Legal framework
Policy and lawWhat is the government policy and legislative framework for the electricity sector?
Belgium is a federal state with several levels of government. The federal responsibilities regarding electricity supply include security of supply, the nuclear fuel cycle, production and federal supply licences, consumer protection and transmission (including local transmission) tariffs, as well as the North Sea. The three regions (Flanders, Wallonia and Brussels) are principally responsible for energy efficiency, (onshore), renewables, regional supply licences and distribution tariffs.
A large part of Belgian energy law, both at the federal and regional level, is based on the European Union’s internal market regulation (the Third Energy Package, which is supplemented by the Clean Energy Package, including new legislation on the electricity market design, renewables and energy efficiency, which have yet to be transposed into Belgian law). These rules, often directly applicable or transposed into Belgian law, include rules on infrastructure investment and state aid, the regulation of network operators (eg, regulated tariffs, unbundling requirements and third-party access), network operation and safety, trading (eg, market coupling) and market monitoring and supervision by independent regulators.
Belgium has been heavily dependent on imported energy since the end of domestic coal production. Security of supply is therefore a key objective of Belgian energy policy. A strategic reserve mechanism was put into place in 2014 and was subsequently amended to address state aid concerns previously expressed by the European Commission, and to implement a number of improvements to bring the mechanism more in line with the realities of the market. The strategic reserve has been approved by the European Commission until the winter period 2021-2022. Recently, the federal parliament approved legislation for the introduction of a broader capacity remuneration mechanism to guarantee the security of supply, secure the energy transition and offset Belgium’s nuclear phase-out by 2025. Subject to European state aid approval, the first capacity auctions under the new mechanism are meant to be organised In 2021, for (new) capacity to be available by 2025.
Other objectives of the Belgian federal and regional energy policies include energy efficiency, transparent and competitive energy pricing and environmental protection.
Driven by EU efforts to deal with energy and climate challenges, the Belgian authorities support the development of capacities of power generation based on renewable sources of energy. Recently, the federal parliament approved legislation to create a framework for the issuance of new offshore concessions for renewable power production on the North Sea, through a competitive tender procedure (the rules for which remain to be established by the federal government). Future offshore generation facilities may be able to benefit from the existing federal renewables support scheme (based on guarantees of origin and green certificates), with subsidy levels to be fixed on the basis of the bids submitted in the competitive tender process.
At the same time, Belgium continues to rely heavily on nuclear power production (representing around 6GW of installed capacity or 50 per cent of total production). In 2015, the federal government reached an agreement with the incumbent producer and owner of the nuclear park, Electrabel, and its mother company, Engie, to keep nuclear power in the Belgian energy mix at least until 2025, subject to heavy investment into the seven existing nuclear generation units.
2Organisation of the marketWhat is the organisational structure for the generation, transmission, distribution and sale of power?
As a matter of principle and in accordance with EU law, the generation and import, trade and supply to end consumers of power is liberalised and open to all market participants. Networks, on the other hand, are strictly regulated and subject to a national (transmission) or local (distribution) monopoly.
While most energy operators in Belgium, including the transmission system operator (TSO) and market operator(s), are private companies, the municipalities either directly or indirectly control the transmission and distribution system operators (DSOs) throughout the country.
Following consecutive generations of EU internal energy market regulation, transmission and distribution activities previously performed by vertically integrated power companies have been disentangled from their respective production or import, trading and supply activities. In 2001, incumbents Electrabel and SPE (and their cooperation subsidiary CPTE) incorporated and contributed their transmission assets and activities to the newly established company Elia. In 2002, Elia was appointed the sole transmission system operator for electricity in Belgium and this designation was recently renewed for an additional 20-year period. In 2012, Elia was certified as a fully ownership unbundled TSO under the EU’s Third Energy Package ownership unbundling rules.
Although ownership unbundling is not required for DSOs, Electrabel has divested all its historic participations in the Belgian DSOs. The DSOs enjoy a legal monopoly within their geographically confined areas, usually covering the territory of several municipalities.
Power can be traded by market participants on the Belgian power exchange operated by Epex SPOT Belgium. The Belgian exchange (formerly Belpex) was created in 2005 and merged with Epex SPOT in 2015. Epex SPOT in turn is owned by the EEX Group (through Powernext) and HGRT, a conglomerate of network operators including Elia. The Belgian power market has subsequently been coupled with markets in other European countries. The currently applicable Multi-Regional Coupling (MRC) covers 19 countries and 85 per cent of European power consumption.
Regulation of electricity utilities – power generation
Authorisation to construct and operate generation facilitiesWhat authorisations are required to construct and operate generation facilities?
