Today saw two landmark decisions for the energy industry. The European Court of Justice dealt with the exemption of customer installations from grid charges, while the Federal Constitutional Court had to decide on the constitutionality of the electricity price cap and the associated levy on surplus revenue. Both judgements will have a significant impact on the regulatory and economic framework conditions in the sector.
CJEU on grid fee exemption in customer systems and for direct renewable energy connections
The CJEU ruled on the exemption from grid fees in customer installations (Section 3 24 a/b Energy Industry Act (EnWG) under European law) and in the case of direct renewable energy connections (judgement on the order for reference of the Federal Court of Justice (EnVR 83/20)). The judgement examines whether the exemption from grid fees in Germany is compatible with European law, in particular in the case of the supply of consumers in customer installations by third parties from renewable energy installations. The decision also concerns the exemption from grid fees for electricity supplies from ground-mounted PV systems and wind farms connected to customer systems via direct lines.
As a result (CJEU judgement), the BGH’s previous criteria for determining a customer installation in a specific case were classified as contrary to EU law. The CJEU has not ruled on whether the exemption for customer installations is contrary to EU law. Only after a detailed analysis of the reasons for the decision can a statement be made on how far this has a general effect, possibly going as far as the inapplicability of the national provision.
Federal Constitutional Court on the electricity price brake
The Federal Constitutional Court had to examine the surplus revenue levy in accordance with Sections 13 et seq. of the Electricity Price Restraint Act (StromPBG) under constitutional law.
The aim of the StromPBG was to relieve the burden on citizens and companies by providing a basic electricity quota at fixed prices until 30 April 2024. It was financed by skimming off so-called “surplus revenues” from electricity producers - from renewable energies and lignite - via a levy mechanism.
These “excess revenues” resulted from the “merit order system”, in which the most expensive power plant determines the electricity price. During the “gas crisis”, this benefited producers with low production costs, such as operators of renewable energy plants. From December 2022, the EU stipulated that surplus revenue from certain plants be skimmed off, except for small plants (under 1 MW) and biomethane plants. This revenue was intended to (partially) finance the electricity price brake.
26 companies, including 22 operators of renewable energy plants, had lodged a constitutional complaint with the Federal Constitutional Court against the skimming of the “excess proceeds”.
Today, the judgement was handed down in the case referred to as “Skimming of surplus revenues under the Electricity Price Brake Act”. The International Centre for the Settlement of Investment Disputes (ICSID) had already ruled against the Federal Republic of Germany - represented by the EU - and granted the plaintiff interim relief against the enforcement of the absorption of (alleged) surplus revenues. The point of dispute was the investment protection stipulated in the Energy Charter Treaty (ECT).
In contrast to this, the BVerfG today dismissed the actions of the 26 companies and thus approved the skimming of random profits by electricity producers. Although the skimming of excess profits interferes with the constitutionally protected freedom of enterprise, the interventions are formally and substantively constitutional. The skimming of profits was neither a tax nor a non-tax levy. The fact that the federal government invoked its legislative competence for energy industry law was therefore sufficient. Furthermore, there was no need for tax legislation competence.
