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Regulator to challenge Verbund domination

31 March 2005 – Germany’s big four utilities will have their domination of the German market challenged as the country’s new energy regulator, RegTP, sets about removing the barriers to entry.

A new report from Datamonitor suggests that the Verbund utilities, which include EON, EnBW, RWE and Vattenfall, will have to unbundle their assets in the interest of competition.

Richard Greenwood, Datamonitor energy managing consultant and report author, said: “The unbundling will reduce the scope for the Verbund to cross subsidize retail operations with their upstream cousins. The harmonizing of access costs will allow greater scope for new entrants to offer nationwide pricing policies.”

Analysts at Datamonitor suggest that the Verbund are at a significant advantage due to their vertically integrated set up, which enables them to ride any potential undercuts to their energy margins by generating higher returns elsewhere in the power supply chain.

The business information company expects retail competition to pick up as the new regulator addresses the issue of unbundling networks and tries to make network access costs more consistent.

Datamonitor’s German Utilities Equity Database has highlighted that the Verbund own 37 per cent of equity in power customers outright and up to 57 per cent when their downstream equity is fully considered. The Verbund have accumulated 66 per cent of Germany’s power generation capacity and the majority of the country’s high power transmission networks.