Electricity law and regulation in Austria

The main legal source for Austrian energy policy is the Federal Electricity Management and Organisation Act 2010 (Electricity Act 2010) (Elektrizitätswirtschafts- und organisationsgesetz 2010). This aims to provide regulations for an equal, fair, consumer friendly and transparent energy market. Therefore it regulates, among other things, the rights and duties of the market participants and especially their obligations to the consumers. Article 4 of the Electricity Act 2010 sets out the goals of the law which include: (i) to provide to the Austrian population high quality electricity at competitive prices, (ii) the development of renewable energy sources and (iii) to provide a general framework in order to develop and secure the electricity supply.

From 1 October 2001 the Austrian electricity market was fully liberalised in accordance with the Third Energy Package requirements transposed into Austrian law under the Electricity Act 2010. Austria has chosen the model of Independent System Operators (ISO) and Independent Transmission Operators (ITO)for unbundling of its Transmission System Operator (TSO).

The Austrian Energy Strategy (Energiestrategie Österreich) provides the national basis for implementation of the objectives agreed at international and EU level to ensure the secure, economic and socially compatible availability of energy sources and a sustainable energy supply.

Following the liberalisation of the market, customers may choose their energy supplier freely from a number of suppliers (see paragraph 1.3 below). The market is divided into generators, TSOs, Distribution System Operators (DSOs) and suppliers. Net electricity consumption in Austria totalled around 69.258TWh in 2012, an increase of 1% in comparison to 2011.

Austria has implemented the “balance group model”, a virtual group of suppliers and customers within which electrical energy procured and supplied is balanced. Electricity suppliers or traders may decide whether to join an existing balance group or to start with their own. However, each market participant is obliged to be a member of a balance group. Balance groups compensate for supply and demand fluctuations.

The key players in the Austrian electricity market are Verbund AG and EVN. Despite liberalisation of the market in accordance with the Third Energy Package requirements, Verbund AG and EVN are both active in the transmission, generation, distribution and supply sectors of electricity. The Republic of Austria owns 51% of Verbund’s share capital. The federal province Lower Austria (Niederösterreich) holds (through a holding company) 51% of the share capital of EVN. The main Austrian TSO is Austrian Power Grid AG owning 94% of the Austrian high voltage electricity grid. The high voltage electricity grid of APG (i.e. 380kV, 220kV and 110kV) has a length of approximately 6,700km. Verbund AG holds 100% of the shares in Austrian Power Grid AG.

Although the majority of the Austrian electricity sector is privately owned, most of the energy companies hold direct or indirect interests in other market participants. For example, EVN owns 100% of EVN Kraftwerks und Beteiligungsgesellschaft GmbH in the generation sector, and through its 100% ownership in EVN Energievertrieb GmbH & Co KG and EVN Netz GmbH, EVN is also active in the distribution and supply market.

To date, there are more than 130 electricity suppliers in Austria. Some offer their products across Austria, others only at a local level. On average, an Austrian electricity customer can choose from ten different suppliers. The following companies are the dominant players in the supply market: Verbund, Wien Energie, KELAG, Salzburg Netz, Linz Strom and EVN. However, the close cooperation between Wien Energie, EVN and BEWAG through the Austrian Energy Alliance (Energie Allianz Austria) had already increased market concentration at the outset of Austria’s market liberalisation.

Planned investments

In the electricity sector EUR 4b of investment in 6,441MW of generating capacity is planned for the period up to 2016. No major closures of generating stations are scheduled up to 2016. On the other hand, according to E-Control, which is the Austrian regulation authority responsible for drawing up and enforcing energy related laws, a further 1,300MW of wind and biomass capacity is likely to be built. If these projects are implemented, Austria will have a total of 26,810MW of generating capacity in place by 2016, compared to a peak demand of about 12,200MW according to 2012 figures. 1 E-Control, Security of Supply (accessed 23 August 2013)
www.e-control.at/de/econtrol_en/topics/security-of-supply           

Smart grids

Since about 2005 there has been ongoing adaptation of the Austrian electricity grid system to smart technologies, with a view to the better integration of renewable energy sources and optimal use of smart metering. Regarding smart grids, the Austrian Energy Strategy states that from 2014 new incentives for innovation and a cost acknowledgment should be laid down. These measures should foster research and development activities for new grid infrastructure.

