KPMG Law Weekly Update on Energy Market Developments as a Result of the Ukraine War (Week 35)

New laws and regulations

EnSikuMaV

On August 24, 2022, the German federal government passed the “Ordinance to Secure Energy Supply via Measures Effective at Short Notice” (“Short-Term Energy Supply Security Measures Ordinance” – EnSikuMaV). It will enter into force as early as 01.09.2022 and thus, in accordance with its title, will develop legal obligations almost immediately. The regulation orders short-term energy-saving measures in various areas and for various addressees in the everyday life, business and operations of the stakeholders concerned. It is valid for a limited period of time for the coming heating period and accordingly comes into force in accordance with the provisions of the German Commercial Code (HGB). § 13 EnSikuMaV expires on 28.02.2023.

The regulations of the ordinance largely concern the regulation of electricity consumption in buildings in general and oblige the public sector, companies of all kinds and also private households as owners, proprietors or operators of the buildings to take energy-saving measures. For example, temporary maximum air temperature values apply in workrooms or workplaces. Exterior lighting of buildings that is not necessary for safety is prohibited, as is the operation of illuminated advertising between 10 p.m. and 4 p.m. the following day. These general obligations for companies of all kinds naturally also affect companies in the energy industry, but will not be discussed in depth here due to the lack of specific reference to the latter.

Of specific importance for the energy industry, on the other hand, is § 9 para. 1 EnSikuMaV. This statutes special information obligations for pipeline-bound gas and heat suppliers of residential property owners (residential buildings or apartments): The latter must be informed by suppliers about

• Energy consumption and costs of the supplied buildings/residential units in the last billing period
• The expected energy consumption and the corresponding costs of the supplied buildings/residential units based on the consumption values of the last billing period on the basis of the basic supply tariff applicable on 01.09.2022
• The calculated savings potential of a building/dwelling unit in terms of energy consumption (in KWh) and costs (in euros) if the average room temperature is reduced across the board; calculation assumption: (-1 C° room temperature) = (-6 % energy consumption and costs)

With regard to the latter point, it should be noted that the flat rate of 6% is intended for simplification and illustration. The legislator explicitly emphasizes: “In contrast, the actual savings potential depends on the energy quality of the building in each individual case and may therefore vary.” The information regarding the savings potentials should, however, be written with caution and care in order to avoid a possible guarantee-like obligation to accept responsibility for the accuracy of this general calculation. Here, the fulfillment of the legal obligation from § 9 para. 1 EnSikuMaV is emphasized and a legally binding intention is expressly denied.

Practically virulent at the duty according to § 9 para. 1 S. 1 EnSikuMaV is that the said information of the residential owners must be made by 30.09.2022. § 9 para. 1 p. 2 EnSikuMaV allows the supplier to initially merely abstract consumption and cost notifications based on the typical consumptions and costs of buildings or households of comparable size to the customers concerned, but only if the information listed above is provided by the aforementioned date. cannot be provided. According to the explanatory memorandum (p. 25), an average consumption of 165 KWh per^{m2 and} year is to be assumed for such abstract information. In this case, the supplier must provide the relevant customers with individualized information by December 31, 2022 . Neither the text of the regulation nor the explanatory memorandum provide any guidance on the question of when end-customer-specific information is “not possible”.

Irrespective of this, the following applies: If the basic supply tariff increases significantly compared to 01.09.2022 (entry into force of the ordinance), a new, updated information with the above-mentioned contents must be provided within one month of the increase. Neither the text nor the explanatory memorandum of the regulation explain when an increase is significant, but in this respect merely use the similarly contourless term of a “significant” increase.

The expected effort required by the energy industry to comply with the information obligations pursuant to Section 9 (2) of the German Energy Act shall be borne by the company. 1 EnSikuMaV is forecast by the legislator at around €161 million (see details on p. 15 of the explanatory memorandum to the ordinance).

EnSimiMaV

In parallel to the EnSikuMaV, the German government has issued the “Ordinance to Secure Energy Supply via Measures Effective in the Medium Term” (“Mittelfristenergieversorgungssicherungsmaßnahmenverordnung” – EnSimiMaV). This makes regulations for energy saving over a period of 2 years, which come into force on 01.10.2022 and expire on 30.09.2024. It obliges the owners of all types of buildings to take further energy-saving measures and contains supplementary specifications for the obligation to conduct energy audits under the EDL-G. However, the EnSimiMaV does not contain any special regulations with reference to the activities of energy management companies, so that no further explanations of the regulation are appropriate in this paper.

