Negotiated Third-Party Access in the German Electricity Supply Industry (by Gert Brunekreeft) - ABSTRACT: This paper provides an overview and analysis of the institutional framework and developments of the electricity supply industry in Germany. As the only EU member state, Germany opted for negotiated third-party access as the network-access regime. This implies a lack of sector-specific, ex-ante regulation; instead, control of the network-access charges is left to the cartel office. The authority of the cartel office mainly relies on the essential-facilities doctrine in the competition act. This doctrine requires access to be non-discriminatory and against a fair and reasonable charge. Despite quite spectacular price drops at the end of 1999, a closer look at the emerging picture casts doubts on the competitive developments in the sector. The access charges are indeed excessively high, the profit margins at the competitive stages are very small, leaving hardly any room for competitors, while the extent of third-party discrimination is (still) relatively minor. This picture fits theoretical analysis. The combination of vertical integration (between monopoly and competitive businesses) and insufficient regulation of the access charges violates a level-playing field. Recently, the cartel office shifted its attention from the aspect of non-discrimination towards the level of the access charges; this is likely to put some pressure on the access charges, but will at the same time enhance the incentive to discriminate against third parties.