Energy

CASE LAW

Gas pipelines connecting third countries

In Case T526/19, Nord Stream 2 AG, responsible for the planning, construction and operation of the Nord Stream gas pipeline, sought to annul Directive 2009/73/EC on the internal market in natural gas. Under the Directive, interconnectors include transmission lines which cross a border between a Member State and a third country up to the territory/territorial seas of the Member State. Some such pipelines completed before 23 May 2019 may derogate from unbundling and third-party access obligations.

Following appeal, the matter was sent back to the General Court, which has dismissed Nord Stream’s challenge. Nord Stream could foresee that the EU/Member States would use their power to extend rules to cover pipelines from third countries, and that Nord Stream would not be able to benefit from the relevant derogation. In any case, this had not prevented it from operating the pipeline under economic conditions and obtaining an appropriate return on investments. The EU had not infringed the principles of legal certainty or protection of legitimate expectation in providing that only pipelines competed before 23 May 2019 could get a derogation; nor did the derogation breach the principle of equal treatment; nor did application of internal market rules to the pipeline breach the principle of proportionality. A press release is available here.

Electricity distribution system operators (“DSOs”)

In German Case C-293/23, ENGIE launched a project for the construction and operation of two CHP plants with an electrical power capacity of 20 kW (zone 1) and 40 kW (zone 2) and two electrical wiring systems separated by galvanic isolation, to which end consumers (tenants) would be connected. In addition to heat and hot water, ENGIE wanted to sell the electricity generated in the CHP plants. It sought grid connections and metering points for the plants as two separate self-consumption facilities. The DSO refused the requests on the ground that the plants were not self-consumption facilities under German law.

The German Court considered a number of issues arising under EU and German law, including that in-house distribution facilities operated by a lessor in a building, or energy facilities belonging to an association of homeowners, do not constitute distribution systems. However, given the size of the facilities and the fact that ENGIE was both the operator and supplier, the Court was not certain that the facilities were not part of the distribution system, within the meaning of the IME Directive. The German Court referred a question for preliminary ruling.

The CJEU indicated that the IME Directive prevents national legislation under which an undertaking that, by replacing the existing distribution system, constructs and operates an energy facility for the supply of electricity, generated by a CHP plant, to several residential buildings with up to 200 dwellings and with an annual energy transfer of up to 1000 MWh, is not subject to the obligations of a DSO. The costs of constructing and operating the energy facility are borne by the end consumers and the electricity generated is sold by that undertaking to those consumers, if that facility is used to transport electricity at high, medium or low voltage for sale to customers and if none of the exemptions or derogations from obligations in the IME Directive are applicable.