D. PREVIOUS EFFORTS TO PROVE MANIPULATIONS
I. P REVIOUS APPROACHES TO PROVE ANTITRUST MANIPULATIONS
Based on the former Art. 82 TEC (now Art. 102 TFEU), the European Commission conducted a sector inquiry into the European gas and electricity sectors with a focus on the years 2002 to 2006.662 This inquiry came to the result that there was a substantial scope for excessive pricing at the EEX.663
The European Commission bases its findings on several different analyses:
662 Commission of the European Communities, Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the European gas and electricity sectors (Final Report), SEC(2006) 1724. Accompanied by Commission of the European Communities, Commission staff working document, COM(2006) 851 final.
663 Commission of the European Communities, Commission staff working document, COM(2006) 851 final, 146 Ref. 436 and p. 150.
(1) The analysis of concentration in generation, mainly looking at ownership of pro-duction assets, and the subsequent analysis of concentration in trade both in spot and forward trading serve the purpose of proving market power of the main sellers.664
(2) Subsequent, the Commission analyses the scope for excessive pricing in the Eu-ropean power markets. As a piece of evidence, the frequency of bids being the market clearing price in a certain hour is examined, as well as the frequency of bids in the close periphery of the market clearing price.
(3) Eventually, the possibilities to withdraw capacity are assessed using a calculation of plant load factors and observations of plant retirements in the period of exam-ination.
The relevant approaches in proving capacity retentions named in (2) and (3) shall be examined further to see whether they are qualified to prove manipulations convincingly.
The Commission acted on the assumption that the residual demand in the power market is supplied by a few or even just one operator.665 Accordingly, the examination of the operators´ price setting frequency was supposed to reveal all hours in which the “selling bid was equal to the clearing price”, resulting in a scope for excessive pricing.666 The data collected for the case of the EEX did reveal a large number of operators who were alter-natively setting the clearing price with their bids. In fact, there were eight operators setting the clearing price in more than 5 percent of the hours examined.667 On the basis of this data, therefore, the Commission could not conclude that a single operator was influencing the spot market price at the EEX.
In a second step, the European Commission examined which operators placed bids in a +/- 10 percent interval around the clearing quantity to identify “whether any operator offered more than 50 percent of the quantity in that interval.668 This analysis came to the result that at the EEX, concentration of bids around the clearing price increased rapidly in 2005. The monthly average of “peak hours when the largest price setter controlled more than 50 percent of the offers of electricity offered at a price around the clearing price”
664 Ibid, 132 et sqq. The Commission does come to the conclusion that the market concentration allows for the exercise of market power, see e.g. Petra Linsmeier and Christian Hamman, “Die Ergebnisse der Sektorunter-suchung Energie und die neue Energiepolitik in Europa: Konsequenzen für die Entflechtung”, et Vol. 57, no. 5 (2007), 93.
665 Commission of the European Communities, Commission staff working document, COM(2006) 851 final, 142 Ref. 428.
666 Ibid, 143 Ref. 429. The period of examination covered each month of the year 2004 and the first eight months of the year 2005.
667 Ibid, 144 Ref. 432. For the detailled data also in comparison with other European power exchanges, please refer to Table 20 on p. 144.
668 Ibid, 145 Ref. 434.
jumped from 11 percent in 2004 to 25 percent in the first eight months of 2005. The same observation was made with regard to the monthly maximum, which increased from 25 per-cent of the hours in 2004 to 52 perper-cent in 2005.669 Therefore, the Commission suggested that the EEX might have become a platform for the optimization of peak plants.
This analysis did however not permit inferences on actual capacity retention by power sellers. As the Commission pointed out itself in the report, this data only allowed for an assessment of the scope for manipulations, but not for conclusions whether the scope had actually been used.670 To verify possibilities to withdraw capacity, the Commission exam-ined the level of utilization of power plants.671 For this purpose, so-called load factors of power plants owned by the main generators have been calculated. The load factor is de-fined as follows:672
Load Factor = Effective production of plant x Maximal possible production of plant x
Throughout the period of investigation covering the years 2000, 2004 and the first tri-mester of 2005, the Commission found an increase in the correlation between marginal costs of production and load factor of the plants. This observation was especially made for the load factors of low marginal cost plants in Germany.673 In addition, the Commission found a decrease of total generation capacity for the four main German operators between 2000 and early 2005 despite slowly increasing demand.674 Based on these findings, the inquiry came to the result that a tighter supply/demand balance developed on the market, and especially plants with low marginal costs did not operate at their maximum at all times.675 However, also these results did not allow for definite conclusions on manipula-tions. With respect to variations of the load factors of certain plants, the Commission acknowledged that e.g. cogeneration plants might have been run according to the need to
669 Ibid, 146 Ref. 436. For the detailled data on Europe´s exchanges please refer to table 21 in the EC report.
670 Ibid,142 Ref. 428.
671 Ibid, 146 Ref. 438.
672 The following formula assumes that all other market terms remain equal and refers to the numbers of hours that the plant has been generating electricity during one production period. For the definition see ibid, 147 Ref. 440.
