Competition Law in Hydropower Balancing Contracts – Morocco

1. Introduction

Hydropower balancing contracts occupy an important position at the intersection of competition law, electricity-market regulation, energy security and infrastructure governance.

Hydropower plants can provide flexible electricity generation by increasing or decreasing output in response to fluctuations in electricity demand, renewable-energy production and grid frequency. Electricity-system operators may therefore enter into balancing contracts with hydropower generators to secure:

Upward balancing services (increasing electricity generation).

Downward balancing services (reducing generation or absorbing surplus electricity).

Frequency regulation and grid stabilisation.

Reserve capacity and emergency electricity supply.

Flexible water-reservoir management.

Short-term electricity balancing and ancillary services.

Competition concerns arise when hydropower operators use their control over reservoirs, generation capacity, transmission connections or balancing services to exclude competing electricity producers.

In Morocco, these arrangements should principally be examined under Law No. 104-12 on Freedom of Prices and Competition, together with Law No. 20-13 on the Competition Council, and the applicable electricity-sector legislation and regulatory arrangements.

An important distinction is necessary: Morocco-specific legislation governs the domestic legal analysis, while European and other foreign judgments discussed below provide comparative guidance. They should not be represented as binding Moroccan precedents.

2. Legal framework in Morocco

A. Law No. 104-12 on Freedom of Prices and Competition

This legislation provides the principal framework for identifying and addressing anti-competitive practices.

Its relevance to hydropower balancing contracts includes:

1. Anti-competitive agreements

Agreements between hydropower producers, electricity suppliers, balancing-service providers or competing generators may be unlawful where their object or effect is to restrict competition.

Examples include:

Agreements to divide balancing-service territories.

Coordinated bids for reserve capacity.

Agreements to restrict access to balancing services.

Collective refusal to supply independent generators.

Coordination of balancing prices.

2. Abuse of dominant position

A hydropower operator controlling a strategically important reservoir or balancing facility may possess substantial market power.

Potential abuses include:

Excessive balancing-service charges.

Discriminatory access conditions.

Refusal to provide technically feasible balancing services.

Capacity withholding.

Exclusivity arrangements preventing competitors from obtaining alternative balancing services.

3. Economic concentration

Mergers, acquisitions and other transactions involving hydropower generation, electricity storage, balancing-service platforms and grid infrastructure may require competition assessment where statutory notification requirements are satisfied.

B. Law No. 20-13 on the Competition Council

The Competition Council has an important role in examining anti-competitive practices and economic concentrations.

In this sector, competition assessment may require examining:

The structure of electricity-balancing markets.

Market shares of hydropower operators.

Barriers to entry for independent generators.

Control over essential infrastructure.

Contractual restrictions affecting electricity-market participants.

The competitive effects of long-term balancing agreements.

C. Electricity-sector regulation

Morocco's electricity-sector framework, including Law No. 13-09 concerning renewable energy and Law No. 48-15 concerning the regulation of the electricity sector and the creation of ANRE, is relevant to market access, regulated infrastructure and electricity-sector oversight.

Competition law should operate alongside sector-specific regulation. A balancing contract that satisfies technical grid requirements is not automatically lawful under competition law.

3. Relevant competition issues in hydropower balancing contracts

A. Market definition

The first issue is determining the relevant market.

Hydropower balancing services may constitute a separate market because they possess distinctive technical characteristics, including rapid response, dispatch flexibility and reservoir-based energy storage.

Possible relevant markets include:

Upward balancing-energy services.

Downward balancing-energy services.

Frequency regulation.

Operating reserve capacity.

Hydropower ancillary services.

Short-term electricity supply.

Access to balancing infrastructure.

The geographical market may be national, regional or limited to a particular electricity-grid zone.

In Morocco, market definition should consider the geographical reach of electricity infrastructure, available interconnections, dispatch arrangements and the practical availability of alternative balancing providers.

B. Bid rigging and collusion

Hydropower generators may compete to supply balancing capacity through tenders or procurement procedures.

Anti-competitive arrangements can arise where competitors:

Coordinate their balancing-service bids.

Agree not to compete for particular contracts.