A federal production licence must be issued by the federal Energy Minister, subject to a prior opinion from the federal Commission for the Regulation of Electricity and Gas (CREG), for each construction of a new generation facility, as well as the reconstruction or modification of an existing facility not subject to an individual licence resulting in an increase of the net capacity by more than 25 megawatts electrical (MWe).
Nuclear generation units and installations for the production of electricity from renewables and hydro storage that are the subject of an offshore concession, are excluded from this requirement. The former can no longer be the subject of any permit or licence in Belgium (ie, subject to a change in law, no new nuclear generation units can be constructed in Belgium). The latter installations are subject to specific procedures for obtaining the relevant offshore concessions. A recent law change enables the federal government to set up a competitive tender procedure for the issuance of new offshore concessions by the relevant ministers, for a maximum duration of 30 years (including construction, operation and decommissioning phase), for the production of electricity from renewable sources, on the lots that have been reserved for that purpose in the new marine spatial plan covering the period from 2020 until 2026.
The construction and operation of generation facilities on land is subject to regional land planning and environmental law and regulations, and may therefore require a building and/or a (combined) environmental permit, depending on the nature of the installations. For offshore constructions (including cables for connection to the onshore transmission system), additional permits and authorisations may be required under federal law.
Grid connection policiesWhat are the policies with respect to connection of generation to the transmission grid?
In accordance with EU law, grid users (including generators) have a right to non-discriminatory grid access, subject to their compliance with the applicable (technical) requirements, payment of the applicable, pre-approved tariffs, and entering into industry standard regulated contracts with the relevant network operator(s) (see question 10). A new technical regulation for the operation of and access to the transmission system has entered into force on 27 April 2019, which replaces the previous one dating from 2002 (as amended from time to time).
Besides the tariffs and contractual framework, grid connection and access are covered by several grid codes at national and EU level.
Priority grid access may apply in certain cases for certain types of (renewable) generation. Under future EU legislation (the Clean Energy Package), the possibilities of priority grid access will be reduced for new installations.
The network operators are required to keep commercially sensitive information obtained from grid users confidential.
Specific permits may be required and compensation can be obtained for costs incurred for the connection of offshore (wind) generation units to the transmission grid. New offshore production installations will need to connect to the modular offshore grid (MOG), from where they will be connected to the onshore grid, at the connection point determined by the TSO and in accordance with the applicable technical requirements. The federal government will also establish the latest dates by which each required extension of the MOG will need to have entered into service, and a compensation mechanism in case of its delay or unavailability.
Specific rules also apply to private and direct lines, as well as closed industrial networks and closed distribution systems to which generators may connect, in order to ensure the viability of the public grid as well as the users’ right to grid access.
Grid connection and access can be refused by the network operators in accordance with the applicable network codes if technically unfeasible or economically unviable, or to ensure the secure operation and integrity of the grid.
Alternative energy sourcesDoes government policy or legislation encourage power generation based on alternative energy sources such as renewable energies or combined heat and power?
Except for power production and storage in the North Sea, renewable energy sources are a regional competence. Government policy and legislation encouraging the use of alternative energy sources are therefore decided on a federal (offshore) and a regional level and may differ between the three Belgian regions.
As a general rule, all three regions as well as the federal state (regarding offshore) have policies and a legal framework in place to support renewable energy generation. All of these include a system of guarantees of origin and green certificates (either federal or regional) that are issued for each kilowatt-hour of power produced, which can subsequently be sold either on the market (demand for certificates is driven by quota obligations for suppliers or grid users) or to the TSO or DSO at a certain minimum price.
Offshore renewable generation is supported through the federal system of green certificates. Brussels promotes the use of renewable energy sources by assimilating the federal system of green certificates combined with a quota obligation, as well as through net-metering for small producers and investment aid for certain companies and projects. Flanders has its own system of green certificates and combined heat and power (CHP) certificates combined with quota obligations in place, together with net-metering for small-scale generation and ecological premiums for environmentally friendly investments. Wallonia promotes renewable generation though various means, including the federal system of green certificates and quota obligations, investment aid and specific support schemes for certain technologies.
Climate changeWhat impact will government policy on climate change have on the types of resources that are used to meet electricity demand and on the cost and amount of power that is consumed?
Belgium is committed to the Paris climate agreement. In 2015, during the Paris negotiations, the different regions and the federal state reached a Belgian internal climate agreement, allocating the efforts to be made by each region and the federal state towards reaching Belgium’s overall climate targets.