Structure of generation sector

Verbund AG generates the vast majority of electricity in Austria, followed by state, province or privately owned companies; more than four fifths of Verbund’s electricity comes from hydropower, supplemented by thermal power and wind power.

The national electricity laws (Landeselektrizitätsgesetze) provide authorisation and notification requirements for the construction and operation of electricity generation facilities. According to the regulations at state level, an authorisation from the respective Austrian province where the generating station will be located is generally required for the construction and operation of the generation facilities. Nevertheless, specific facilities are exempted from the authorisation required and, in respect of these facilities, the authority requires notification only. Such specific facilities may not exceed certain pollution thresholds with regard to noise and air pollution and electricity consumption as laid down in the Austrian Trade Law (Gewerberecht).

Energy mix

Austria’s generation mix is dominated by hydroelectricity and other renewables, mainly biomass. About 57.4% is generated from these sources. Austria remains an importer of energy, in particular fossil fuels, with most of its remaining energy requirements (17.6%) covered by imports of crude oil from Asian and African countries, natural gas from Russia and solid fuels from neighbouring EU member states. Austria has a policy set out in its Federal Law of 15 December 1978 and in the constitutional law of 13 August 1999 on a nuclear-free Austria (Bundesverfassungsgesetz Atomfreies Österreich) regarding the prohibition of generation of Nuclear Energy for electrical power supply in Austria. Nevertheless, nuclear energy importation into Austria from foreign generators is permitted. The share of nuclear energy in Austria amounts to approximately 5% and major Austrian electricity providers have explicitly excluded reselling nuclear energy.

Structure of transmission sector

There are three TSOs in Austria – Austrian Power Grid AG (APG), TIWAG-Netz AG and VKW-Netz AG. APG is the main Austrian electricity TSO. It owns and operates approximately 94% of the Austrian high-voltage (i.e. 380kV, 220kV and 110kV) electricity grid (6,454km). The TSOs are generally responsible for operating, maintenance and, if necessary, development of the transmission system and hence, are their own control area managers. Austrian law however, allows for co-operation between the TSOs regarding the operation of the control areas. Since 2011, APG has taken over the control area from Tyrolean TIWAG Netz AG and since 2012, APG has been running the Vorarlberg control area under a cooperation agreement with VKW-Netz AG. Therefore since 2012, APG is the only Austrian-wide control area manager. APG’s main obligation as control area manager includes in particular the responsibility for interconnectors with other systems, in order to ensure the long-term ability of the system to meet demand for electricity transmission. Nevertheless, each TSO has certain obligations according to federal or state electricity laws, such as submission of an area development plan for their respective control area to E-Control. Such development plan is to be approved by E-Control. E-Control supervises the TSOs with regard to the implementation of the development plan and their compliance with the TSOs’ other obligations as stipulated by the Electricity Act 2010.

Cross border issues

Cross-border supplies have to be notified to the relevant TSO by virtue of the operating schedule. There is one control area manager in Austria responsible for operating the transmission systems, namely APG. The control area is connected to the transmission systems of Germany, Czech Republic, Hungary, Slovenia, Italy and Switzerland. There is no interconnection between Austria and Slovakia.

There are no bottlenecks with regard to cross-border supplies in the line connections of VKW-Netz AG. Neither are there any bottlenecks with regard to the connections of APG to Germany. Line bottlenecks are likely to occur at the connections on APG’s transmission system to the Czech Republic, Hungary, Slovenia, Italy and Switzerland. The transmission capacities requested by market participants in Austria regularly exceed existing transmission capacities. As a result, transmission rights for short-term capacity are auctioned among the TSOs. Physical transmission rights for specific time periods (e.g. one year, months, a few days or hours in a certain day) are bought at auction.

