UPDATE: German Federal Court of Justice (BGH) clarifies the legal concept of “customer installations” (“Kundenanlagen”) and its implications

On 3 July 2025, the German Federal Court of Justice (BGH) published the full reasoning for its decision of 13 May 2025 (case EnVR 83/20).

As previously outlined in its press release of 13 May 2025, the BGH provided detailed grounds for its interpretation of § 3 No. 24a of the German Energy Industry Act (EnWG) in light of the Internal Electricity Market Directive (EU) 2019/944 (“the Directive”). The BGH held that the facility in question does not qualify as a “customer installation” within the meaning of § 3 No. 24a EnWG, as it satisfies the characteristics of a distribution network under Article 2(28) of the Directive.

Since the broader applicability of the customer installation concept was not decisive for the case at hand, the BGH did not address whether other typical configurations might still fall under this definition. Such configurations could include, for example: in-building distribution systems used in tenant electricity models (in German: Hausverteileranlage); single or jointly used connection infrastructures for linking renewable energy generation installations and/or battery energy storage systems (BESS) to the upstream grid; or customer installations for on-site self-supply by commercial or industrial entities or hospitals supplying additional end users. While these use cases, depending on the respective case, may still be possible under the existing legal framework, the BGH indicates that legislative clarification would be desirable, given their economic and regulatory significance.

In this context, the legislative proposal amending the EnWG issued by the German Government on 6 August 2025 – subsequent to the BGH’s ruling – raises eyebrows. The legislative proposal retains a definition of “customer installations” that in relation the wording is identical to the previous one, despite the BGH’s shift in interpretation.

The uncertainty arising from the BGH’s decision – coupled with ongoing regulatory reforms by the Federal Network Agency (BNetzA) concerning new cost structures (e.g. feed-in charges, construction cost contributions, and the elimination of certain network privileges) – is currently undermining investment and planning security.

Background: Decisions of the BGH and the Court of Justice of the European Union (CJEU)

In the underlying proceedings, an energy supply company sought to connect two combined heat and power (CHP) plants to the public distribution grid, invoking the “customer installation” exemption under § 3 No. 24a EnWG. The two CHP units (20 kW and 40 kW) were to provide approximately 1,000 MWh of electricity annually to around 200 residential units, alongside heat via a local heating network. However, the local distribution system operator (DSO) denied the connection, arguing that the installations constituted a regulated distribution network, not a customer installation.

Given the legal uncertainty – particularly concerning whether the installation was to be classified as a distribution network under the Directive – the BGH referred the matter to the CJEU. The question referred was whether national provisions such as § 3 No. 24a EnWG, read in conjunction with § 3 No. 16 EnWG, were compatible with Articles 2(28) and (29), and Articles 30 ff., of the Directive.

The “customer installation” concept, as defined under German law, does not exist under Union law. It was introduced domestically in 2011 to distinguish between regulated networks and non-regulated infrastructure. Under § 3 EnWG, customer installations are deemed exceptions: they are not subject to unbundling or network charges, and their operators are not classified as network operators or energy suppliers.

CJEU Judgment of 28 November 2024 (Case C-293/23)

On 28 November 2024, the CJEU ruled (as we reported [•]) that the German concept of “customer installations” under § 3 No. 24a EnWG is incompatible with EU law. Specifically, the Court held that Member States may not apply additional criteria to the definition of “distribution networks” beyond the scope allowed in the Directive. Criteria such as the date of installation, on-site generation, operator’s legal form, or network size are inadmissible.

Under Union law, the classification of a distribution network must rely solely on the two criteria in Article 2(28) of the Directive: the voltage level and the delivery of electricity to customers.

BGH Decision

As stated in its earlier press release (as we reported [•]), the BGH ruled that § 3 No. 24a EnWG must be interpreted in conformity with the Directive. Accordingly, a “customer installation” exists only where the infrastructure does not qualify as a distribution network under Article 2(28) of the Directive.

In the case at hand, the BGH found that the pipeline system at issue does constitute a distribution network because it is used for the onward transmission of electricity for sale to end customers. With this, the BGH expressly departs from its earlier case law, which had focused on whether the installation had a material impact on competition.

The Court clarified that the existence of a distribution network depends only on whether the network is used to transmit electricity at high, medium, or low voltage for delivery to wholesale or final customers. Member States may not apply further criteria to exclude certain network types. Exceptions from regulatory obligations may be granted only where provided by the Directive or permissible national interpretations, such as exemptions for closed distribution systems (Article 38), citizen energy communities (Article 16), or small connected or small isolated systems (Article 66(1)), the latter requiring approval from the European Commission.

The BGH held that § 3 No. 24a EnWG can still be interpreted compatibly with the Directive. Even with a narrower scope, it allows for configurations where energy systems serve solely the operator’s own consumption – e.g. shared systems for co-owners of residential complexes or landowners.

In the specific case, the CHP-generated electricity was supplied to tenants via a low-voltage pipeline system. This, according to the BGH, constituted a regulated distribution network. The applicant’s request to use “summation metering” under § 20(1d) EnWG failed, as this provision presupposes a customer installation – which the BGH had excluded. The applicant, therefore, bears the obligations of a metering point operator under § 2 sentence 1 no. 4 MsbG.

The Future of customer installations

The BGH’s reasoning confirms that the concept of “customer installations” still exists – but its scope has narrowed. The Court stated that pipeline systems used for transmitting electricity not intended for sale can still qualify as customer installations. However, the phrasing “in any event” leaves open how broadly this exception may be interpreted.

Equally notable are the questions the BGH left unresolved, such as:

• When exactly does a “network” exist, prior to its classification as a “distribution network”?
• Are internal building installations (e.g. distribution systems in multi-unit dwellings) already considered networks?
• Does the presence of even a single tenant change the legal classification of a building system from “customer installation” to “network”?
• What remains of the legal basis for tenant electricity models?

• How does §3 No. 24b EnWG (customer installations for operational self-supply) apply in relation to the supply of hospitals, schools, or company premises that are supplied via their own renewable energy installations when other final consumers are also supplied there? Does the sale of electricity to employees, who for example, live in company housing on the premises, lead to the customer installation being classified as a distribution network?

Due to a lack of relevance to the decision, the BGH has also not ruled on the practically and economically relevant question of whether jointly or individually used connection infrastructures or feed-in lines linking renewable energy generation installations or grid-connected BESS to the upstream grid can be considered customer installations.

Outlook

The Governments legislative proposal amending the EnWG (dated 6 August 2025) raises further concerns. Despite the BGH’s reinterpretation, the legislative proposal includes an unchanged definition of customer installations – now placed elsewhere in § 3 EnWG.

It remains unclear whether the Government seeks to reinforce trust in the existing framework, to prepare grounds for exemptions (e.g. under Article 66(1) of the Directive for isolated networks), or has other regulatory intentions. The explanatory memorandum of the legislative proposal fails to address the BGH decision entirely.

Given the significant impact of both the CJEU and BGH rulings on operators of energy infrastructure, legislative action is now essential. The current draft does not sufficiently address the existing regulatory uncertainties.