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The Energy Agreement of 29 March 2004 - New Perspectives in the Danish Energy Sector

19 March 2004

On 29 March 2004 Bendt Bendtsen, Minister of Economic Affairs and of Business and Industry, has entered into a political agreement with a majority of the other political parties substantially regarding ownership to the overall electricity transmission grid and system-responsibility, as well as regarding the construction of large windmill parks. Furthermore, the major barriers with respect to the acquisition of Danish public utility companies as well as with respect to the Danish public utility companies' business-related development have been removed. Hereinafter, the Minister will introduce the necessary bills, in order that the amendments to the legislation can become effective as of 1 January 2005.

From the agreement the following may be highlighted,

  • The future ownership to the overall transmission grids and the operation of the system-responsibility shall be transferred to the Danish central government. This will imply the possibility of a more effective competition within production enterprises and electricity selling enterprises.

  • The breakdown of the tied-up equity and the free equity of the electricity grid companies is cancelled, which will solve the present conflict between some electricity companies and the Danish central government regarding the companies' reversal of any tied-up equity to the consumers. The companies will gain full authority to dispose of its total equity, but at the same time a new price regulation will be implemented in order to make sure that the amendment will not result in increased prices detrimental to the consumers.

  • That the present restriction in ownership of the collective electricity supply enterprises which have hampered investment, structural adjustments and consolidation of the Danish electricity sector is cancelled. Among other factors the required consumer influence will be amended to the effect that the owners of grid companies will get controlling interest, and electricity production companies and electricity trading companies will be allowed to own the collective electricity supply companies. We expect that the amendments will imply that some municipalities will consider selling their electricity enterprises. We note, however, that the agreement does not amend the present provisions concerning reduction of the block grant to the municipalities in case of sale of their ownership shares.

  • That the subsidisation to windmills and decentralised co-generation of heating and power will be restructured to the effect that the total production of electricity will enter the free market to the advantage of the consumers and consequently increased competition between the electricity enterprises.

You can read more about the Energy Agreement of 29 March 2004 here.

For further information or questions, please contact attorney-at-law Poul Flemming Hansen or attorney-at-law Michael Skovgaard Christensen.