Structure of distribution sector

DSOs operate distribution grids generally from 110kV to 0.4kV. The 110kV grids are connected to the TSOs 220/380kV-grids. The majority of the end-consumers are provided with electricity from the 230V/400V-grids (Niederspannungsnetz).

DSOs have an obligation to publish general terms and conditions and to enter, under these terms and conditions, agreements with end users and producers, providing for their connection to the grid. Such general terms and conditions are subject to prior approval by the E-Control Commission.

The electricity laws of the Federal States provide for area monopolies for electricity distribution grids. Therefore, a concession for this type of grid is only granted as long as no other distribution grid exists. The implementing laws of the provinces have to ensure that the distribution grid operator has the exclusive right to connect all end users and generators in the area covered by its concession.

Consumers may not switch their DSO, as the place of residence determines the competent system operator and consumers are obliged to connect their facilities with the competent DSO operating in their service area. There are 14 DSO’s and distribution areas in Austria. Wien Energie, Linz Strom, Salzburg Netz and Kelag are the main participants in this sector.

Electricity prices are not regulated in Austria, neither for households nor for industrial customers. Since 2008, retail prices have risen gradually in contrast with wholesale market prices. In 2011 the share of network costs in household prices (without taxes) was 44%, around average for the EU, while energy and supply costs accounted for 56%.

Mergers have played a major part in holding back the development of competition. Horizontal mergers between retailers have significantly reduced the number of suppliers, while the anticipated market entry of new suppliers and resultant increase in competition has not transpired.

In 2012, Austria had 5.93m meter points (Zählpunkte) which were provided with electricity. Private households account for 71.97% of these metering points, small and medium-sized businesses, farms and other interruptible consumers for 27.43% and different consumers such as businesses and agricultural businesses, and industrial customers for 0.6%. Private households were responsible for 23.91% of electricity consumption and small businesses for 17.91%; 58.18% of the electricity provided was consumed by industrial customers. The threshold between a private household customer/business customer and an industrial customer is a consumption of electricity in the amount of 100,000kWh per year. Industrial customers may negotiate their own terms with suppliers. 2 E-Control, Elec_Market Cons 2012             

Structure of supply sector

In 2010, market concentration at retail level was moderate to high. The market share of the three largest household suppliers was 58%. The three largest suppliers are Verbund, EVN and Wien Energie. Of the roughly 130 retailers, many operate only at local or regional level.

Competition

According to E-Control, several suppliers did not pass on a decrease in network tariffs in early 2011, which points to insufficient competition. In 2011, only 1.5% of household customers switched. About 64,500 electricity customers changed suppliers in 2012 – a customer churn rate of 1.1%.

Structure of trading market

Austria’s wholesale trading market is joined with Germany’s and forms a single price zone. In this wider market, Austrian traders have a relatively small market share. However, foreign wholesale traders are not very active in Austria, limiting themselves to sales to larger customers consuming between 10-20GWh. Eleven domestic wholesale traders are currently active in the country, among others APG, Linz Strom GmbH, ÖBB Infrastruktur AG, OMV Trading and Verbund AG.

EEX

In Austria, spot-market products (day ahead, etc.) may be traded on the Energy Exchange Austria (EEX). Admission as a member of EEX is a requirement in order to trade electricity on the power exchange. In early 2012, there were approximately 70 companies admitted as traders to the EEX. The registration process to become a member of EEX takes, on average, two to three months. The length of the proceedings depends, for instance, on the completeness of the documentation. When trading on the power exchange, rules such as the Clearing and Settlement Rules for Electric Energy, the Participation Rules for Electric Energy or the Trading Rules for Spot Market Products for Electric Energy as well as the model agreements provided by EEX are mandatory.

