Toy train town takes back grid in German power shift

By Vera Eckert

FRANKFURT (Reuters) - The southern German town of Goeppingen, set in the Alpine foothills, is a magnet for tourists and famous for being the home of toy train maker Maerklin.

For activists in the German "Rekommunalisierung" movement that wants to take local electricity networks away from the big utilities and put them back in public hands, picturesque Goeppingen now has another reason to be proud.

Last spring, the town of 60,000 paid 23 million euros ($32 million) to buy back its power network from utility EnBW, in the biggest remunicipalisation in the southern state of Baden Wuerttemberg to date.

"We wanted to make our essential supply line free from speculation and to keep the local infrastructure in our ownership for a long time," mayor Guido Till, who has ruled Goeppingen for nine years, told Reuters from his town hall.

"We will keep more jobs in Goeppingen than EnBW would have secured in the long term," Till, 59, said. Prices have also come down as a result of the move.

The mayor, a former Social Democrat who now thinks the party is too left wing, enjoys cross party support and this was reflected in the move to take the town's power grid into local ownership.

Goeppingen's decision also reflects the mood in Germany, where opinion polls show two thirds of voters back green energy policies and would also prefer power networks to be managed by local suppliers.

EnBW said it had accepted Goeppingen's decision and successfully handed over the network to its new owners. But it said the fragmentation of German network ownership would not necessarily help the expansion of renewable energy.

The president of the German Federal Cartel Office, Andreas Mundt, has also spoken critically about buying back grids.

"It is important that these local companies do not shun the competitive market. We also believe that too much fragmentation of networks bears the risk of becoming inefficient," he said.

Nevertheless, since 2007, some 80 new local utilities have been set up to supply electricity, gas, water, and heat, according to their business lobby, the VKU, which represents 1,400 such companies.

There could be many more to come.

BOTTOM-UP

Some 8,000 out of 14,000 land concession contracts, mostly granted on a 15 or 20 year basis to private interests in the 1990s, are up for renewal between 2010 and 2015.

In a backlash against Germany's liberalized energy market, where power production and distribution are in the hands of a few large German and international groups, activists around the country are trying to claw back network assets into the public sector and are doing this with highly visible campaigns.

The movement is part of a Europe-wide trend of creeping renationalization of the utilities industry.

With energy production more and more localized via countless solar panels and thousands of windmills dotting the German landscape, remunicipalisation enthusiasts want power grids to have the same local flavor.

"A bottom-up energy shift is to everyone's benefit," reads a Friends of the Earth Germany (BUND) brochure.

But not all municipalities are motivated by environmental or ideological concerns. Local power transport networks yield steady fees for their public owners, while the local management gives their services a measure of proximity to boot.

Mayor Till said his approach was based on economics rather than ideology.

As a private concern, his city's grid would have to make a profit for investors, but as a public operation he can run it with a modest margin and keep tariffs low, he said.

SAME CHALLENGES

The activists' biggest catch so far is Hamburg, Germany's second-biggest city, where Vattenfall has just sold back the remainder of the power grid it had operated for over a decade.

The city in 2012 bought 25 percent of the power and heat distribution grids from Vattenfall and wants to run them alone. It also bought 25.1 percent of E.ON's gas grid.

Vattenfall chief executive Oystein Loseth said last year he was not convinced the new trend makes sense.

"Clearly we see a political trend where the municipalities want to take over operation of the grids. My question is why," he said.

"Cities can spend their money on other things and not on buying back the grids because we are running those grids safely and smoothly and have done so for many years," he said.

In December, a remunicipalisation referendum in Berlin - also operated by Vattenfall - failed because not enough people voted.

Germany's utilities - already facing overcapacity, falling demand, the country's exit from nuclear power, and competition from subsidized renewable energy - are fighting back, stressing their expertise and financial strength.

RWE chief executive Peter Terium said his company did not see ownership changes as a threat, as his firm's stretched finances could actually benefit from outside capital.

But distribution grids that revert to public hands would soon find, like their previous private owners, "they will face the same challenges as everyone else," Terium said. ($1 = 0.7352 euros)

(Editing by Geert De Clercq and Giles Elgood)

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