Despite these commitments and in line with public opinion, policy has recently seen a shift towards reducing subsidies for renewable power generation (eg, cutting subsidies for biomass, photovoltaic generation, and offshore wind). Moreover, security of supply and generation adequacy measures such as the already existing strategic reserve and the contemplated new capacity remuneration mechanism are likely to target mainly (new and existing) gas-fuelled power plant, both during a transitory period and after 2025, to compensate for the closure of nuclear power plant in Belgium. These policy options may render the achievement of the Belgian climate targets more challenging.
In view of the climate targets, nuclear power, despite its gradual phase-out, will continue to play an important role in the Belgian energy mix at least until 2025. Some factions already argue today that climate policy will make the extension of the life duration of the nuclear units beyond 2025 inevitable.
At the same time, climate targets are likely to push the different Belgian governments towards policies promoting energy efficiency measures, flexibility services, distributed generation and small-scale renewable production that require fewer subsidies (such as heat boilers, which have seen prices drop drastically over recent years, and small-scale biomass, in the form of combined heat and power installations).
StorageDoes the regulatory framework support electricity storage including research and development of storage solutions?
Electricity storage is subject to the opinion of CREG and the approval of the federal Energy Minister, and the Minister responsible for the North Sea to the extent relevant to the connection of offshore generation units.
Investments into the network by the TSO are compensated through the regulated tariffs in accordance with the applicable tariff methodology and proposal, as approved by CREG (see below).
Government policyDoes government policy encourage or discourage development of new nuclear power plants? How?
Under the current state of the legislation, no new nuclear power generation units can be constructed in Belgium.
Subject to any policy changes, all seven existing nuclear units in Belgium are subject to a gradual phase-out by 2025.
Regulation of electricity utilities – transmission
Authorisations to construct and operate transmission networksWhat authorisations are required to construct and operate transmission networks?
Belgium has a single TSO to operate the entire public transmission system, which is appointed for a 20-year period by the federal Energy Minister following consultation with the Council of Ministers and a prior advice from CREG, on the proposal of one or more network owners which, jointly or separately, own a part of the transmission system covering at least 75 per cent of the national territory and at least two-thirds of the territory of each region. In addition to the national transmission grid (high and very high voltage), the TSO also operates the local grids with a transmission function (ie, with a nominal voltage level equal to or below 70kV).
Elia System Operator was initially appointed as the single TSO for a 20-year period on 13 September 2002. On 6 May 2019, Elia’s TSO designation was renewed for an additional 20-year period, with effect from 17 September 2022. The network assets are owned by its wholly owned (minus one share) subsidiary, Elia Asset. In accordance with EU unbundling rules, Elia System Operator was certified as a fully ownership unbundled TSO on 6 December 2012.
Subject to certain conditions, third parties may obtain an individual licence from the federal Energy Minister to construct a direct line or may be authorised by the federal Energy Minister to operate a closed industrial network.
Much the same as for generation facilities, the construction and operation of transmission (and distribution) systems on and off shore may require certain permits and authorisations under regional and federal law, depending on the nature and the location of the installations. Public utility easements may be granted to the TSO for infrastructures crossing private land and, in certain instances, the TSO may be entitled to expropriate the property of private owners in the public interest.
Eligibility to obtain transmission servicesWho is eligible to obtain transmission services and what requirements must be met to obtain access?
In principle, all grid users connected to the transmission system on 1 July 2004 or who are otherwise eligible (ie, under the laws of another EU member state) have a right of access to the grid on non-discriminatory conditions as set out in the answer to question 4.
The TSO can refuse access only if it does not have sufficient capacity available (in accordance with the applicable rules on capacity allocation and congestion management) or if the access would prevent its proper execution of a public service obligation in the general economic interest, and without breaching the rules on the exchange of energy flows in a way that would harm the European interest.
Government transmission policyAre there any government measures to encourage or otherwise require the expansion of the transmission grid?
The TSO is required to draw up and update (every four years) a 10-year network development plan, taking into account the EU-wide 10-year network development plan determined by the European Network of TSOs for Electricity (ENTSO-E). The 10-year network development plan is subject to the advice of CREG and the approval of the federal Energy Minister, and the minister responsible for the North Sea to the extent relevant to the connection of offshore generation units.
Investments into the network by the TSO are compensated through the regulated tariffs in accordance with the applicable tariff methodology and proposal, as approved by CREG (see below).
Rates and terms for transmission servicesWho determines the rates and terms for the provision of transmission services and what legal standard does that entity apply?
