An extract from The Energy Regulation and Markets Review, 9th Edition

Regulation

i The regulators

The overall administrative responsibility for the energy sector lies with the Danish Minister for Climate, Energy and Utilities (the Minister). Part of the Minister's authority has been delegated to the Danish Energy Agency (DEA). The DEA is responsible for the entire chain of tasks linked to energy production and supply, transportation and consumption, including energy efficiency and savings as well as national carbon dioxide targets and initiatives to limit emissions of greenhouse gases. In cooperation with the Minister, the DEA prepares the majority of the bills and other political proposals. The DEA carries out analyses and estimates of the development in the energy sector and represents Denmark in international forums.

The Danish Utility Regulator (DUR) controls prices and conditions in the energy sector. DUR's purpose is to ensure an efficient and transparent energy market in Denmark. Transmission, storage and distribution undertakings and supply-committed undertakings are under the supervision of the DUR. Decisions made by DUR may be appealed to the Energy Board of Appeal. Decisions made by the Energy Board of Appeal cannot be brought before any other administrative body but may be challenged before the courts.

Energinet, a state-owned undertaking, owns, operates and develops the Danish transmission network for electricity and gas, and is responsible for effective and safe supply and for a competitive energy market. Energinet must ensure open and equal access to the transmission networks for all users. It also issues rules on gas transport and coordinates the general planning of emergency supply for the natural gas sector. In March 2019, Energinet acquired the entire Danish gas distribution network.

The city councils in the municipalities are responsible for the planning of local heat supply. In each municipality, the city council must carry out planning in cooperation with the supply undertakings and other stakeholders.

The Energy Supplies Complaint Board is a private board established by the energy industry and the Danish Consumer Council. The Energy Supplies Complaints Board handles complaints about the purchase and delivery of energy from supply undertakings. As a principal rule, the board only accepts complaints from consumers. Decisions of the Board cannot be appealed to any administrative authority but can be brought before the courts.

The main legislation for energy regulation is the Continental Shelf Act, the Act on Raw Materials, the Subsoil Act, the Pipeline Act, the Natural Gas Supply Act, the Heat Supply Act and the Electricity Supply Act.

ii Regulated activities

A licence issued by the DEA is necessary for all exploration, production, transmission, distribution and storage activities.

A permit is required for the establishment of plants and for expansion or changes to plants that cause increased pollution. Permits are issued by the relevant city council or regional council, depending on the size of the plant. Permits for major plants require a prior public hearing, and for major plants there may be a duty to complete an environmental impact assessment under the Planning Act. Offshore plants are primarily subject to approval under the Subsoil Act and the Continental Shelf Act. Offshore installations are subject to approvals and permits issued by the DEA. These include operation permit, manning and organisation plan approval and approval for the contingency plan. To obtain an operation permit, there must be an evaluation of safety and health conditions for the installation and the operational conditions (health and safety review or safety case) and other relevant information regarding health and safety conditions (e.g., certificates). Offshore installations operating in Denmark must have a workplace assessment system.

iii Ownership and market access restrictions

The Danish state has a general right to all hydrocarbons in the subsoil of the Danish territorial jurisdiction area. The state can grant licences for preliminary investigation, exploration and production of hydrocarbons. Licences are granted through tender procedures or under the 'open door' procedure.

The majority of the natural gas on the Danish market is produced in the Danish North Sea. Through the Danish North Sea Fund, the Danish state participates in concessions for exploration and production of hydrocarbons. The fund is administered by the Danish North Sea Partner, a unit under the Ministry of Climate, Energy and Utilities. The fund, which was established in 2005, is the Danish state's oil and gas company, which contributes to the decision-making processes in connection with exploration, production and development activities with respect to Danish licences. The aim is to use existing knowledge across licences and support the development of new technologies that can enhance the recovery rate of oil and gas resources in the subsoil.

Partly state-owned Ørsted A/S (previously DONG Energy) owns upstream pipelines and operates the gas treatment plant at Nybro. The establishment and operation of upstream pipeline networks require a licence issued by the DEA. Any interested party is entitled to access an upstream pipeline network subject to payment. In March 2019, Energinet's last acquisition of the gas distribution network was finalised, and Energinet now owns the entire gas distribution network. The physical planning of the system for the supply of natural gas is governed by the Heat Supply Act. Establishment of new distribution network facilities for natural gas and major alterations to existing facilities requires approval from the relevant city council and, in certain cases, the DEA. A storage undertaking is obliged to place storage capacity at the disposal of Energinet, but only to the extent necessary to enable Energinet to maintain physical balance in the network and to ensure security of supply. A storage undertaking must grant access to the storage facilities on the basis of objective, transparent and non-discriminatory criteria. The Danish market for natural gas was fully liberalised on 1 January 2004, and since then customers have had a right to choose a natural gas supplier. Anybody may in principle establish a natural gas supply undertaking.

Electricity grid undertakings have a monopoly on the distribution in their areas and are governed by the Electricity Supply Act. The transmission system operator (Energinet) is responsible for the general security of supply in Denmark and must ensure the overall balance and quality of the electricity supply system. Also, the operator must ensure players have access to the transmission system on objective, fair and transparent terms. Electricity supply undertakings supplying electricity on commercial terms are generally not governed by the Electricity Supply Act.

iv Transfers of control and assignments

Natural gas and electricity licences, where applicable, can only be issued to applicants with the necessary expertise and economic capacity. The licence can neither directly nor indirectly be transferred to others without approval by the DEA. A gas distribution network or shares in companies that own distribution networks are generally only allowed to be transferred to the state. In 2016, 2018 and 2019, the Danish state purchased the three large gas distribution networks in Denmark. The Danish state now owns the entire gas distribution network.

Since 1998, Danish competition legislation has been strongly influenced by EU competition law, but the Danish rules are generally stricter than those of the European Union in terms of support for free competition.