UPDATE 2-German power breaks ruled unlawful, EU to investigate

Wed Mar 6, 2013 1:19pm EST

* Waivers for big power users unlawful -court

* European Commission launches separate investigation

* Berlin under pressure to review system (Adds court decision, lawyer, federation)

By Vera Eckert and Markus Wacket

FRANKFURT, March 6 (Reuters) - Power grid charge exemptions which saved big industry in Germany 300 million euros ($390 million) last year were ruled unlawful by a German court on Wednesday.

The European Commission separately said it would investigate the exemptions, which were granted to big companies in sectors such as metals, chemicals, glass, cement and building materials.

The Duesseldorf district court (OLG) said it had found that Germany's energy law failed to provide a legal basis for the exemptions, which began in 2011.

"The...OLG has nullified the decree and has lifted the related implementation rule," the court said. Its ruling is non-binding and the affected parties may appeal to the Federal Court of Justice (BGH).

The issue has implications for the international competitiveness of German industry, which current pays some of the highest power prices in the European Union.

"The grid fee exemption is important for the survival of Germany's energy-intensive companies," industry federation BDI said in a statement.

Wednesday's ruling upheld a complaint brought by network firms. The exemptions have also meant that consumers paid more on power bills which include 20 percent transmission network charges.

The court said the exemptions were not in line with EU laws requiring equal and cost-based treatment of charges to market participants.

The European Commission, however, stressed the opening of its investigation did not prejudge its outcome.

"If this turns out to be the case (that they constitute state aid), the Commission will further examine whether the exemption is likely to unduly distort competition in the EU or whether it can be justified," it said.

Germany's economy ministry said it would respond to the Commission within a month. A spokesman said the ministry had no role in levying network usage fees so the waiver could not be considered a form of unlawful state subsidy.

The exemptions also recognised the network-stabilising role of big companies, he added. Large firms such as BASF have their own on-site power generation units which are able to feed power into the public grid.

Still, some analysts said the government, which is already grappling with public anger over power prices buoyed by subsidies for renewable energy, is in a tight spot.

"(This) will be a signal for Berlin that the exemptions have to be reconsidered and possibly changed," said Hans-Christoph Thomale, an energy expert at Frankfurt law firm FPS.

($1 = 0.7677 euros) (Additional reporting by Alexandra Hudson, editing by Jason Neely)

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