2009/47/EC: Commission Decision of 22 December 2008 establishing that Article 30(1) of Directive 2004/17/EC of the European Parliament and of the Council coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors is not applicable to the production of electricity in the Czech Republic (notified under document number C(2008) 8569) (Text with EEA relevance)
Date: 2008-12-22
Institutions: European Commission
Subjects: Czechia, award of contract, competition law, electrical energy, electrical industry, energy distribution, energy transport, public contract

23.1.2009

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Official Journal of the European Union

L 19/57

COMMISSION DECISION

of 22 December 2008

establishing that Article 30(1) of Directive 2004/17/EC of the European Parliament and of the
Council coordinating the procurement procedures of entities operating in the water, energy,
transport and postal services sectors is not applicable to the production of electricity in the
Czech Republic

(notified under document number C(2008) 8569)

(Only the Czech text is authentic)

(Text with EEA relevance)

(2009/47/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty
Community,

establishing the European

be unrestricted, while none of them establish that the
further condition relating to the direct exposure to
competition is met in respect of electricity production
in the Czech Republic.

II. LEGAL FRAMEWORK

the European
Having regard to Directive 2004/17/EC of
Parliament and of the Council of 31 March 2004 coordinating
the procurement procedures of entities operating in the water,
energy, transport and postal services sectors (1), and in particular
Article 30(4) and (6) thereof,

(4)

Having regard to the request submitted by the Czech Republic
by e-mail received on 3 July 2008,

After consulting the Advisory Committee for Public Contracts,

Whereas:

(1)

(2)

(3)

I. FACTS

the Commission received a Czech
On 3 July 2008,
request
of Directive
30(4)
to Article
pursuant
2004/17/EC, transmitted to the Commission by e-mail.
The Commission requested additional information by e-
mail of 26 September 2008, which was transmitted by
the Czech authorities by e-mail of 9 October 2008.

(5)

The request submitted by the Czech Republic concerns
production of electricity.

The request is accompanied by a letter from an inde­
pendent national authority, (Energetický regulační úřad,
the Czech energy regulatory authority), and by a letter
from another independent authority (Úřad pro ochranu
hospodářské soutěže, the Czech Office for the Protection
of Competition). Both of these authorities analyse the
conditions of access to he relevant market, finding it to

Article 30 of Directive 2004/17/EC provides
that
contracts intended to enable the performance of one of
the activities to which the Directive applies shall not be
subject to the Directive if, in the Member State in which
it is carried out, the activity is directly exposed to compe­
tition on markets to which access is not restricted. Direct
exposure to competition is assessed on the basis of
objective criteria, taking account of the specific characte­
ristics of the sector concerned. Access is deemed to be
unrestricted if the Member State has implemented and
applied the relevant Community legislation opening a
given sector or a part of it. This legislation is listed in
Annex XI to Directive 2004/17/EC, which, for the elec­
the
tricity sector,
European
of
and
19 December 1996 concerning common rules for the
internal market in electricity (2). Directive 96/92/EC has
been superseded by Directive 2003/54/EC of
the
the Council of 26 June
European Parliament and of
2003 concerning common rules for the internal market
in electricity and repealing Directive 96/92/EC (3), which
requires an even higher degree of market opening.

to Directive 96/92/EC of
Council

refers
Parliament

the

of

The Czech Republic has implemented and applied not
only Directive 96/92/EC but also Directive 2003/54/EC,
opting for legal and organisational unbundling for trans­
mission and distribution networks except for the smallest
distribution companies, which, while continuing to be
subject to accounting unbundling, are exempted from
the requirements of legal and organisational unbundling
having less than 100 000 customers or serving electricity
systems with consumption lower than 3 TWh in 1996.
Furthermore, the transmission system operator, CEPS, has
been ownership unbundled. Consequently,
and in
accordance with the first subparagraph of Article 30(3),
access to the market should be deemed not
to be
restricted.

(1) OJ L 134, 30.4.2004, p. 1.

(2) OJ L 27, 30.1.1997, p. 20.
(3) OJ L 176, 15.7.2003, p. 37.