Grid connection, access and balancing services are subject to regulated tariffs, which are pre-approved by CREG for a four-year regulatory period, based on a proposal by the TSO. The proposal must be based on a tariff methodology established in advance by CREG, which in turn takes into account the specific tariff guidelines set out in the law. A new tariff period will run from 1 January 2020 until 31 December 2023. On 28 June 2018, the CREG approved the tariff methodology applicable in the new tariff period, which will be consistent with the methodology for the current tariff period 2016-2019 and follow the same principles (ie, a fair remuneration mechanism, combined with incentive components for certain expenses and revenues of the TSO). Once approved, the tariffs in principle remain unchanged during the entire tariff period, subject to revision that can be requested by the TSO or initiated by CREG if they are no longer proportionate owing to changed circumstances.
In addition to the regulated tariffs, transmission services are governed by industry standard regulated contracts, which are also pre-approved by CREG. For electricity transmission, the main regulated contracts are the connection contract, the access contract and the access responsible party (ie, balancing) contract.
The tariffs and regulated contracts are non-negotiable between the TSO and individual grid users. Any amendments are subject to prior CREG approval and are applied to all grid users simultaneously.
Entities responsible for grid reliabilityWhich entities are responsible for the reliability of the transmission grid and what are their powers and responsibilities?
The TSO is responsible for the secure and reliable operation of the grid in accordance with the law and all the applicable (national and European) grid codes. Its various tasks and roles are detailed in the law. The federal regulator, CREG, as well as the federal energy administration and the federal Energy Minister, have certain specific monitoring and supervision competencies.
In the event of a sudden crisis on the energy market or when the physical safety of persons, the safety or the reliability of equipment or installations or the integrity of the transmission system are in jeopardy, the federal government, in consultation with the TSO and following an opinion from CREG, can take emergency measures (which can temporarily deviate from the provisions of the law).
Regulation of electricity utilities – distribution
Authorisation to construct and operate distribution networksWhat authorisations are required to construct and operate distribution networks?
Distribution system operators are appointed by the regional regulators or, in the Brussels-Capital region, by the Brussels government, to operate the distribution system of a certain geographically confined area, within which they enjoy a legal monopoly. The DSOs are appointed for a maximum period of 12 years (in Flanders) or 20 years (in Wallonia and Brussels). In the Flemish and Walloon regions, several DSOs are active. In the Flemish region, all DSOs work together through the operating company, Fluvius, a company that was created through a merger of the previously existing operating companies Infrax and Eandis. The two largest DSOs in the Walloon region are Ores and Resa, with a number of smaller DSOs that are locally active. Sibelga is the sole DSO in the Brussels-Capital region.
Subject to certain conditions, third parties can obtain an individual authorisation from - or have to notify - the relevant regional regulator, to construct a new direct line or to operate a closed distribution system or a private network. Following a recent law change in the Flemish region, the construction and operation of a direct line that does not cross the borders of the own site, is no longer subject to prior approval, and the operation of a direct line that does cross the borders of the own site, is made subject to a levy, calculated on the basis of the amount of megawatt-hours annually injected into the line.
As mentioned in question 3, the construction and operation of both transmission and distribution systems may require certain permits and authorisations. Like the TSO, DSOs may benefit from public utility easements for infrastructures crossing private land and, in certain instances, may be entitled to expropriate the property of private owners in the public interest.
Access to the distribution gridWho is eligible to obtain access to the distribution network and what requirements must be met to obtain access?
In accordance with EU law, all DSOs must provide non-discriminatory access to their distribution system, subject to grid users entering into regulated contracts, compliance with the (technical) requirements and payment of distribution tariffs.
The DSOs may refuse access to their distribution system on specific conditions set out in the laws of each region. For instance, access can be refused in the event that there is insufficient grid capacity or if the technical requirements are not met.
In the event of a dispute on the conditions for access, grid users can lodge a complaint before the competent regional regulator or before the courts.
Government distribution network policyAre there any governmental measures to encourage or otherwise require the expansion of the distribution network?
In Belgium, the legal framework does not provide for specific rates or tax benefits to encourage the development of distribution systems.
DSOs must operate, maintain and develop the distribution system for which they are responsible. In that framework, they must establish a multi-annual network development plan, to be approved by the relevant regional regulator, to ensure the continuation of the electricity supply, security and development.
Economically speaking, distribution system expansion is mainly encouraged through the regulated network tariffs, which are approved by the relevant regional regulator (see question 17).
Rates and terms for distribution servicesWho determines the rates or terms for the provision of distribution services and what legal standard does that entity apply?
In accordance with EU law, the rates for access to distribution systems are monitored and approved by the relevant regional regulator.
