Imagine you're the principal energy buyer for a national chain of managed health care centers, with a $200-million annual energy tab. Top management asks you to assess how the chain can cut its...
Germany: Taking the Lead in Electricity and Gas
German electricity market and lack of a national regulatory agency.
These two conditions - lack of a central power market and the existence of a unique regulatory structure created by a single agreement implemented by private parties - are the main variables in any evaluation of the German market. While neither is an impediment to investment in Germany or sales into the German market, the unwieldy nature of such arrangements may find the major German electric companies demanding more transparent and responsive regulation and market structures. Clearly the other EU members that are subject to the liberalization directives and that have responded much more timidly to the new requirements will watch the German experience. Lower rates to Germany's residential consumers cannot fail to be noticed by consumers and politicians in other European Union member states. Concurrently, Germany's industry should be even more competitive with the newly lowered energy costs, putting industrial pressure on policymakers in higher priced markets.
As U.S. policymakers hesitate to install national legislation to preempt state-by-state liberalization of the U.S. electric and gas sectors, a successful German example may add to arguments for national legislation and policies. The entire European experience with an international agreement calling for "open access" in electricity and gas markets provides valuable new information for the lagging U.S. energy market.
Branko Terzic is director of public utility services at Deloitte & Touche LLP in McLean, Va. The former chairman and CEO of Yankee Energy System Inc. has served as a commissioner at the Federal Energy Regulatory Commission and Wisconsin Public Service Commission. Terzic can be reached at email@example.com.Berthold Wurm is senior manager and Yorck Dietrich is manager at the Dusseldorf, Germany, office of Deloitte Consulting. Contact Wurm at Bwurm@deloitte-consulting.de, and Dietrich at YDietrich@deloitte-consulting.de.
[Sidebar by B. W. Radford]
Germany's Bold Leap -
A quick take on the law of April 1998.
* Exceeds standards of European Union for electric open access.
* Restructures German gas market ahead of any EU gas directive.
* Protects German companies against non-reciprocal foreign competition.
* Abolishes area franchises for retailing.
* No phase-in by customer class or size.
* No forced divestiture of transmission assets.
Transmission Access & Pricing:
* No mandated federal standard on electric open access.
* No mandated institutional spot market for electricity.
* Players negotiate open access on bilateral basis.
* Fixed zonal transmission tariffs.
* No new federal regulatory bureaucracy.
* Special protection for combined heat and power, and lignite from former East Germany.
* Distribution utilities must buy renewable energy at producer cost.
* Many nuclear questions still left open. - B.W.R.
Articles found on this page are available to Internet subscribers only. For more information about obtaining a username and password, please call our Customer Service Department at 1-800-368-5001.