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The German power sector is now open for business. Legislation took effect at the end of April to liberalise the market after being passed by parliament in November. "After five decades of a monopoly industry, we have finally succeeded in breaking open the protected supply areas," enthuses economy minister Günter Rexrodt. "In future, consumers are free to choose their supplier. This reform of energy law is a victory for competition over monopolies."

Electricity generated by renewable energy and combined heat and power systems is given special status under the reform, but what this means in practice remains to be seen. The new legislation abolishes utilities' demarcated supply areas, as well as exclusive contracts between utilities and municipalities for the use of public rights of way for cable and pipeline routes. It also introduces access to the grid and pipelines for third party players. An alternative competitive system, dubbed "single buyer," in which municipal utilities take on a kind of electricity wholesaler role, is also allowed -- initially until 2005.

In the short to middle term, customers can expect a fall in electricity prices, according to Heinz Klinger, president of the German utilities' association Vereinigung Deutscher Elektrizitätswerke. He also expects that with the appearance of power traders and brokers on the German market, a power exchange will be set up within the next few years.

Renewables are catered for in the new legislation within an amended version of the Electricity Feed Law, which sets the Renewable Energy Feed in Tariff (REFIT). Utility giant Preussenelektra is threatening to appeal this amendment to the Federal Constitutional Court (“uåX˜äŠÊ˜·³Ç, May 1998) and to the European Commission. Meanwhile, in parliament, the Social Democrats plan to take a scalpel to the new law if they win the federal election in September, removing the time limit on the single buyer system and attempting to create a more encouraging climate for renewable energies and energy saving.

The competitive market is more or less ruled out in eastern Germany until 2003 to protect the massive investment in lignite mining and power stations after reunification.