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(6)

Direct exposure to competition should be evaluated on
the basis of various indicators, none of which are, per se,
In respect of the markets concerned by this
decisive.
decision,
the market share of the main players on a
given market constitutes one criterion which should be
taken into account. Another criterion is the degree of
concentration on those markets. Given the characteristics
of the markets concerned, further criteria should also be
taken into account
the
balancing mechanism, price competition and the degree
of customer switching.

the functioning of

such as

(7)

This Decision is without prejudice to the application of
the rules on competition.

III. ASSESSMENT

(8)

The request submitted by the Czech Republic concerns
production of electricity in the Czech Republic.

there would be a larger

scope, whether certain countries

9 October 2008, the overwhelming share of the growing
volume of the PXE, stems from transactions involving
CEZ. Furthermore,
the Commission has also analysed
in its Energy Sector Inquiry (2), with regards to possible
going beyond the
geographical market definitions
in Central
national
Europe could be part of possible pairs of
relevant
markets. For the Austria-Germany country pair, the size
of the main operator in Austria coupled with internal
Austrian network congestion prevented the Commission
from concluding that
than
national relevant market. Similarly,
in the case of the
Czech Republic and Slovakia, the respective size of the
dominant operators and their indispensability to meet
demand lead to the conclusion that even those two
country pairs are not part of one and the same
relevant geographic market. In addition, the Commission
has recently examined the Austrian and the Polish elec­
tricity production markets and found them to be national
in geographical scope (3). Finally,
in its recent antitrust
Decision C(2008) 7367 of 26 November 2008 against
E.ON concerning the German wholesale market (4), the
Commission has considered the latter to be national in
scope, without neighbouring countries (neither to the
west, nor the east) being part of a broader geographic
market.

(9)

larger

territory,

incorporating the territories of

The Czech request considers that the relevant geogra­
than the
phical market would be a market
national
the
Czech Republic, Poland, Slovakia, Austria and Germany.
It is argued that a main reason for this market definition
is the high share of interconnection capacity (with several
Member States) as compared to domestic generation and
demand. According to the information given by the
Czech authorities in their answer of 9 October 2008,
25,6 TWh were exported in 2007 and 9,5 TWh
imported during the same year. The Czech Republic is
thus a net exporter of electricity with net exports
amounting to 16,1 TWh, equivalent to almost 20 % (1)
of the total, net electricity generation (81,4 TWh). A
to the
further
existence of a wider geographic market is a development
towards price convergence between the national market
within the Czech Republic and the one in Germany as
well as the growing role of
the PXE Prague energy
Exchange.

submitted with respect

argument

sufficient

(10) However, relatively high interconnection capacity and
price convergence are not
to delineate a
relevant market. The local market rules, and in particular
the indispensability and dominant position of any market
player (being in the case of
the Czech Republic the
operator CEZ) can also lead to defining a narrower
it must be noted that
market.
context,
In this
the Czech authorities of
according to the reply of

(1) 19,78 %. The total (gross) exports amounted to 31,45 % of the total,
net generation, whereas the total imports amounted to 11,67 % of
the total, net generation. If seen in relation to the domestic net
electricity
consumption for 2007 (approximately 59,7 TWh
according to the Czech authorities), the total exports amounted to
42,88 % and net exports
imports
amounted to 15,91 % of the domestic net electricity consumption.

to 26,97 %, whereas

total

(11)

taking into account

Consequently, the existence of a regional market should
be rejected. This is also consistent with the statement by
the Czech Office for the Protection of Competition that
‘in assessing the (application pursuant to Article 30), the
Bureau,
its existing investigation,
started from the presumption that the relevant market
of production of electricity should be, from the geogra­
phical standpoint, defined by the territory of the Czech
Republic.’ In view of the facts set out in recitals 9 and 10
the Czech Republic should
above,
therefore be
relevant
market
for the purposes of evaluating the conditions
laid down in Article 30(1) of Directive 2004/17/EC.

considered to constitute

the territory of

the

(12) As it results from a constant practice (5) in respect of
the
to Article 30,
in respect of electricity

Commission Decisions pursuant
Commission considered that,

(2) See COM(2006) 851 final of 10.1.2007: Commission Communi­
cation:
to Article 17 of Regulation (EC) No
1/2003 into the European gas and electricity sectors, hereinafter
referred to as ‘Final Report’, Annex B, point A.2.7, p. 339.

