The European Commission accepted commitments from CEZ concerning the Czech electricity market and made them legally binding

Brussels, 11-4-2013 — /europawire.eu/ — The European Commission has accepted a set of commitments offered by CEZ, the Czech electricity incumbent. These commitments are now legally binding. The Commission had concerns that CEZ may have abused its dominant market position by reserving capacity in the transmission network in order to prevent competitors from entering the market. After the Commission opened an investigation under EU antitrust rules that prohibit such behaviour (see IP/11/891), CEZ offered to divest a significant generation capacity. Following a consultation of market participants (see IP/12/766), the Commission is satisfied that the final commitments offered by CEZ adequately address its concerns.

Commission Vice-President in charge of competition policy Joaquín Almunia commented: “More competition leads to lower prices. The divestiture of significant generation capacity will allow a new player to enter the Czech electricity market and to compete with the incumbent CEZ. This will benefit all electricity customers. ”

In the course of its investigation, the Commission came to the preliminary view that CEZ might have hindered entry into the Czech market for the generation and wholesale supply of electricity, in particular through making a pre-emptive capacity reservation in the transmission system network which it did not need at that moment.

To address the concerns expressed by the Commission, CEZ proposed to divest about 800 – 1 000 MW of its generation capacity. More specifically, CEZ offered to sell one of the following generation assets in the Czech Republic: (i) Pocerady, (ii) Chvaletice or (iii) Melnik III together with Tisova. Acquiring any of these assets should allow the buyer to establish itself on the Czech market for the generation and wholesale supply of electricity. The new entrant should then be able to gradually develop a wider portfolio of generation assets and to compete effectively with CEZ.

CEZ will carry out the sale under the supervision of a monitoring trustee, who will verify in particular that the transaction would not raise new competition concerns. The buyer will have to be approved by the Commission.

Background

Article 102 of the Treaty on the Functioning of the European Union (TFEU) prohibits the abuse of dominant market positions.

After unannounced inspections in 2009 (see MEMO/09/518), the Commission opened an in-depth investigation into the Czech electricity sector in June 2011 (see IP/11/891). After CEZ offered commitments to address the Commission’s concerns, the Commission consulted market participants by carrying out a market test in July 2012 (see IP/12/766).

The Commission’s decision (a so-called “commitment decision”) is based on Article 9 of the Antitrust Regulation (Regulation 1/2003 on the implementation of the TFEU’s competition rules). It takes into account the results of the market test. The decision, which does not reach a finding on an infringement of EU competition rules, legally binds CEZ to the commitments it offered and ends the Commission’s investigation.

If CEZ were to break its commitments, the Commission could impose a fine of up to 10% of CEZ’s total turnover without having to prove a violation of EU competition rules.

More information is available on the Commission’s competition website, in the public case register under the case number 39727.