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German gas markets allows early termination of E.ON commitment

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Staff Writer | July 27, 2016
The European Commission has released German energy firm E.ON from commitments to reduce long-term bookings on the German gas grid almost five years ahead of schedule.
Power in Europe   Almost five years ahead of schedule
This is because, thanks to the successful implementation of the commitments, competition on the market has increased significantly.

Access to gas pipelines is vital for new market entrants. Insufficient access limits the ability of suppliers to acquire customers, no matter how competitive their offers might be.

E.ON used to book on a long-term basis the significant majority of the available transport capacity at entry points into its own gas transmission networks.

The Commission had concerns that these long term bookings may have prevented other gas suppliers from accessing the German gas market and competing with E.ON.

In May 2010, the Commission accepted commitments from E.ON to release large volumes of gas pipeline capacity and to further reduce its bookings of long term entry capacity in the NetConnect Germany grid. The commitments were originally due to last until April 2021.

Following the Commission's decision, E.ON has actually booked significantly less capacity than the threshold of 54% of total capacity set out in the commitments.

As a result of this, competitors have been able to enter the market and gain significant market shares. In addition, large amounts of transport capacity are now available so that competitors will continue to have access to the capacity they need to operate on the market.

Moreover, the gas market has evolved insofar as market participants, including E.ON, now generally prefer short-term bookings, to be able to respond flexibly to changing market demand and market shares.

At E.ON's request, the Commission re-assessed the market situation and concluded that, due to this material change in the structure of German gas market, the commitments were no longer necessary to ensure sufficient gas transport capacity for E.ON's competitors.