673 Ibid, 147 Ref. 442.
674 Ibid, 149 Ref. 445.
675 Ibid, 150 Ref. 448. Similar for exemplary weeks in the year 2006 Alfred Richmann and Annette Loske,
"Gibt es strategisches Verhalten auf dem Strom-Spotmarkt?," et Vol. 57, no. 4 (2007), 9 et sqq.
produce heat instead of focusing in the power production.676 Furthermore, technical con-straints, maintenance obligations, etc. might have falsified the results.677 Similarly, plant retirements might be explained by the age of the plant concerned.678
Therefore, the European Commission sector inquiry did not succeed in providing substan-tial evidence for actual manipulations by one of the established power sellers that could stand up in court.
2. The FCO sector inquiry (2011)
In its 2011 sector inquiry, the FCO chose a similar approach as the Commission to prove manipulations through capacity retention by the established firms. The authority collected data on marginal cost and operation of power plants for the sample period. Using an ad hoc designed algorithm qualified to identify the optimal operation mode for any generation unit from the data, a comparison with the actual operation mode of the gener-ation units was rendered possible.679 Since the optimization was conducted from an ex post perspective without uncertainty, a certain tolerance with regard to deviations was taken account of, such that only “considerable reductions in plant operation in substantial time periods can be considered as valid indicators for abusive retention of power plant capacity”.680
The FCO found 9.9 TWh of unused capacity during the sample period, whereupon in almost any hour examined at least 100 MWh of plant capacity were withdrawn, mainly from hard and brown coal plants (68 percent of all capacity not used).681 The authority therefore concluded that with the help of the optimization algorithm, some indications for the non-operation of power plants on the part of the huge power generators could be found. The firms´ information with regard to technical restrictions and maintenance of plants, reveal-ing an average outage of about a quarter of the time in the sample period, arouses further suspicion with regard to fair market behavior, since fringe suppliers did have considerable less outages.682 However, the evidence did not lead to the conclusion of actual abusive
676 Ibid, 147 Ref. 443.
677 Ibid, 311 Ref. 998.
678 Ibid, 149 Ref. 445.
679 Federal Cartel Office, Sektoruntersuchung Stromerzeugung/Stromgroßhandel, N° B10-9/09, 134.
680 Ibid, 148.
681 Ibid, 157. See also Peter Becker, “Die Sektoruntersuchung Stromerzeugung/Stromgroßhandel des Bundes-kartellamts: Ausgezeichnete Analyse, unzureichende Konsequenzen”, ZNER Vol. 15, no. 2 (2011), 118.
682 Federal Cartel Office, Sektoruntersuchung Stromerzeugung/Stromgroßhandel, N° B10-9/09, 210.
behavior in the market, since tolerable deviations in operation due to the ex post optimi-zation model, as well as trade activities on the intraday market might disprove the find-ings.683
An appropriate proof for manipulative behavior that would result in the initiation of legal proceedings was therefore not part of the sector inquiry.684 The authority referred to a lack of data and resources to conduct even more complex analyses of market behavior.685
3. Conclusion
The above survey of former efforts to prove manipulations of the energy market has revealed serious impediments. In both cases, manipulations could not be proved in spite of serious suspicious facts.686 An expertise for the German Bundestag from 2011 came to the conclusion that calculations of optimal plant operation could not serve as reliable indi-cators for manipulations due to lacking or non-verifiable data and the obligatory ex post perspective.687 The proof of manipulations would rather require detailed behavior-based analyses of the market, followed by a normative evaluation of the facts for which the data collected may only serve as an indicator.688
The following section II. will show that also in the field of capital market law, efforts to prove manipulations were not successful. Thereafter, the findings are summarized and a brief outlook on the solution to the shortcomings in enforcement proposed in this work is given.
683 Ibid, 157-158.
684 Fouquet, Dörte, Angela Seidenspinner, and Thomas Füller, “Kurzgutachten Wettbewerbs- und energiepoliti-sche Lücken der Sektoruntersuchung Stromerzeugung, Stromgroßhandel des Bundeskartellamtes vom Januar 2011”, 6.
685 Peter Becker, “Die Sektoruntersuchung Stromerzeugung/Stromgroßhandel des Bundeskartellamts: Ausge-zeichnete Analyse, unzureichende Konsequenzen”, ZNER Vol. 15, no. 2 (2011), 118. Federal Cartel Office, Sek-toruntersuchung Stromerzeugung/Stromgroßhandel, N° B10-9/09, 160.
686 Similar Konar, Wettbewerbskonforme Stromgroßhandelspreise: Eine Untersuchung über die Integrität und Transparenz des Energiegroßhandelsmarkts (München: C.H. Beck, 2015), 61.
687 Fouquet, Dörte, Angela Seidenspinner, and Thomas Füller, “Kurzgutachten Wettbewerbs- und energiepoliti-sche Lücken der Sektoruntersuchung Stromerzeugung, Stromgroßhandel des Bundeskartellamtes vom Januar 2011”, 11.
688 Fouquet, Dörte, Angela Seidenspinner, and Thomas Füller, “Kurzgutachten Wettbewerbs- und energiepoliti-sche Lücken der Sektoruntersuchung Stromerzeugung, Stromgroßhandel des Bundeskartellamtes vom Januar 2011”, 11.