Germany: Taking the Lead in Electricity and Gas

Fortnightly Magazine - January 15 2000
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Once trailing, but now the frontrunner, Germany attempts to remake its fragmented energy markets - with no new federal bureaucracy.

Here's a timely recommendation for U.S. electric power executives: Maybe it's time to brush up on those long-forgotten high school German lessons. Suddenly, the German electric power market has become the fastest changing in the world. It all happened in less than the two years passed since Germany enacted a new energy law, which became fully effective on April 28, 1998.

At the time the law was introduced, Germany's electric consumers were paying among the highest electric rates in Europe. Figures from the U.S. Energy Information Administration show that for 1997, when the law was debated, the average German residential customer was paying 16.1 cents per kilowatt-hour. Compare that with 13.4 cents paid by their French neighbors and 8.5 cents per kilowatt-hour prevailing in the United States. The new law removed exclusive franchises for electricity and gas, and opened the retail market for both energy forms to competition. The German law was passed to comply with directives for energy liberalization that will apply to all 15 members of the European Union over the next few years.

This introduction of competition in electricity and gas supply in Germany is referred to as "liberalization." Liberalization, also known in Europe as "third-party access," or TPA, is similar to the concept of "retail access" in the United States.

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