Energy E2 did not impose excessive prices
22. december 2010
On December 22nd 2010 the Danish Competition Council decided that the Danish electricity production company Energy E2 A/S (hereinafter E2) did not infringe Competition law by abuse of dominance by imposing excessive prices on the wholesale market for electricity in Eastern Denmark in the period from July 1st 2003 to December 31st 2005.
The case against E2 was initiated in response to a complaint from costumers. In the case markets that are characterized by structural problems resulting in limited competition e.g. high barriers for entry – as is the case for the Danish wholesale market for electricity – there is a special need for investigating the behaviour of the dominant player (E2).
The E2-case is in many ways similar to the Elsam-cases (handled by the Danish Competition Authority in 2005 and 2007) concerning the Western Danish wholesale market for electricity. In these cases the Danish Competition Council decided (which was confirmed by the Tribunal Court) that Elsam had infringed competition law by imposing excessive prices on the Danish wholesale market in the period from July 1st 2003 to July 1st 2006. Elsam has appealed the decision and the case is now pending at the Maritime and Commercial Court.
Overall the Danish Competition and Consumer Authority applied the same economic framework as in the Elsam-cases (herein after: the Elsam-abuse-test). Yet in the E2-case – opposite that of the Elsam-cases – the Elsam-abuse-test came out inconclusive. Hence on the one hand side the test showed that E2 did not obtain a high overall yield rate. Yet, on the other hand, the test identified a number of hours in which E2 obtained extreme profit-rates which could potentially indicate that E2 – in some hours manipulated the prices upward. In light of this a supplementary analysis of the bid curves of E2 was carried out in order to identify the strategic behaviour of E2 in hours with extreme profit-rates.
The bid-curve-analysis compares – hour by hour – E2’s production costs to the company’s actual bid-curve. The analysis found that E2 did in fact cause very high prices in 67-84 hours, yet in most of the identified hours E2s was able to present objective and documented cost-related reasons for the behaviour.
The overall assessment of abuse relies on a general assessment taking all relevant factors into account. In this light the analyses carried out the Competition and Consumer Authority concludes that E2 did not abuse its dominant position by operating a price strategy on Nord Pool that resulted in excessive pricing during the period July 1st 2003 till December 31st 2005.