Exchange commercially sensitive pricing information.

Rotate successful bidders.

Agree on minimum reserve-capacity prices.

Coordinate the quantity of electricity offered.

For example, three hydropower operators participating in a balancing-capacity tender might agree that each will win a predetermined proportion of the contracts.

Such arrangements can constitute prohibited anti-competitive agreements.

C. Capacity withholding

Capacity withholding occurs when a generator deliberately withholds available generating capacity to create artificial scarcity.

A hydropower operator might reduce the amount of balancing capacity offered despite having technically and economically available generation capacity.

This can produce:

Artificial increases in balancing prices.

Higher procurement costs for system operators.

Increased electricity costs for consumers.

Disadvantages for independent electricity suppliers.

Reduced reliability of the balancing market.

However, withholding must be distinguished from legitimate operational decisions involving reservoir levels, environmental obligations, water availability, maintenance and dam safety.

D. Exclusive balancing contracts

Long-term exclusivity may prevent competing electricity generators from accessing hydropower balancing services.

For example, a dominant hydropower operator might agree to supply all balancing services exclusively to one electricity supplier.

The arrangement becomes problematic when it forecloses competing suppliers or prevents independent generators from obtaining necessary balancing capacity.

Relevant considerations include:

Duration of exclusivity.

Market coverage.

Availability of alternative providers.

Switching costs.

Entry barriers.

Whether exclusivity is technically necessary.

E. Discriminatory balancing charges

A dominant balancing-service provider may impose different contractual terms on similarly situated customers.

Examples include:

Charging independent generators higher balancing fees.

Offering preferential reserve capacity to affiliated electricity suppliers.

Providing faster dispatch services to selected customers.

Applying unequal penalties for comparable deviations.

Refusing access to competing electricity retailers.

Such conduct may constitute abuse of dominance where it lacks objective justification and produces anti-competitive effects.

F. Tying and bundling

A hydropower operator may require customers purchasing balancing services to purchase additional services from the same undertaking.

For example, a generator might condition access to balancing capacity on the purchase of:

Electricity trading services.

Reservoir-management services.

Forecasting software.

Transmission-related services.

Energy-storage services.

Bundling may be commercially legitimate where it produces efficiency benefits. It becomes problematic when it leverages market power to exclude competing providers.

G. Essential facilities and infrastructure access

Hydropower reservoirs, pumping facilities, grid connections and dispatch infrastructure may constitute strategically important inputs.

A dominant operator could potentially restrict access to such facilities, preventing competitors from supplying balancing services.

Competition analysis should examine whether:

The infrastructure is practically indispensable.

Replication is technically or economically feasible.

Access can be provided safely.

Refusal substantially restricts downstream competition.

Reasonable access conditions can be established.

H. Cross-subsidisation

An integrated electricity undertaking may use revenues from regulated activities to subsidise its competitive balancing-service operations.

This could distort competition by allowing the undertaking to offer artificially low prices to exclude independent balancing providers.

Separate accounting, transparent cost allocation and appropriate regulatory oversight can reduce this risk.

4. Detailed case laws and comparative judicial precedents

The following cases and regulatory decisions provide useful comparative principles. They are not six Moroccan hydropower-balancing judgments. Several are European Commission competition decisions or regulatory proceedings rather than court judgments, and their legal status is identified accordingly.

1. E.ON Electricity – European Commission (2008)

Case: COMP/39.388 – German Electricity Wholesale Market.

Legal principle: Capacity withholding and abuse of market power in electricity generation.

The European Commission investigated E.ON's conduct in the German electricity wholesale market, including concerns relating to the exercise of market power and the competitive conditions in electricity generation.

E.ON offered commitments involving the divestiture of generation capacity and transmission-system assets.

Relevance to hydropower balancing contracts:

A hydropower operator with substantial generation capacity may have the ability to influence balancing prices by strategically withholding capacity.

Competition authorities should examine whether generation decisions reflect genuine operational constraints or strategic conduct intended to increase market prices.

2. RWE – European Commission (2009)

Case: COMP/39.402 – RWE Gas Foreclosure.

Legal principle: Dominant undertaking's control over essential infrastructure and foreclosure.

