Federal cabinet agrees amendment to the 1975 Energy Security of Supply Act – Update necessary to strengthen crisis preparedness

The Federal Government is continuing to equip itself to cope with heightening tensions on the energy markets. In this context, the Federal cabinet today agreed in a written procedure on amendments to the Energy Security of Supply Act. The Act provides far-reaching scope for responses in the event of any risk or disruption to the energy supply. These extend from the power to place critical energy infrastructure companies under fiduciary management to enhancing European solidarity and the introduction of a digital platform to help companies reduce their gas consumption more efficiently. The Energy Security of Supply Act was originally passed during the first oil crisis in the 1970s and is now being comprehensively updated in order to ensure that the Federal Government can act quickly and broadly in the current situation as well. The bill has been adopted as a drafting tool and will now be brought before the Bundestag via the parliamentary groups of the governing coalition.

Vice-Chancellor and Federal Minister for Economic Affairs and Climate Action Robert Habeck commented: “Russia’s war of aggression against Ukraine, which is a breach of international law, has led to a tense situation in the energy sector. Prices are high, there is great uncertainty, and there are risks. We must therefore prepare ourselves for the situation to get worse. That is why, by updating the Energy Security of Supply Act, we are once again honing and modernising the instruments available to us. This will enable us to strengthen preparedness and act rapidly and comprehensively. The priority is to do everything possible to maintain the basic supply. We are doing this in a spirit of European solidarity and are also strengthening our capacities to that end.”

The bill updates and adds to the authorisation to issue ordinances in the Energy Security of Supply Act. This means that, if there is an immediate danger or a disruption to the energy supply, the Federation and the authorities assume far-reaching powers to manage the crisis that can be implemented in the form of ordinances. In addition, the legal basis is put in place for special crisis preparedness measures. Under certain precisely defined circumstances, these may be implemented even before there is an immediate danger or a disruption to the energy supply.

One such measure is placing companies that operate critical energy infrastructure under fiduciary management – if they can no longer adequately fulfil their tasks and this endangers security of supply. As a final resort, in certain very narrow, clearly defined circumstances, and if there is no other way to secure the supply of energy, there is also the possibility of expropriation. Rules to strengthen European solidarity mechanisms are also being introduced.

Amendments and consequential amendments to the Energy Industry Act also form part of the bill. These, too, serve to enhance preparedness. For example, any decommissioning of gas storage facilities will in future have to be notified to and approved by the Bundesnetzagentur (Federal Network Agency). Further, the conditions are being put in place to be able to prohibit, in the case of critical energy infrastructure, the use of critical components pursuant to the Act on the Federal Office for Information Security.

The drafting tool can be accessed here (in German).  

More detailed information on the amended Energy Security of Supply Act:

Specifically, the drafting tool for the amendments to the 1975 Energy Security of Supply Act and other energy-related regulations provides for the following measures:

• The Federal Government is to be able to establish and use digital platforms in order to implement crisis measures. For the gas sector, it is already specifically envisaged that larger industrial companies and gas traders register on a platform, providing data on their gas procurement, gas consumption, etc. The aim is to be able to use these data in a crisis (i.e. when there is a shortage of gas) to ascertain quickly how and where energy use can be cut, and, if necessary, to switch off supplies to companies.
• Rules to strengthen European solidarity mechanisms are being added. This mechanism is enshrined in European law and ensures that the Member States support each other in the event of energy shortages. In future, the Federal Government will be able to implement measures under the Energy Security of Supply Act also if another EU Member State is facing such an energy crisis and asks Germany for help under the EU SOS (Security of Supply) Regulation. If these amendments are not made, Germany will not be able to meet its obligations to supply gas to EU Member States arising from the SOS Regulation.
• In addition, a new part of the Energy Security of Supply Act creates the legal basis for special crisis preparedness measures that can be implemented under specific, clearly defined conditions even before there is any immediate danger or disruption to the energy supply. The aim here is precisely to ward off any such risk.
  • Firstly, the priority is to be able to authorise special measures if there is a danger that operators of critical infrastructure can no longer adequately fulfil their tasks and there is a risk to the security of supply. For such an event, the possibility of placing critical infrastructure companies under fiduciary management and, as a last resort, expropriating them, is being introduced.
  • Secondly, a rule on price adjustment along the entire supply chain is being introduced for the event that gas supplies to Germany from a non-EU country are stopped or drastically cut. The precondition is the identification of substantially reduced gas imports at the alert or emergency level pursuant to the Emergency Plan for Gas. The aim of these price adjustment rules is to maintain the market mechanisms and supply chains for as long as possible and to prevent cascade effects. For example, if gas imports are reduced, gas can be expected to become much more expensive on the market. If the energy companies cannot pay the high prices or cannot fulfil their contracts, they may face financial difficulties, perhaps even insolvency. However, if the energy companies collapse, there is a danger of serious disruptions throughout the market along the supply chain, right down to the end user. To avoid this, price adjustment rules can be applied by way of exception, for a limited period of time and under very specific, narrowly defined conditions.

Furthermore, the draft contains amendments to the Energy Industry Act, also designed to enhance preparedness.

• For example, conditions are stipulated in the Energy Industry Act for prohibiting the use of so-called critical components in the area of critical energy infrastructure if it is likely that there would otherwise be an adverse effect on public order or security in the Federal Republic of Germany, for instance because the manufacturer of the critical components is controlled by the government of a non-EU country.
• Moreover, any planned decommissioning of gas storage facilities will in future have to be notified to and approved by the Bundesnetzagentur. This can prevent a situation where gas storage facilities are shut down without the knowledge of the Bundesnetzagentur and the Federal Government, thus jeopardising the energy supply.

A list of FAQs on the revised Energy Security of Supply Act and the amendments to the Energy Industry Act can be found here (in German).