Inquiry pursuant

the European Parliament and of

coordinating the procurement procedures of
transport and postal

(3) See Commission Decision 2008/585/EC of 7 July 2008 exempting
the production of electricity in Austria from the application of
the
Directive 2004/17/EC of
Council
entities
services
operating in the water, energy,
sectors, OJ L 188, 16.7.2008, p. 28, and Commission Decision
2008/741/EC
that
September
Article 30(1) of Directive 2004/17/EC of the European Parliament
and of the Council of 31 March 2004 coordinating the procurement
procedures of entities operating in the water, energy, transport and
postal services sectors is not applicable to the production and
wholesale of electricity in Poland, OJ L 251, 19.9.2008, p. 35.
(4) Not published in the Official Journal. See press release IP/08/1774 of

establishing

2008

11

of

26.11.2008.

(5) Most recently in the abovementioned Decisions 2008/585/EC and

2008/741/EC.

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Official Journal of the European Union

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three producers’. According

‘one indicator for the degree of competition
generation,
on national markets is the total market share of the
to ‘Table 6:
biggest
Wholesale Market Position’, p. 12 et seq. of ‘Commission
Staff Working Document: Accompanying document to
the Report on Progress in Creating the Internal Gas
and Electricity Market’ (1), the shares of the three largest
generators amounted to 69,4 % of electricity production
in 2006 and rising to 73,9 % in 2007. According to the
information given by the Czech authorities in their
the dominant company
answer of 9 October 2008,
held almost 70 % of
installed capacity, and
the total
the second and third largest held respectively 3,5 and
3 %. These levels of concentration, encompassing the
total market share of the largest three generators, are
higher than the corresponding percentage, 39, to which
and
Commission
2007/141/EC (3) refer to for the UK. They are also signif­
(52,2 %) referred to in
icantly higher than the level
Commission Decision 2008/585/EC (4)
in respect of
Austria, as well as being higher than the level (58 % of
gross production) referred to in Commission Decision
2008/741/EC (5) in the case of Poland.

2006/211/EC (2)

Decisions

is, however, an important difference between the Czech
case on the one hand and the Swedish and Finnish on
the other hand. Notably, in the Czech Republic there is a
single dominant operator with the other two largest
producers having market shares that are smaller by a
factor of 20 (3 % being the lowest share and almost
70 % the highest). In Finland the corresponding figures
show that the operator with an 18,3 % market share was
lowest among the top three and one with a 33,7 %
for Sweden there
market share the highest. Similarly,
exists a range between 17,4 % as
the lowest and
47,1 % as the highest.

(14) A constant jurisprudence should also be recalled in this
context (8), according to which ‘very large market shares
are in themselves, save in exceptional circumstances,
evidence of the existence of a dominant position. That
is the situation when there is a market share of 50 %’.

(13)

The Czech levels of concentration of the largest three
operators are finally similar to or lower than the corre­
sponding levels referred to in Commission Decisions
2006/422/EC (6) and 2007/706/EC (7) concerning,
re­
spectively Finland (73,6 %) and Sweden (86,7 %). There

(2) Commission Decision of 8 March 2006 establishing

(1) COM(2008)192 final of 15.4.2008, in the following referred to as
the ‘Annex to the 2007 Progress Report’. The Report
itself,
SEC(2008)460, will be referred to as the ‘2007 Progress Report’.
that
Article 30(1) of Directive 2004/17/EC of the European Parliament
and of the Council coordinating the procurement procedures of
entities operating in the water, energy,
transport and postal
services
to electricity generation in England,
applies
Scotland and Wales, OJ L 76, 15.3.2006, p. 6.

sectors

(3) Commission Decision of 26 February 2007 establishing that
Article 30(1) of Directive 2004/17/EC of the European Parliament
and of the Council coordinating the procurement procedures of
entities operating in the water, energy,
transport and postal
services sectors applies to the supply of electricity and gas in
England, Scotland and Wales, OJ L 62, 1.3.2007, p. 23.

