For a long time, it was common practice to supply several customers in locally limited areas - such as shopping malls or airports - with electrical energy via one feed and tapping point (i.e. 1 metering point). However, these so-called property or area grids are in immanent conflict withthe rules of energy market liberalisation (which has basically already been covered by an ECJ decision of 22 May 2008, C-439/06 - citiworks,
ECLI:EU:C:2008:298). The Austrian Administrative Court has now confirmed (ruling Ro 2018/04/0016 of 04 April 2022) that there is no right to grid connection for such constructions.
1. The specific case
The appellant converted a former brewery in Carinthia into a multi-family residential building with 20 residential units. These were to be rented out. The building permit was granted in 2016. In November 2017, an application was filed with the competent Carinthian provincial government seeking a decision that there was a general obligation pursuant to Sec. 45 of the Carinthian Act on the Electricity Sector and Organisation (K-ElWOG) to connect theentire residential building.
In its notice of 27 March 2018, the Carinthian provincial government determined that the distribution grid operator was not under a general obligation to connect the appellant's system. The appeal filed by the appellant against this decision was dismissed as unfounded by the Carinthian Provincial Administrative Court in its ruling of 28 June 2018 and an appeal against the appellate ruling was declared permissible.
The Supreme Administrative Court also considered the permissibility ruling to be justified, especially since the question of (i) whether the central purchase of energy at a consumption site wouldexclude a grid user fromthe status of an end user had not yet beenclarified. There was also a lack of case law on the following questions: (ii) in which form would the transfer of electrical energy to third parties be permissible and in which constellation were the connection rights of the licensed grid operator encroached upon. Finally, the issue as to (iii) whether the competence of the provincial governments todecide on the existence of an obligation to connect complied with EU law had not been clarified.
2. End users and transitional provisions
The general obligation to connect under Sec. 45 K-ElWOG only applies to end users and producers, in line with the basic provision set forth in Sec. 46 par. 1 of the Austrian Federal ElWOG 2010. End users are legally defined as natural persons or legal entities or partnerships purchasing electricity for their own use (Sec. 3 par. 1 sub-par. 12 K-ElWOG).
The appellant considered himself to be an end user because distribution at cost at a consumption site (the 20 residential units in the case on hand) had always been permitted. This would also apply if the activity started after the deadline specified in the transitional provision set forth in Sec. 68 sub-par. 2 ElWOG 1998 because that provision would only have referred to end consumers distributing energy at the consumption site with the intention of making a profit. Sec. 74 par. 1 second sentence of the K-ElWOG would also stipulate that undertakings which distributed electricity on business premises as at 19 February 1999 were deemed to be end users even if the conditions of the legal definition were not met in their entirety.
The Administrative Court rejected this view. On the one hand, the electricity consumption of an area supplier - e.g. a real estate owner supplying tenants with electricity via his own lines - is not considered own consumption as regards the energy purchased by the tenants, so that he is not an end user to that extent (cf. already Supreme Administrative Court ruling of 01 October 2018, Ro 2016/04/0046 [Th.Rabl/Ortner]). On the other hand, the transitional provisions referred to (Sec. 74 par. 1 K-ElWOG, Sec. 68 sub-par. 2 ElWOG 1998) are not aiming at the intention to generate profit. Thus, it is not relevant for the (former) consumption site provision whether or not the electricity is passed on at cost.
3. Impermissible aggregation of metering points
Following on from the (lack of) end consumer status, the Supreme Administrative Court clarified that the metering point had to be set up at the point where the electricity was taken from or fed into the grid, i.e. directly on the end consumer's premises (specifically,the 20 residential units). The aggregation of several metering points was not permitted (this is also expressly stated in Sec. 3 par. 1 sub-par. 83 K-ElWOG).
4. Grid connection, grid access and the competence of the provincial government
For the first time, the Supreme Administrative Court also dealt with the competence of the provincial government as regards decisions on the existence of the obligation to connect. The court clarified that the terms "access" and "connection" have different meanings (see also ECJ decision of 09 October 2008, C-239/07 - Sabatauskas, ECLI:EU:C:2008:551). While "access to the grid" would include the right to use the electricity grids, the term "connection" would be used in a more technical context and concerned the physical connection to the grid. The Internal Market Directives only govern theobligations of the Member States with regard to access, but not with regard to connection. Therefore, issues of connection do not fall within the mandatory competence of the national regulatory authorities. Against this background, the assessment of the Provincial Administrative Court, which affirmed the competence of the provincial government in the case on hand, was also unobjectionable.
5. Tricky regulatory issues regarding the supply of third parties
In its ruling the Supreme Administrative Court remained silent about the form and constellations in which the transfer of electrical energy to third parties could (still) be permissible by way of exception. However, and this probably does not come as a surprise, the court stated that the (former) consumption site provision would not apply to "new" multi-party residential buildings. In any case, property or area grid are continuing towards their end of life; it remains exciting to see which regulatory options may still be open in individual cases.
If you have any questions about this and other issues of energy law, the KWR Energy Team is always available to assist you.