In each region, the regulator sets up a tariff methodology taking into account the specific tariff guidelines set out in the relevant regional legislation. Based on that methodology, each DSO establishes a tariff proposal which is approved by the relevant regulator. In practice, network tariffs are payable to the DSOs by the grid users and subsequently charged on to the end users.
In general, the tariffs are established for a multi-annual term and remain unchanged during the entire tariff period, but they can be subject to revision in limited circumstances. In Belgium, the tariff models in the various regions are shifting from a ‘cost plus’ model towards a more incentive-based model, bearing in mind that each region has its own specificities and requirements.
Like transmission services, distribution services are governed by regulated contracts to be pre-approved by the relevant regional regulator. The main regulated distribution contracts are the connection contract and the access contract. As for transmission, distribution tariffs and regulated contracts are non-negotiable between the DSOs and individual grid users and any amendments (subject to prior approval by the competent regulator) are applied to all grid users simultaneously.
Regulation of electricity utilities – sales of power
Approval to sell powerWhat authorisations are required for the sale of power to customers and which authorities grant such approvals?
A regional supply licence is required for the sale of power to end users in each region. These supply licences are granted in Flanders, Wallonia and Brussels by the Flemish Regulator for Electricity and Gas (VREG), the Walloon Commission for Energy (CWaPE) and the Brussels Energy Minister respectively. Any person wanting to perform supply activities in the whole of Belgium must therefore obtain licences in all three regions. In all three regions, the supply licences are valid for an indefinite period. The laws of each region stipulate the exact licence requirements, the procedure, the reporting obligations and the grounds for suspension or revocation of the licence.
Exceptions to the supply licence obligation exist for the TSO and DSOs in the performance of their public services obligations (eg, as a social supplier).
If an end user has a direct connection to the federal transmission system, a federal supply licence is also required to supply power to it.
Besides these general licences, Walloon and Brussels legislation provide for specific licences: a licence for the supply of 100 per cent renewable energy (Brussels-Capital region), a licence limited to a capped capacity, a licence limited to certain types of clients or to a certain area and a licence limited to ensuring a grid user’s own supply (Wallonia).
Power sales tariffsIs there any tariff or other regulation regarding power sales?
The price of electricity is, in principle, based on market mechanisms. However, both federal and regional law may intervene in the sale of electricity.
The federal Economy Minister may impose maximum prices for the supply of electricity to end users and protected clients.
Federal law further provides that an electricity supplier must objectively justify its prices in comparison to its costs. In that framework, CREG has a general mission to monitor electricity prices but cannot (yet) take binding enforcement actions against suppliers. Furthermore, the law sets out a package of measures regarding the variable prices charged for the supply of electricity to households and SMEs.
The sale of electricity to household consumers is also governed by regional legislation. These regional laws determine, among other things, mandatory provisions in supply contracts and invoices, such as those dealing with minimum notice periods for termination, consumer protection, change of supplier and dispute resolution.
The Brussels legislation also enables the Commission for Energy Regulation in the Brussels-Capital region (Brugel) to set up a progressive pricing system for electricity.
More generally, power suppliers must also comply with the rules set out in the Code of Economic Law (the CEL), especially regarding unfair commercial practices, distance selling or publicity, and the new version of the Consumer Agreement (‘the consumer in a liberalised electricity and gas market’) and the related Code of Conduct. This industry wide agreement aims to protect consumers against abusive practices developed and misleading information given by suppliers.
Rates for wholesale of powerWho determines the rates for sales of wholesale power and what standard does that entity apply?
Subject to rules curtailing abusive market behaviour, power prices on the wholesale electricity markets are based on market mechanisms. As explained in question 19, the federal Economy Minister may impose maximum prices for the supply of electricity to end users.
Public service obligationsTo what extent are electricity utilities that sell power subject to public service obligations?
Regional legislation sets out public service obligations for the TSO, DSOs and electricity suppliers.
These public service obligations vary from one region to another. As a rule, electricity suppliers must ensure the regularity and quality of the electricity supply. Besides this general public service obligation, the federal and regional legislators have imposed public service obligations on suppliers aimed at the protection of vulnerable consumers (eg, providing for specific procedures in the event of payment problems encountered by household consumers), rational use of energy, protection of the environment and, in particular, promotion of renewable energy (eg, green certificates).
Other intermediaries, such as producers, must also abide by certain public service obligations, some of which are linked to the security of electricity supply (ie, the provision of certain services to be contracted by the network operators), such as in the framework of the strategic reserve and future capacity remuneration mechanism.
