Cities and municipalities should no longer be penalized for energy conservation

Agora Energiewende has proposed a reform of German concession fees. The goal is to prevent towns and communities from being penalized for conserving energy. Each year, electricity and gas consumers pay some 3.5 billion euros to German municipalities so that operators of electricity grids and gas networks can use public property for their lines. Up to now, these concession fees have been reliable sources of revenue. But this income will decline for two reasons: first, households, businesses, and industry are reducing their consumption of electricity and gas; and second, people are increasingly generating their own electricity. Up to now, these fees have been based solely on the amount of electricity and gas consumed, with 0.03 to 2.39 cents being tacked onto each kilowatt-hour of electricity and gas. "The budgets of local governments should not suffer just because citizens are consuming less electricity and gas and generally becoming more efficient," warns Rainer Baake, director of Agora Energiewende<link service glossar energiewende>. "A better approach would be to have the fee based on the line capacity for electricity and gas connections – in other words, not based on kilowatt-hours consumed, but on the connection's kilowatts. After all, the concession fee is the price that the network operator pays to install lines on public property. Technically, it makes no difference whether a lot of energy flows through these lines are not. It would therefore be better to have the concession fee charged as a flat rate; in this way, the cost of our electricity and gas supply would be distributed more equitably."  Law firm Raue LLP, renowned experts in energy law, reviewed the proposal on behalf of Agora Energiewende, the European Climate Foundation, and the Regulatory Assistance Project. The legal experts found that the concession fee can be legally linked to the capacity of power and gas connections if the concession fee ordinance and the German Energy Management Act are amended. The "Reform proposal for concession fee rules" would first determine the average income from the concession fees for each municipality over the past few years. This amount would then be converted into fees for the capacities of all electricity and gas connections in a given municipality. For instance, power customers with a small connection (low capacity) would pay a lower concession fee than those with a powerful connection. The revenue paid to each municipality would remain unchanged. "This approach ensures that prices remain the same for the average power and gas customer even as it changes the rules so that municipalities do not see their revenue decrease as our power supply changes and energy efficiency increases," Baake says. The legal review, including detailed facts about how revenue from the concession fee would develop and which laws would need to be changed for the proposal to be implemented, is available for downloading. The review is in German language, however, it includes an English abstract.