The Federal Energy Efficiency Act(1) seeks to implement the EU Energy Efficiency Directive (2012/27/EC) and requires energy suppliers to take energy efficiency measures amounting to at least 0.6% of their total energy supply to domestic end customers in the previous year. These obligations were implemented for the first time in 2015. These measures must be reported to the national energy efficiency monitoring body by November 14 of each calendar year. By that time, energy suppliers must have properly implemented the efficiency measures or acquired them from a third party. The measures must originate from the commitment year. The definition of an 'energy efficiency measure' and how cost savings will be calculated is defined abstractly in Section 5(1)(8), in conjunction with Appendix 1 of the act, and concretely by the implementation order to the act,(2) which entered into force on January 1 2016.
If an energy supplier cannot reach the savings target (0.6%) with its energy efficiency measures, it may buy its way out. According to Section 21(2), companies must pay the federal government €0.20 per kilowatt hour of the remaining gap as a compensation payment. Since the tariff has a penalising character, energy suppliers are effectively required to purchase efficiency measures from third parties on a large scale. For this purpose, they can:
- approach their own customers;
- approach external end customers;
- shop around for energy efficiency measure trading platforms; or
- purchase measures from measure traders.
Thus, the act seeks to establish a trading market for energy efficiency measures.
Companies that take efficiency measures may transfer them to energy suppliers. Efficiency measures should thus be of a market value that motivates future measure takers. It is evident that, in order to meet the obligations set out in the act, energy suppliers must use the transfer mechanism established in this regard. Competitive energy suppliers must try to find the most cost-effective savings measures available on the market in order to minimise the increased obligations imposed on them in light of the act. Lower surcharges can be turned into price advantages and ultimately into increased market share.
Reporting energy efficiency measures
Energy suppliers must report their annual efficiency measures to the national monitoring body by February 14 of the following year. If the measures cannot be implemented in the respective obligation period, they must be reported within a three-month grace period. According to Section 10(1), in addition to the measures taken by the supplier, measures acquired from measure takers are permitted. Section 27 refers to "the terms of civil law", under which the transfer of measures must occur at a flat rate. If the energy supplier fails to report an acquired measure to the monitoring body by February 14, that measure will be considered invalid (Section 15(1)(1) of the implementation order).
Notably, registration does guarantee that the measures will be recognised. The monitoring body has a period in which it can review the correctness of the reported measures and delete any invalid ones therein.
Section 10(3) expressly allows for late registration (up to a three-month grace period) of measures for the previous year. This provides energy suppliers with a second chance to take any necessary measures. The obligation to pay compensation is also delayed accordingly. Further, according to Section 24(6), energy suppliers are permitted a three-month grace period to address any gap caused by a measure being found invalid by the monitoring body.
Trading and transfer of energy efficiency measures
According to Section 27(4)(2), transfers of efficiency measures occur through agreements "in accordance with the terms of civil law". Therefore, in principle, transfers can be freely constructed. However, the principle of freedom of contract is negated in some aspects in the case of energy efficiency measure trading. Thus, Section 27(4)(2) sets out that measures taken during a calendar year can be transferred up to three times by February 14 of the following year. The debate in this context is whether measures lose their value if they are not transferred to an energy supplier by February 14 deadline.
Bergthaler and Holzinger argue that Section 27(4)(2) refers only to additional transfers and that these are to be distinguished from first transfers. According to this opinion, efficiency measures registered with the monitoring body can be transferred to energy suppliers for the first time even after February 14. By contrast, a subsequent transfer or a transfer of an efficiency measure that has already been transferred (traded) once before February 14 is not permitted after that date. The same applies for measures that were not registered with the monitoring body by the February 14 deadline.
Christian Schneider presents a different opinion. He argues against the differentiation between the first transfer and subsequent transfers, with reference to the statutory materials. According to this view, efficiency measures can be transferred to energy suppliers only until February 14; otherwise they lose their value. The Ministry of Economics has aligned itself with the opinion of Bergthaler and Holzinger, but it remains to be seen whether the monitoring body or future court rulings in this regard will follow this interpretation.
If the aforementioned grace periods have expired and no measures – or only measures that are insufficient with regard to the savings obligation – are reported, the energy supplier in question must pay compensation. If this payment obligation is violated, an administrative prosecution can be opened against the supplier.
Passing compensation payment onto customers
In practice, energy suppliers have attempted to pass on any required compensation payments to their customers. For this purpose, energy suppliers regularly refer to price escalation or cost recovery clauses provided in energy supply contracts. However, in individual cases, disputes can arise over whether the contractual clauses in question justify the passing on of compensation payments in relation to the act, particularly since a compensation payment is not a primary payment and thus need not necessarily be seen as a tax or fee (regularly passed onto customers). Because energy suppliers ultimately have a strong interest in avoiding losing their customers to competitors due to a dispute regarding the passing on of costs associated with the act, they will typically agree on an appropriate cost regulation with their customers. Nevertheless, it is recommended that the transfer of efficiency measures implemented by the energy supplier's own energy customers be thoroughly regulated by contract. In particular, disputes can arise with regard to the transfer of compensation payments that would typically be required. As such, regulations should be put in place regarding how to proceed in case the monitoring body illegally disregards an efficiency measure (eg, late registration, replacement procurement or lodging an appeal). This is particularly important in light of the fact that the question of whether the eligibility rules contained in the implementation order also apply to efficiency measure taken before January 1 2016 (the date on which the order entered into force) has not yet been adjudicated.
For further information on this topic please contact Bernd Rajal at Schoenherr by telephone (+43 1 53 43 70) or email (firstname.lastname@example.org). The Schoenherr website can be accessed at www.schoenherr.eu.
(1) Bundes-Energieeffizienzgesetz, Federal Law Gazette I 72/2014.
(2) Energieeffizienz-Richtlinienverordnung, Federal Law Gazette II 394/2015.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.