The supplier of last resort is the relevant DSO (although in Flanders there is no legal provision in this respect, yet).
Regulatory authorities
Policy settingWhich authorities determine regulatory policy with respect to the electricity sector?
As set out in question 1, the responsibilities for electricity policy are split between the competent ministers and the relevant administrations for the federal state on the one hand, and the three regions on the other. At the federal level, the Energy Minister and the Directorate-General for Energy, part of the federal Public Service for Economy, SMEs, Self-employed and Energy, are the key authorities that develop and implement electricity policy.
Several agencies independent from the federal and regional governments also regulate parts of the electricity sector. There is one federal regulator - CREG - and three regional regulators: VREG, CWaPE and Brugel. The Federal Agency for Nuclear Control and the National Agency for Radioactive Waste and Enriched Fissile Materials supervise nuclear activities in Belgium, including the seven nuclear reactors and the treatment of nuclear waste.
Scope of authorityWhat is the scope of each regulator’s authority?
CREG monitors the proper functioning of the electricity market and compliance with the federal electricity legislation. The main competencies of CREG are the approval of transmission (including local transmission) tariffs, regulation of transmission system operators, monitoring of the national electricity market and a broad advisory role.
The regional regulators have broad competencies, ranging from monitoring the regional electricity markets to imposing sanctions, ensuring compliance with the regional regulations and settling disputes. They are principally responsible for the granting of supply licences, approval of distribution tariffs, regulation of DSOs, monitoring of the regional electricity markets and the renewable support schemes (other than for offshore renewables). The regional regulators also advise the regional governments, ensure compliance with the regional regulations and settle disputes.
The regulators are also vested with investigative powers and may impose sanctions on the electricity market players.
Establishment of regulatorsHow is each regulator established and to what extent is it considered to be independent of the regulated business and of governmental officials?
The federal and regional regulators are independent administrative authorities established by federal or regional legislation. In accordance with EU law, they act fully independently of the state, governments and regulated businesses such as the network operators.
Challenge and appeal of decisionsTo what extent can decisions of the regulator be challenged or appealed, and to whom? What are the grounds and procedures for appeal?
As a rule, most of the regulators’ decisions are considered administrative acts. Accordingly, their annulment can be requested before the Council of State (the highest administrative court). The Council of State reviews the lawfulness of the disputed decisions.
As an exception to this general rule, the decisions of CREG and the tariff decisions of VREG and Brugel can be appealed in a de novo review before the Market Court of Brussels. CWaPE’s decisions can be appealed before the Court of Appeal of Liège.
Any party that is affected by a decision of a regulator may also submit a request for review to these authorities. This is the only non-judicial challenge available.
Acquisition and merger control – competition
Responsible bodiesWhich bodies have the authority to approve or block mergers or other changes in control over businesses in the sector or acquisition of utility assets?
European CommissionThe European Commission has the authority to review all concentrations in the electricity sector with a ‘community dimension’ within the meaning of Council Regulation (EC) No. 139/2004 on the control of concentrations between undertakings (OJ 2004, L24/1) (the Merger Regulation). According to the Merger Regulation, a concentration has a ‘community dimension’ when the annual turnover of the combined undertakings exceeds specified thresholds in terms of global and European sales, as well as in terms of sales dispersion across Europe. If these thresholds are fulfilled, the European Commission has exclusive jurisdiction to assess the proposed transaction, and the domestic regulatory bodies, such as the Belgian Competition Authority (BCA), will be precluded from reviewing the transaction. Nevertheless, member states may, under article 9 of the Merger Regulation, request a referral of such transaction where it affects competition in a distinct market within that member state’s territory.
Belgian Competition AuthorityAccording to the provisions of Book IV (Protection of competition) of the CEL, the relevant merger control authority in Belgium is the BCA, which is an independent administrative body composed of the president, the Competition College, the College of Competition Prosecutors, and a Management Committee. Notifications of transactions are submitted to the Competition Prosecutor General and appeals against decisions approving or prohibiting a notified transaction may be lodged before the Brussels Court of Appeal.
The BCA is responsible for providing merger clearance to concentrations that do not have a ‘community dimension’ (in which case they must be notified to the European Commission) and where the undertakings concerned have a joint turnover in Belgium of more than €100 million, while at least two of the undertakings concerned each realise a turnover in Belgium of at least €40 million.
Review of transfers of controlWhat criteria and procedures apply with respect to the review of mergers, acquisitions and other transfers of control? How long does it typically take to obtain a decision approving or blocking the transaction?