Data on traded volumes

Trading volume on EEX increased in 2012 to 9.35TWh and the turnover amounted to EUR 406m. Compared to 2011, the increase amounts to approximately 24% as the trading volume in 2011 amounted to 7.6TWh (turnover amounted to EUR 289m). 3 Energy Exchange Austria, Market Data
www.exaa.at             

Price differentials

The average Austrian day-ahead wholesale price on EEX in 2012 was at EUR 42.22 per MWh for base load power. Compared to 2011, the day ahead wholesale price decreased by approximately 18% as in 2011 the day ahead wholesale price amounted to EUR 51.78 per MWh. In 2012, the peak price amounted to EUR 48.88 per MWh. Relevant factors influencing the wholesale price include the situation in neighbouring countries (notably Germany and the Czech Republic). Generally, 2012 was a year of relatively low spot and futures prices. Dayahead base load prices fell to approximately EUR 20 per MWh in December 2012.

Cooperation with other exchanges

The Central Auction Office (CAO) brings together the eight TSOs of the Central East European (CEE) region. CAO was established with a view to ensuring coordinated congestion management in the region. It holds daily, monthly and yearly cross-border transmission capacity auctions. Since Austria and Germany share a common wholesale electricity market through Germany, Austria is partially coupled with the central west European market. On the other hand, it is not yet coupled with its eastern and southern neighbours. However, the Agency for the Cooperation of Energy Regulators (ACER) and the National Regulatory Authorities in the CEE region (including E-Control) jointly declared their willingness to implement implicit flow-based capacity allocation procedures in the region by 2014 4 European Energy Regulators, Activities, Regional Initiatives, Electricity Regional Initiative . Therefore the Central East Region Electricity Regional Initiative Work Plan 2011-2014 (ERI) was presented in November 2011. ERI sets the goals to be achieved, such as the implementation of long-term capacity allocation, day-ahead allocation, single EU price market coupling, intraday capacity calculation and electricity balancing integration.

The main energy regulatory authority is E-Control, which is in charge of regulating and monitoring both the electricity market and the gas market. Pursuant to the E-Control Act 2010 5 Federal Law Gazette I No 110/2010, last amended by Federal Law Gazette I No 174/2013.  (Energie-Control-Gesetz 2010), the supervisory tasks of E-Control include monitoring compliance with competition rules and drawing up and publishing comparisons of electricity tariffs. E-Control also has the authority to enact regulations (in the form of “ordinances”) on the functioning of the Austrian electricity market. The general terms and conditions of network operators have to be approved by E-Control.

The Austrian Energy Agency (AEA) is the Austrian energy research and policy institution in which the federal and the provincial administration and a number of important institutions and corporations (e.g. EVN, ÖBB, Wien Energie) from a variety of economic sectors cooperate. The AEA’s scope of activities comprises the implementation of national and international projects and programmes, the implementation of public relations assignments and the development of strategies in the fields of, for example, energy politics, energy law, renewable energy and biomass, research and development and the development of energy-efficient buildings, devices and businesses.

Competition authorities

The investigating authority in Austria is the Federal Competition Authority (FCA) (Bundeswettbewerbsbehörde). It was established by the Austrian Competition Act 6 Federal Law Gazette No 448/1984, last amended by Federal Law Gazette I No 112/2013.  in 2002 (Competition Act) (Bundesgesetz gegen den unlauteren Wettbewerb). The Director General is independent from orders of the ministry although the FCA administratively belongs to the Ministry for the Economy.

The FCA is the investigating body and legal party in cartel cases. Decisions, however, are taken by the Cartel Court, which is a court specialised in competition law matters.

Another important authority is the Competition Commission (Commission) (Wettbewerbskommission), which is an independent organisation of experts performing a primarily advisory role. The Commission provides economic expert opinions to the FCA if requested by the FCA or the Federal Ministry. In addition, it may request that the FCA launches an in-depth investigation of a market concentration at the Cartel Court.

Additionally, E-Control monitors merger activities in the electricity sector. There is close cooperation between the FCA and E-Control with respect to this matter.

