On May 13, 2025, the Federal Court of Justice (BGH) issued a long-awaited decision (EnVR 83/20) on the question of whether an energy grid can be classified as an unregulated “customer installation” (Kundenanlage). In the underlying case, the BGH dismissed the applicant’s appeal and did not classify the disputed grid lines as customer installations which would be exempt from the regulatory obligations of a network operator.
The BGH’s decision will have a large impact on the energy sector beyond this individual case, as it affects a large number of decentralized supply structures. The BGH’s reasons for its decision have not yet been published, but the press release on the BGH’s decision allows some initial conclusions to be drawn.

Facts

The BGH’s decision was based on the following facts: The applicant, an energy supply company, operates several CHP plants, local heating networks, and energy plants for the supply of energy, which it uses to supply end consumers with heat and electricity. Under a heat supply agreement with a housing association, the applicant supplies several apartment blocks with heat and hot water via an energy center and a connected local heating network. In order to supply these apartment blocks, the applicant also began planning in 2018 for the construction and operation of two combined heat and power plants with an electrical output of 40 kW and two galvanically separated electrical line systems to which the end consumers, i.e., the tenants of the residential units, were to be connected. The applicant wanted to sell the electricity generated in the combined heat and power plants to the tenants, assuming an annual amount of energy transmitted of 288 MWh and 480 MWh. The applicant notified the respondent, the local distribution system operator (DNO), of grid connections for two separate customer installations and applied for connection to its grid and the provision of the necessary metering points. The respondent rejected the applications on the grounds that, in its opinion, the installations did not constitute unregulated “customer installations” within the meaning of Section 3 No. 24a EnWG.

Previous course of proceedings

Following the respondent’s rejection, the applicant filed applications with the state regulatory authority for a review of this conduct and an order requiring the respondent to connect the installations to its grid as customer installations. These applications were unsuccessful. The applicant’s appeal against the decision of the state regulatory authority to the Dresden Higher Regional Court was also dismissed, which is why the applicant pursued its application for an order requiring the respondent to connect the installations to its network before the BGH in the context of an appeal on points of law. The BGH then suspended the proceedings by order of December 13, 2022, and referred the case to the Court of Justice of the European Union (ECJ) for a preliminary ruling.

Decision of the ECJ

The ECJ then ruled in its much-noted judgment of November 28, 2024 (C-293/23) that the German legal concept of customer installations in Section 3 No. 24a EnWG is not compatible with EU law. The ECJ clarified that the underlying European provisions of the EU Electricity Market Directive, which do not recognize the concept of “customer installations,” must be interpreted as precluding national legislation according to which an undertaking which, instead of the existing distribution network, installs and operates an energy installation in order to supply several apartment blocks with electricity generated in a combined heat and power plant is not subject to the obligations of a distribution system operator. With this decision, the ECJ has made it clear that the “German Sonderweg” for customer installations is not permissible and that the purely national concept of “customer installations” must not deviate from the scope of the EU law concept of a distribution network within the meaning of the Electricity Market Directive. The ECJ emphasized that the obligations imposed on network operators by the Electricity Market Directive cannot be waived by classifying a line infrastructure as a “customer installation” under German law.

Decision of the BGH

Following the preliminary ruling of the CJEU, the BGH continued the oral proceedings in the main proceedings on May 13, 2025, and ultimately dismissed the applicant’s appeal. The BGH thus followed the ECJ’s decision on the question referred for a preliminary ruling on German customer installations. The BGH ruled that the applicant’s transmission lines at issue in the dispute are not to be connected to the distribution network as “customer installations” pursuant to Section 3 No. 24a EnWG. The BGH further states that the provision on customer installations in Section 3 No. 24a EnWG must be interpreted in accordance with the Electricity Market Directive to the effect that a customer installation only exists if it does not constitute a distribution network within the meaning of Article 2 No. 28 of the Electricity Market Directive. However, the applicant’s line installations are distribution networks within this meaning. They serve to transmit electricity intended for sale to end customers by the applicant. In the view of the BGH, they cannot therefore be exempted from the provisions applicable to the regulation of networks.

Classification and outlook

The BGH’s ruling comes as little surprise given the ECJ’s clear position on German “customer installations”. The reasoning behind the ruling must still be awaited for a detailed and conclusive assessment of the practical scope of the BGH’s decision. However, it is noteworthy that in its press release, the BGH did not take the ruling as an opportunity to clarify the fundamental continued existence of the national legal concept of customer installations, but instead emphasized the applicable interpretation in accordance with the Electricity Market Directive. This can be understood as an indication by the BGH that there may still be a remaining scope of application for customer installations and that the ruling of the ECJ and the BGH may not apply to all customer installation cases, but that the scope of application could be limited to certain network-like case constellations. If, according to this, transmission systems do not constitute distribution networks within the meaning of Article 2(28) of the Electricity Market Directive, they are likely to continue to be exempt from the provisions applicable to the regulation of networks.

The BGH’s emphasis on an interpretation of German customer installations that is in line with the Electricity Market Directive is also likely to lead to further, possibly even more detailed case law on line and network infrastructure in the future, and thus to more controversial discussions about the exact classification and categorization of line infrastructure (and any additional network operator obligations that may have to be fulfilled).

It is therefore to be hoped that the BGH will provide sufficiently clear guidance in its reasoning for its decision so that the question of line systems are still customer installations under a “directive-compliant” application does not remain unclear. It also remains to be seen whether the Federal Network Agency or the new federal government will take the BGH ruling as an opportunity to create clarity through new legislation. Until then, legal uncertainty will remain for the time being with regard to the treatment of existing customer installations.

We will report separately on this matter as soon as the BGH’s grounds for its decision are published.