Judicial decisions

Düsseldorf Regional Court – Decision dated August 26, 2022, Ref. 12 O 247/22:
Price guarantees rule out price increase due to rise in procurement costs

In a decision dated August 26, 2022, the Regional Court granted an application by the consumer association for an injunction against the company ExtraEnergie. With this injunction, the Düsseldorf Regional Court prohibited ExtraEnergie from increasing supply prices in contravention of price guarantees contractually agreed with customers. ExtraEnergie had announced increases in electricity and gas tariffs to several customers, citing the additional costs it had incurred as a result of recent developments in the energy market, particularly gas surcharges.

ExtraEnergie based the planned price increase in particular on § 313 BGB: Due to the effects of Russia’s war against Ukraine on the energy industry, the (so-called major) basis of the business had changed severely, so that it would be unreasonable for ExtraEnergie to adhere to the price guarantee and it could therefore demand an adjustment of the contract in the form of the price increases.

The Düsseldorf Regional Court rejected this argument. The specific opinion of the court is still unclear because the preliminary injunction, which was issued without an oral hearing, was issued without reasons for the decision. ExtraEnergie has the right to appeal against the preliminary injunction. When it is filed, the consumer association’s emergency motion will be heard again orally. It must also be taken into account that in summary proceedings the court examines the issue only summarily. A judicial clarification on the merits may therefore still take place.

Official or other sovereign activities

Management Report Gas Supply (as at 26.08.2022)

The BNetzA’s situation report on the gas supply situation in Germany as of 26.08.22 (1 p.m.) reveals the following: According to the report, the nationwide gas supply remains stable but tense. Further deterioration could not be ruled out, he said. Security of supply is currently guaranteed. A further deterioration of the situation cannot be ruled out. Gas flows from the Nord Stream 1 pipeline remain at 20% of maximum capacity. It continues to be stored. The total storage level in Germany is 83.26%. The level of the Rehden reservoir is 66.22 %. Accordingly, the memory levels increase almost proportionally.

Wholesale prices have recently risen sharply and are currently between around 270 euros and 315 euros/MWh. Companies and private consumers would have to reckon with significantly rising gas prices. Daily gas imports to Germany had temporarily dropped to 3,000 GWh/day in week 34, the lowest level since mid-July. Since then, there has been a slight upward trend in these figures.

In accordance with the new Gas Storage Ordinance of July 29, 2022, the mandatory fill levels have been raised again. By October 01, 2022, the storage facilities must be 85% full, by November 01, 95% full, and on February 01, still 40% full. The first interim target for September 01 of 75% was achieved. According to the German government, the filling of the gas storage facilities is proceeding more successfully than previously expected. The BMWK therefore assumes that the October storage target (see above) can be reached as early as the beginning of September. In this respect, the BMWK considers Germany to be on track with regard to the plan to release gas into the market in winter along the statutory withdrawal path and to reduce the storage level in this again to 40% by February 2023.

Political developments

Gas procurement levy

Federal Economics Minister Habeck recently defended the controversial gas procurement levy in principle in an interview with Deutschlandfunk ahead of the cabinet meeting of the German government in Meseberg. At the same time, it specified the changes that are intended to prevent the much-criticized windfall profits from companies that are not in need. According to the current, broad version of Section 2 GasPrAnpV, companies that import gas to Germany and are also affected by the reduction in import volumes, but have not suffered a significant economic burden as a result, can also claim financial compensation from the market area manager. As a prominent example, the Austrian utility OMV had filed claims for compensation payments, even though the latter had made billions in profits away from the restricted gas supply to Germany. According to the BMWK’s current forecast, around 5-8% of the total compensation payments to be distributed would benefit non-needy companies.

According to Habeck, this grievance should essentially be remedied by the insertion of additional requirements for the claim pursuant to § 2 GasPrAnpV can be remedied:

• The claimant company must be “relevant” to security of supply in Germany .
• Gas imports to Germany must be the main focus of the claimant company’s business activities. This would be lacking if the company made large profits in other areas or sold (imported) Russian gas elsewhere.
• A state-supported company may not pay dividends or bonuses.
• Transparency requirements are to be created to verify the aforementioned criteria. In the interview, Habeck only superficially explained the concrete content of these. In essence, the claimant companies are to be required to disclose group structures. This requirement also served to deter “free riders” so that they would refrain from applying for compensation.

Gas supply situation

On August 19, 2022, the Russian state-owned corporation Gazprom announced the following for the period from August 31. again announced maintenance work until 02.09.2022, during which gas supplies will be interrupted. According to Gazprom, the only working turbine at the Portovaya compressor station needs to be checked and overhauled. This is to be done in cooperation with specialists from Siemens Energy, which Siemens did not comment on in response to media inquiries. After that, a return to the current supply volumes of 33 million cubic meters per day is planned, he said.

The Association of Municipal Companies (VKU) also sees a general possibility in the current situation that regional shortages will occur in some areas if gas supplies from Russia remain low for a long time. There had already been a massive shortage of futures supply in OTC trading.