European CommissionConcentrations that fall under the Merger Regulation must be notified to the European Commission prior to their implementation. The European Commission must complete its initial review (Phase I) within 25 working days following the date of receipt of the notification (or receipt of complete notification if later). This period may be extended to 35 working days if the parties to the transaction offer commitments within 20 working days of the notification, or if a member state requests a referral of the transaction. At the end of Phase I, the European Commission is required to decide: that it has no jurisdiction over the transaction, provided that such transaction does not fall within the ambit of the Merger Regulation; that the transaction does not raise serious doubts as to its compatibility with the common market; or to launch an in-depth investigation (Phase II).
If the European Commission opens a Phase II investigation, it has a further 90 working days in which it has to determine if the transaction is compatible with the common market. This period may be extended to 105 working days if the parties offer commitments within 55 working days from the opening of the Phase II investigation. Following a Phase II investigation, the European Commission is required to decide if it clears (with or without conditions) or prohibits the transaction.
Belgian Competition AuthorityThe substantive test applied by the BCA, when reviewing mergers, acquisitions and other transfers of control, is whether the proposed concentration will result in a significant obstacle to effective competition on the Belgian electricity market (or other relevant product markets), in particular by creating or strengthening a dominant position. In applying this test, the BCA will consider the market shares of the parties to the transaction, as well as other structural factors relevant to competition (such as the existence of potential new entrants on the market, barriers to entry, the availability of alternative products, etc).
After the merger notification has been submitted, the BCA has 40 working days to approve the concentration (Phase I). The 40-working day period can be shortened to 15 working days in case of a simplified procedure or extended up to 55 working days in case remedies are proposed. If there is any concern that the concentration may have a negative effect on competition, the BCA may open an extended Phase II investigation, in respect of which it must make a final decision within 60 working days (or 80 working days in case remedies are proposed).
Prevention and prosecution of anti-competitive practicesWhich authorities have the power to prevent or prosecute anticompetitive or manipulative practices in the electricity sector?
European CommissionThe European Commission can enforce articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). To apply and enforce these provisions, the European Commission has the power to require production of all necessary information and to undertake all necessary inspections of companies.
In 2014, the European Commission adopted Directive 2014/104/EU on antitrust damages actions (OJ 2014, L 349/1) (the Damages Directive), which aims to remove practical obstacles to compensation for all victims of infringements of EU competition rules. The Damages Directive applies to all damages actions, whether individual or collective, that are available in the member states.
Belgian Competition AuthorityUnder Book IV of the CEL, the BCA has the power to investigate (upon complaint of another market player or at its own initiative) and prosecute anticompetitive behaviours. To this end, the BCA is entitled to request information and to conduct on-site investigations at the company’s premises.
On the basis of the Damages Directive, the Belgian parliament adopted in June 2017 the Act on Antitrust Damages, which establishes a specific civil liability regime aimed to facilitate the recovery of damages suffered by victims of anticompetitive practices. The Belgian legislation also introduces a number of claimant-friendly changes to the generally applicable liability regime in Belgium (such as the presumption that cartels cause harm, specific rules on the passing-on of cartel overcharges and the disclosure of evidence).
Energy regulatorsOne of the missions of the federal and regional regulators is monitoring and supervising the energy market and guaranteeing transparency and competitiveness of those markets. In the performance of their tasks, they have the power to investigate anticompetitive behaviour (eg, the occurrence of elevated prices and price peaks). In that framework, a formal reciprocal exchange of information and regular coordination between the CREG and the BCA has recently been put in place to allow for an efficient coordination between the regulation of the energy sector and the enforcement of competition rules.
Determination of anti-competitive conductWhat substantive standards are applied to determine whether conduct is anticompetitive or manipulative?
There are no sector-specific criteria for the energy sector under Belgian or EU competition rules and therefore the general provisions apply. Mirroring the provisions of articles 101 and 102 TFEU, articles 1 and 2 of Book IV of the CEL prohibit agreements and concerted practices among undertakings, as well as the abuse of a dominant position, which lead to the prevention, restriction or distortion of competition on the Belgian market.
Certain agreements caught under article VI.1 of the CEL or article 101 TFEU may be exempted if they yield benefits such as improving production or distribution or promoting technical or economic progress and result in a share of the benefit being allocated to consumers, provided that such agreements do not give rise to the possibility of eliminating competition in respect of a substantial part of a product or a service on the relevant market or markets.
Preclusion and remedy of anti-competitive practicesWhat authority does the regulator (or regulators) have to preclude or remedy anticompetitive or manipulative practices?
The BCA or the European Commission may take certain actions if an undertaking has intentionally or negligently breached competition rules.