The main sources of electricity law are the Electricity Act 2010, the Electricity Acts of the nine federal states, the Green Electricity Act 2012 7 Federal Law Gazette I No 110/2010, last amended by Federal Law Gazette I No 174/2013.  (Ökostromgesetz 2012) (which provides an incentive scheme for the use of renewable energy resources), the Cogeneration Act 8 Federal Law Gazette I No 111/2008.  (KraftWärme-Kopplungsgesetz) which promotes cogeneration plants (combined heat and power), the High Voltage Current Line Act 1968 9 Federal Law Gazette No 70/1968, last amended by Federal Law Gazette I No 112/2003.  (Starkstromwegengesetz) which regulates high voltage lines which run through two or more Austrian federal states, and the Energy Control Act 2010 (Energie-Control-Gesetz) which regulates the tasks and powers of the energy regulatory authority).

Three different sets of market rules exist regarding the electricity market: (a) general terms and conditions; (b) the Electricity Market Code; and (c) technical and organisational rules (TORs) for system operators and users. They cover, in particular, the following issues:

• the allocation of responsibilities to market players and system operators;
• the general terms and conditions of distribution and transmission system operators, balancing group representatives, green electricity balancing group representatives, and clearing and settlement agents;
• standardisation of liability rules;
• supplier switching procedures;
• TORs; and
• standards for hardware, software and data management.

The general terms and conditions must be approved by E-Control prior to their entry into force. The competent body for approval of such general terms and conditions is the E-Control Commission. Further, the E-Control Act stipulates that the Electricity Market Code and the TORs must be drawn up and published by E-Control in consultation with the relevant market players.

Agreements between different participants in the electricity market must be based on these market rules. Failure to do so is prohibited by the E-Control Commission and shall prohibit the respective market participant from using such terms and conditions.

The Green Electricity Act 2011 was adopted in order to implement the targets of the Austrian Energy Strategy and the national renewable energy action plan and has strengthened the support scheme in Austria. The new Green Electricity Act 2012 further consolidates the legal framework for financial support to green electricity generation and the expansion of generation capacities. The Green Electricity Act introduces a strong increase of the feed-in tariff for energy generated by wind generating stations located in Austria. The feed-in tariffs for new renewable generating stations are laid down in the Green Electricity Ordinance (Ökostromverordnung). The current version is the Green Electricity Ordinance of 2012. 10 Federal Law Gazette II No 503/2013.

The Cogeneration Act contains provisions on the promotion of combined heat and power plants. However, there are no obligations or commercial incentives for TSOs to invest in additional capacity to service renewable energy plants.

The electricity distribution networks are subject to multi-year incentive regulation, and steps have already been taken to overcome the inherent disadvantages of this form of regulation. In particular, incentives have been created for maintaining sensible levels of capital expenditure. However, further modifications to the system will be required to maintain long-term supply security. For instance, explicit quality incentives should be introduced, so as to enable tariff determination to take account of supply quality criteria. The next regulation periods for the electricity distribution grids are due to start in 2014. The electricity transmission grid differs from the distribution grid in that it is still subject to cost-plus regulation, and it too would profit from a stable long-term regulatory regime.

Figure 1: Austrian Domestic Electricity Consumption 2011 and 2012 – Total Electricity Supply 11 E-Control, Graf_TOCn       

Figure 2: Gross Production in 2011 and 2012 – Total Electricity Supply 12 E-Control, Graf_TOPn        

Figure 3: Austrian Domestic Electricity Consumption in 2011 and 2012 – Public Grid 13 Accessed 23 August 2013        

Figure 4: Gross Production in 2011 and 2012 – Public Grid 14 Accessed 23 August 2013         

(*) Including all supply areas on the Austrian federal territory (control areas APG, TIWAG and VKW including VIW)
Footnote reference: www.e-control.at

• Federal Ministry of Economy, Family and Youth: www.en.bmwfj.gv.at
• E-Control: www.e-control.at
• Austrian Energy Agency: www.energyagency.at
• Verbund: www.verbund.com
• Austrian Power Grid: www.apg.at
• Austrian Energy Alliance: www.energieallianz.at
• Energy Exchange Austria: www.exaa.at
• Federal Competition Authority: www.en.bwb.gv.at
• Statistics Austria: www.statistik.at