(4) Commission Decision of 7 July 2008 exempting the production of
electricity in Austria from the application of Directive 2004/17/EC
of the European Parliament and of the Council coordinating the
procurement procedures of entities operating in the water, energy,
transport and postal services sectors, OJ L 188, 16.7.2008, p. 28.
(5) Commission Decision 2008/741/EC of 11 September 2008 estab­
lishing that Article 30(1) of Directive 2004/17/EC of the European
Parliament and of the Council of 31 March 2004 coordinating the
procurement procedures of entities operating in the water, energy,
transport and postal
is not applicable to the
production and wholesale of electricity in Poland, OJ L 251,
19.9.2008, p. 35.

services

sectors

(6) Commission Decision of 19 June 2006 establishing

that
Article 30(1) of Directive 2004/17/EC of the European Parliament
and of the Council coordinating the procurement procedures of
entities operating in the water, energy,
transport and postal
services sectors applies to the production and sale of electricity in
Finland, excluding the Åland Islands, OJ L 168, 21.6.2006, p. 33.
the
production and sale of electricity in Sweden from the application
of Directive 2004/17/EC of the European Parliament and of the
the procurement
Council of 31 March 2004 coordinating
procedures of entities operating in the water, energy,
transport
and postal services sectors, OJ L 287, 1.11.2007, p. 18.

(7) Commission Decision of 29 October 2007 exempting

(15)

(16)

its

than 11 % of

to slightly more

The level of electricity imports into the Czech Republic
amounts
total
demand (9), which, while higher than the share of elec­
tricity imports into Poland, reaches less than half of the
share in the case of Austria (10) (11). Also in the Swedish
and Finnish cases, the high levels of concentration of the
three largest producers are ‘offset’ by the ‘competitive
pressure on the […] market deriving from the potential
to import electricity from outside […]’ (12). It is therefore
difficult to find that there would be a substantial compe­
titive pressure from imported electricity in the Czech
there would be transport
Republic and the fact
imports substantially is
capacity to raise the level of
the Czech Republic has
only theoretical, given that
been a net exporter each year since at least 2003 and
will continue to be so in the mid-term. This level of
concentration therefore cannot be taken as an indicator
of direct exposure to competition of
the generation
market.

that

The Czech authorities’ answer of 9 October 2008 also
future
points towards CEZ planning the majority of
large-scale generation projects on the
transmission
network level, through in particular envisaged nuclear
new-build,
the
existing Dukovany nuclear plant as well as coal- and
gas-fired power plant projects. Besides CEZ’s plans,

the planned life-time

extension of

(8) See point 328 of the judgment of the Court of First Instance (Third
Chamber) of 28 February 2002. Atlantic Container Line AB and
the European Communities. Case T-
Others v Commission of
395/94. European Court reports 2002 Page II-00875.

(9) i.e. the quantity of electricity needed for internal consumption and

exports.

(10) 23,5 % according to information given by the Austrian authorities.
‘[…] imported electricity
(11) See recital 10 of Decision 2008/585/EC.
in

accounted for approximately a quarter of
particular for base load power.’.

total needs,

its

(12) See, e.g. recital 12 of Decision 2007/706/EC. Indeed, in the Swedish
and Finnish cases, the existence of a regional market has been left
open, which, if taken as reference, brought the levels of concen­
tration to 40 %.

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there are also projects, especially in the field of renewable
energy sources, which are planned by others in part at
the transmission level and in particular at the distribution
level.