If an undertaking has breached article 101 TFEU or article IV.1 of the CEL, it may be fined up to 10 per cent of its worldwide group turnover and be ordered to cease the operation of the anticompetitive behaviours. Any agreements caught under these provisions are void and unenforceable. If an undertaking has breached article 102 TFEU or article IV.2 of the CEL, it may be fined up to 10 per cent of its worldwide group turnover and be ordered to cease or modify its conduct. In addition, the European Commission or the BCA may impose structural or behavioural remedies that are proportionate to the anticompetitive behaviour of the undertaking or undertakings concerned.
The federal and regional regulators may, within their respective jurisdictions, impose sanctions and the CREG can also request the BCA to open an investigation in case of breach of certain provision of the CEL.
International
Acquisitions by foreign companiesAre there any special requirements or limitations on acquisitions of interests in the electricity sector by foreign companies?
Until 1 January 2019, subject to their compliance with the unbundling rules, no specific requirements or limitations applied in Belgium to acquisitions of interests in the electricity sector by foreign companies. The Flemish Administration Decree of 7 December 2018 sets out a new control mechanism for foreign investments to safeguard the strategic interests of the Flemish region and the Flemish community. If a legal act of a Flemish public institution results in foreign natural or legal persons acquiring a participation in or control of that institution and this threatens the strategic interests of the Flemish community or the Flemish region, the Flemish government can annul the act or declare its consequences void. Such power could be used to oppose the privatisation of power assets in Flanders.
Authorisation to construct and operate interconnectorsWhat authorisations are required to construct and operate interconnectors?
Interconnectors are considered part of the transmission system in Belgium. Consequently, their construction and operation in Belgian territory are subject to the TSO’s legal monopoly and therefore subject to the same authorisation and permitting requirements as other parts of the transmission system (see question 9).
Offshore interconnections must be structured in such a way that the TSO holds at least 50 per cent of the share capital and voting rights of the vehicle developing, maintaining and owning the offshore interconnector.
Interconnector access and cross-border electricity supplyWhat rules apply to access to interconnectors and to cross-border electricity supply, especially interconnection issues?
The Belgian electricity transmission grid is part of a larger, European interconnected system. As mentioned in question 4, grid users in principle enjoy a right to non-discriminatory grid access, including access to the interconnectors. A number of mechanisms control the flows of electricity between countries. Each Access Responsible Party (ARP) is able to exchange energy with ARPs in neighbouring countries on a non-discriminatory and non-transactional basis (ie, not involving a choice between transactions that have been entered into), while maintaining the balance between injection and offtake at the respective injection point or points falling under its responsibility.
A number of allocation mechanisms are used to allocate the desired volumes of electricity to ARPs on an annual, monthly, daily or intraday basis. Annual and monthly capacity is allocated by means of explicit auctions. At such auctions, the ARP can set the price for the import or export in relation to a specific bidding zone border for a certain volume (in megawatts) of power for each hour of the year or month in question through the acquisition of long-term transmission rights. Price formation on the European power exchanges is also influenced by market and price coupling mechanisms. The European transmission system operators have created shared rules governing the explicit auctions for allocating annual and monthly capacity.
The specific rules and requirements set out above apply to cross-border supplies of electricity to end users in Belgium.
Transactions between affiliates
RestrictionsWhat restrictions exist on transactions between electricity utilities and their affiliates?
No specific restrictions exist on transactions between electricity utilities and their affiliates. Listed electricity utilities are, however, subject to the provisions of the Belgian Companies Code, which apply to related-party transactions with a listed company. Such provisions, which do not apply to transactions between the listed company and its subsidiaries, set out a procedure that purports to safeguard the corporate interest of the listed company through a review of the relevant transaction by a committee of independent directors.
Enforcement and sanctionsWho enforces the restrictions on utilities dealing with affiliates and what are the sanctions for non-compliance?
Not applicable.
Update and trends
Key developments of the past yearAre there any emerging trends or hot topics in electricity regulation in your jurisdiction?
Key developments of the past year36 Are there any emerging trends or hot topics in electricity regulation in your jurisdiction?Key trends in Belgium include the approval of legislation to enable the granting of new offshore concessions for renewable power production in the North Sea and the introduction of a market-wide capacity remuneration mechanism to ensure the security of electricity supply beyond 2025, to offset the nuclear phase-out.
Other events worth noting include a successful capital round and anticipated internal restructuring of the TSO, to help fund the construction of the Nemo Link interconnector with the UK and other big investments in network infrastructure that are planned over the coming years. The consolidation in the retail supply market also continues.
