The Supreme Court recently considered whether distribution network operators must provide network users with a written cost estimate for a grid connection even if the general obligation to connect final customers to the grid is still in dispute and has yet to be decided by the competent authority.(1)
Background
Distribution network operators must conclude private law contracts with final customers on the connection and use of the natural gas distribution network (general obligation to connect). The general obligation to connect does not apply if, in an individual case, the connection is economically unfeasible for the distribution network operator, considering the interests of all customers.(2)
Distribution network operators will be compensated by means of a network access charge for all reasonable expenses which are:
- directly associated with the initial connection or the modification of a connection to the network; and
- in accordance with market prices.(3)
Distribution network operators must provide network users with a written cost estimate of the network access charge for the defined scope within 14 days on request. Except in the case of a lump-sum payment calculated on the basis of comparable network users, the cost estimate must include the main components of the network access charge to be paid. Where the absence of a distribution pipeline makes extensive assessments necessary, a concrete proposal for further action is sufficient.(4)
Facts
The respondents ran a market garden and wanted to switch from district heating to a natural gas energy supply. For this purpose, they requested access to the natural gas network operated by the applicant. The applicant refused to establish a network connection.
In response to a request from the respondents, the energy regulator required the distribution network operator to provide a detailed cost estimate for the construction of a connection pipeline and a concrete proposal for further action. The energy regulator dismissed the respondents' request to determine whether the refusal of network connection was lawful. The applicant filed an appeal on the grounds that it was under no obligation to provide a detailed cost estimate and a concrete proposal for further action because the project was not economically feasible.
Decisions
The first-instance court dismissed this complaint. The court of appeal ruled in the applicant's favour and made clear that the obligation to provide a cost estimate and a concrete proposal for further action (Section 4 of the Gas Network Service Quality Ordinance) applies only if a distribution network operator does not dispute its obligation to connect or if the obligation has already been finally and conclusively established by the competent authority.
If no agreement on the obligation to connect can be reached between a network operator and a final customer, the provincial governor decides on the application made by one of the parties involved.(5) Such an application had not been made in the case at hand.
Analysis
Section 4 of the Gas Network Service Quality Ordinance establishes enforceable (civil) obligations of network operators, especially as Section 30(3) of the Gas Law stipulates that in the general terms and conditions of a network operator, reference must be made to the standards set out in the ordinance insofar as they relate to the rights and obligations of the persons entitled to access the network.
Thus, it was necessary to clarify only whether a network operator's obligation to provide a cost estimate presupposes that its connection obligation is undisputed or has already been legally established.
Especially in situations where the obligation to connect is controversial, it can be useful for parties interested in a connection to request a cost estimate and a concrete proposal for further action in order to enable them to decide whether an application to the provincial governor is worthwhile. They can also be significant for enabling an interested party to assess the chances of success of an application to the provincial governor pursuant to Section 59(3) of the Gas Law.
Notably, the present decision has not established an obligation to connect. The provincial governor is the competent authority to decide on this matter. The present decision therefore does not deprive the applicant of the possibility to (continue to) dispute its connection obligation at the same time as providing a cost estimate and a concrete proposal for further action.
Comment
Parties seeking connection to the gas network may ask their provincial governor to clarify whether the distribution network operator has an obligation to connect. Irrespective of this, they may request a cost estimate from the distribution network operator. Cost estimates serve as a helpful means of assessing whether a connection obligation exists with regard to the necessary economic feasibility. Such cost estimates also counteract arbitrary refusals by distribution system operators and strengthen the rights of final consumers.
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Endnotes
(1) OGH 10 October 2019, 6 Ob 123/19k.
(2) Sections 59(1) and (2) of the Gas Law.
(3) Section 75(1) of the Gas Law.
