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The Danish Competition Council Abolishes a Commitment from DONG Energy

28. maj 2014

On 28 May 2014 the Danish Competition Council abolished a commitment from a merger between Elsam (now DONG Energy) and Nesa in 2004. The commitment obliged DONG Energy to auction 600 MW electricity generation capacity through Virtual Power Plants. The commitment was required to recover competition in the post-merger wholesale market for electricity in Western Denmark. During the past decade, the market conditions have improved significantly and there is now a strong competitive pressure on DONG Energy. Accordingly, the commitment is no longer necessary for competition in the wholesale market for electricity in Western Denmark.

In 2004 the Danish Competition Council approved a merger between Elsam and Nesa with commitments. The Danish Competition Council had concerns that the merger would make Elsam able to affect prices independent of other competitors in the wholesale market. Consequently, one of the commitments obliged Elsam to auction 600 MW of generation capacity through Virtual Power Plants in order to facilitate competition in the wholesale market for electricity in Western Denmark.

DONG Energy acquired Elsam in 2006 and has since then been bound by the commitments given by Elsam.

The market conditions have significantly improved since the merger. Firstly, the import capacity on the transmission cables to Germany, Norway and Sweden has been expanded. Consequently, the competitive pressure on DONG Energy from generators in the neighboring countries has increased significantly since 2004.

Secondly, the Swedish company Vattenfall has acquired large power plants in Western Denmark. Vattenfall’s acquisition of generation capacity has also significantly increased the competitive pressure on DONG Energy in Western Denmark.

Thirdly, the large increase in windmill capacity has also increased the competitive pressure on DONG Energy in Western Denmark.

Fourthly, the smaller heating companies that hold a combined heat and power plant have also increased their participation in the wholesale market for electricity which enhances competition in the market.

It is the Danish Competition Councils assessment that the improved market conditions have created a stronger competitive pressure on DONG Energy. Consequently, DONG Energy no longer has the market power to affect prices independent of other competitors in the market. Accordingly, it is the Danish Competition Councils assessment that the commitment regarding auctions of 600 MW generation capacity trough Virtual Power Plants is no longer needed in order to ensure competition in the wholesale market for electricity in Western Denmark.

Read the decision from 2004 

For more information please contact Head of Division, Jacob Schaumburg-Müller, phone +45 71 51 18, e-mail jsm@kfst.dk.