IERN International Energy Regulation Network

The sector has mixed ownership.

The two major generating companies are state-owned DONG Energy and Swedish Vattenfall (owned by the Swedish state). A great number of smaller generating companies/plants (each with less than 100 MW of capacity) are owned by municipalities, cooperatives or manufacturing industry.

The majority of power stations are thermal (mostly CHP Plants) fuelled by imported hard coal or natural gas. Non thermal generation is dominated by wind power while hydro generation is negligible.

Denmark is part of the intra-state Nord Pool power exchange, which offers a physical spot market, the intra day market ElBas and a financial market – and for Eastern Denmark also the intra day market ElBas.

The entire country participates in the joint Nordic Market in regulation power.

The wholesale market is totally competitive – now also including (subsidized) wind generation and small gas or biomass fired CHP plants. There is basically no wholesale price regulation.

The electricity system consists of two not interconnected systems: western part synchronous with UCTE and an eastern part synchronous with Nordel.

The country has strong interconnections, with total capacity almost equalling maximum load. Denmark plays a key role for transit between Nordic heavily hydro-based power systems and continental thermal power systems.

State-owned Energinet.dk is the ownership unbundled TSO for both electricity and gas. It owns the 400 kV transmission lines as well as international interconnectors.

A number of regional transmission companies of 132/150 kV and to some extent 60 kV are owned by the distribution network companies (or in the same company group as these). 132/150 kV networks gradually are sold to national TSO Energinet.dk, which has a legally based obligation to acquire in case owners wish to sell.

Around 90 distribution network companies (40 of these very small) owns and operates low-voltage networks. The sector has mixed ownership: State ownership for those owned by DONG Energy, municipal ownership or cooperatives consisting of the local network users.

The distribution network companies mostly belongs to a company group also dealing with trade/supply. Legal and functional unbundling, as well as comprehensive compliance programmes are required.

Access to the network is according to regulated TPA, based on an income cap regulation – for a transitional period – based on 2004 access prices. Energinet.dk is regulated according to a cost-plus method.

The ownership structure is the same as for distribution network companies (see above). Supply companies to a high degree are jointly owned by a number of company groups also having a distribution network company.

All customers are eligible as of 1st January 2003. The retail market for customers hourly metered customers (above 100,000 kWh) is quite efficient with high degree of supplier switching. The retail market for load profile customers, however, is not very active and relies on price regulation of “obligation to supply” (default supply and supply of last resort)

Around 20 supply companies are active in the competitive market. Around 40 companies only offer electricity locally on “obligation to supply” terms.

Indigenous production by Danish and foreign companies is 9-10 billion c.m. a year and the country is a net exporter of gas. All production is off shore in the North See. Licences of exploitation are allocated according to a state tendering procedure.

The whole sale market is competitive. Whole sale trade is based on bilateral contracts and all prices are market based.

DONG Energy is the major actor, facing competition by a number of other traders via the international interconnectors (especially to Germany) by companies like SHELL, Sydkraft Gas, Statoil Gazelle.

The transmission networks on land are owned and operated by the state-owned TSO Energinet.dk. The off shore pipes from the production sites to Danish mainland and to the Nogat-pipeline in the Dutch part of the North See as well as the one underground storages are owned and operated by DONG Energy in separate companies. Another underground storage has been sold to national TSO Energinet.dk.

Four distribution network companies cover 5 distribution areas: unbundled subsidiary DONG Distribution covers two distribution areas, and 3 unbundled network companies are parts of municipally-owned gas company groups. Legal and functional unbundling, together with comprehensive compliance programmes, required for network companies.

Regulated TPA to the network for all market participants, based on an income cap regulation with efficiency requirements according to mutual benchmarking of efficiency. Energinet.dk is regulated according to a cost-plus method. Access to off shore pipelines as well as to the gas storages is done according to negotiated TPA.

The ownership structure of gas supply companies is basically the same as for distribution network companies. In addition a number of foreign suppliers have entered the market.

All customers are eligible as of 1st January 2004. The retail market for smaller customers based on price regulation of “obligation to supply” (default supply and supply of last resort) because of lack of dynamics.

• Plans for an interconnection between the two Danish electricity tranmsission systems over the Storebælt.
• Increased focus on developing unbundling compliance programmes.
• Development of more efficient and pro-competitive tools and policies for the protection of load-profile customer, in alternative to existing “obligation to supply” legislation.
• Further consolidation of electricity network/supply companies, with substantial scope for foreign investments.
• DSM and promotion of renewables has for many years been key elements of Danish energy policy. A new market oriented promotion of DSM has now been in operation for a couple of years.
• Nord Pool in March 2008 will open a gas exchange in Denmark.

Primary legislation only available in Danish:

Electricity Supply Act (1999) with subsequent amendments – latest consolidated version LBK 1115 of 08-11-2006

Natural Gas Supply Act (2000) with subsequent amendments – Latest consolidated version LBL 1116 of 08-11-2006

Act on Energinet.dk (L1384 of 20-12.2004)