into account the competitive pressure from electricity imports.

Sharp criticism came from the green electricity provider Naturstrom.

The company, together with ten municipal energy suppliers, is suing against the deal agreed in 2018 between RWE and Eon, in which the two groups had divided Innogy's activities among themselves.

"RWE's market dominance is becoming a disadvantage for consumers," said Naturstrom CEO Thomas Banning.

According to the Monopolies Commission, the sale of electricity to private end customers, which is currently dominating the political discussion after the bankruptcy of some discounters, only plays a secondary role in the current price explosion.

There is no evidence of market abuse there, and the profit margins of local suppliers even fell in December 2021.

There is lively competition for consumers, on average they can choose between 162 electricity and 133 gas suppliers in their network area.

Politicians are focusing precisely on that market level "which is responsible for the smallest share of the end customer price".

The Monopolies Commission considers the steps discussed in politics to improve consumer protection to be the wrong approach.

One of the things under discussion is compulsory insurance for energy suppliers.

In the event of termination or insolvency, this insurance should cover the additional costs that arise from the return to basic care.

Alternatively, there are considerations to require suppliers to conclude long-term contracts for the purchase of their energy.

The Monopolies Commission considers such direct interventions in business models to be wrong because they would cause “further price increases throughout the industry”.

Instead, she recommends expanding the information obligations of suppliers.

An example is contracts that require upfront payments: in this case, “warning notices” could be prominently included in the product description.

Contractually agreed, particularly short periods of notice would also have to be highlighted separately.