(17)

total

amount of

electricity produced

Furthermore, even though they represent a small part of
the
and/or
consumed in a Member State, the functioning of the
balancing mechanisms should also be considered as an
additional
indicator. According to the available infor­
mation, the workings of the balancing mechanism – in
particular
the markets based pricing and the well-
developed intra-day market with one-and-a-half hourly
gate closures, that is the possibility for network users
their position every one-and-a-half hours –
to adjust
are such that it does not constitute an obstacle to elec­
tricity production being subject to direct exposure to
competition.

the

competitive

In respect of

the
(end)users,

state of
large industrial

(18) Given the characteristics of the product concerned (elec­
tricity) and the scarcity or unavailability of suitable
substitutable products or
services, price competition
and price formation assume greater importance when
electricity
assessing
the
markets.
number of customers switching supplier may serve as
an indicator of price competition and, thus,
indirectly,
‘a natural indicator’ of the effectiveness of competition.
If few customers are switching, there is likely to be a
the market, even if
problem with the functioning of
the benefits from the possibility of renegotiating with
ignored (1).
the historical
should not be
‘the existence of regulated end-user prices
Furthermore,
is clearly a key determinant of customer behaviour […].
Although the retaining of controls may be justified in a
period of
cause
distortions as the need for investment approaches’ (2).

increasingly

these will

transition,

supplier

(19) According to the latest available information, switching
rates in the Czech Republic have been qualified as being
at a ‘high level’ (3) and, according to the latest infor­
mation given by the Czech authorities in their answer
of 9 October, ‘since the electricity market opening almost
every second customer in the large customer segment has
changed its electricity supplier’. This must be seen against
the background of the situation as set out in the previous
Decisions concerning the electricity sector
in which
switching rates for large and very large industrial users
ranged from more than 75 % (Decision 2006/422/EC
concerning Finland) to 41,5 % (Decision 2008/585/EC

(1) 2005 Report, p. 9.
(2) Technical Annex, p. 17.
(3) See the 2007 Progress Report, p. 8, point 7.

industrial

etc.) have

concerning Austria). Furthermore, supply markets (for
household,
in the
customers,
Commission’s prior decision practice been defined as
to the
separate product markets,
supply
influence
companies, have a different competitive landscape the
wholesale or generation market. The high level of
switching can therefore not be taken as an unequivocal
indicator of direct exposure to competition.

and may, due
and well-established

strong

of

the

shares of

In respect of production of electricity in the Czech
the situation can thus be summarised as
Republic,
follows:
three
the aggregate market
biggest generators are high, but more importantly, the
biggest generator on its own represents a market share
of almost 70 %, without
this having been counterba­
lanced by imported electricity, as the Czech Republic
has on the contrary been a constant net exporter of
substantial quantities of electricity over at least the past
5 years. As set out in recital 17, the functioning of the
balancing mechanism does not constitute an obstacle to
direct
electricity
to competition of
generation market and there
is a high degree of
switching. The well-functioning balancing mechanism
switching can not, however,
and the high level of
outweigh the quite high degree of concentration, and
in particular the high share of the greatest producer,
taking into account also the jurisprudence mentioned
under recital 14 above.

exposure

the

IV. CONCLUSIONS

In view of the factors examined in recitals 9 to 20, it
should be concluded that production of electricity is
currently not directly exposed to competition in the
Czech Republic. Therefore Article 30(1) of Directive
2004/17/EC is not applicable to contracts intended to
in the Czech
enable the pursuit of
2004/17/EC
Republic.
continues
to apply when contracting entities award
contracts intended to enable generation of electricity to
be carried out
in the Czech Republic or when they
organise design contests for the pursuit of such activities
in the Czech Republic.

those activities
Directive

Consequently,

(20)

(21)

(22)

This Decision is based on the legal and factual situation
as of July to October 2008 as it appears from the infor­
the 2007
mation submitted by the Czech Republic,
the
Communication and the 2007 Staff Document,
Final Report as well as the 2007 Progress Report and
the Annex thereto. It may be revised, should significant
changes in the legal or factual situation mean that the
conditions
the applicability of Article 30(1) of
Directive 2004/17/EC are met,

for

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HAS ADOPTED THIS DECISION:

Article 1

Article 30(1) of Directive 2004/17/EC is not applicable to production of electricity in the Czech Republic.
Consequently, Directive 2004/17/EC shall continue to apply to contracts awarded by contracting entities
and intended to enable them to carry out such activities in the Czech Republic.

This Decision is addressed to the Czech Republic.

Article 2

Done at Brussels, 22 December 2008.

For the Commission

Charlie McCREEVY
Member of the Commission