The Commission investigated RWE's conduct in the German gas transmission market, particularly concerns involving access to infrastructure and potential exclusion of competing suppliers.

RWE offered commitments involving the divestiture of its gas transmission network.

Relevance to hydropower balancing contracts:

Although this concerned natural gas rather than hydropower, the case illustrates the competition risks arising when an integrated energy undertaking controls infrastructure necessary for competitors to operate.

A hydropower company controlling an indispensable balancing facility could similarly restrict downstream competition through discriminatory access arrangements.

3. Svenska Kraftnät – European Commission (2010)

Proceeding: Swedish electricity interconnector competition investigation.

Legal principle: Restrictions on cross-border electricity flows and market integration.

The Commission examined concerns involving restrictions on electricity transmission capacity and the resulting effects on competition between electricity-market areas.

The case illustrates the importance of avoiding discriminatory restrictions that artificially fragment electricity markets.

Relevance to hydropower balancing contracts:

A hydropower generator or system operator should not use contractual arrangements to prevent competing electricity providers from accessing available cross-border balancing opportunities.

Restrictions should be justified by genuine network-security and operational requirements.

4. Bulgarian Energy Holding (BEH) – European Commission (2015)

Case: AT.39767 – BEH Electricity.

Legal principle: Abuse of dominance through restrictions affecting electricity-market access.

The Commission investigated Bulgarian Energy Holding and related electricity undertakings over alleged restrictions affecting access to electricity trading and wholesale electricity markets.

The investigation concerned the competitive implications of arrangements involving electricity-market liquidity and access.

Relevance to hydropower balancing contracts:

Where a hydropower undertaking controls a significant proportion of balancing capacity, contractual restrictions can prevent independent generators and electricity suppliers from competing effectively.

The case supports close scrutiny of market-access restrictions imposed by dominant energy undertakings.

5. OPCOM – European Commission (2014)

Case: AT.39984 – OPCOM.

Legal principle: Discriminatory access conditions and abuse of dominance.

The Commission found that OPCOM, the Romanian electricity-market operator, had infringed EU competition rules through discriminatory treatment involving access to its electricity spot market.

The conduct disadvantaged certain electricity traders on the basis of their establishment.

Relevance to hydropower balancing contracts:

A balancing-service provider should apply objective and transparent eligibility criteria.

It should not discriminate between independent generators, electricity suppliers or balancing-service participants on grounds unrelated to legitimate technical and operational requirements.

6. Distrigaz – European Commission (2007)

Case: COMP/B-1/37966 – Distrigaz.

Legal principle: Long-term contractual foreclosure in energy markets.

The Commission examined long-term gas-supply contracts and the possibility that contractual commitments could restrict competitors' access to customers.

Commitments were used to address concerns relating to the duration and foreclosure effects of the contracts.

Relevance to hydropower balancing contracts:

Long-term exclusive balancing agreements may foreclose competing providers, particularly where a dominant operator commits a substantial proportion of available capacity to a single customer.

Contract duration, market coverage and realistic alternative supply options are important factors.

7. SSE Generation Ltd v Competition and Markets Authority (2022)

Case: SSE Generation Ltd and Others, R (on the application of) v Competition and Markets Authority [2022] EWCA Civ 1472.

Legal principle: Electricity balancing services and competition-related regulatory charges.

The English Court of Appeal considered a dispute involving the treatment of electricity balancing-service costs and the regulatory framework governing electricity generation.

The judgment explains the operational importance of balancing services, including the use of generators to increase or reduce electricity output to maintain system stability.

Relevance to hydropower balancing contracts:

This is particularly useful because hydropower generators can participate in balancing services by adjusting output in response to system requirements.

It demonstrates why balancing-service arrangements must be assessed in light of their technical purpose and the regulatory treatment of the associated costs.

A distinction must be maintained between legitimate system-balancing expenditure and anti-competitive contractual conduct.

8. Swissgrid AG v European Commission (2025)

Case: C-121/23 P, Swissgrid AG v European Commission, judgment of 13 February 2025.

Legal principle: Participation in European electricity-balancing platforms.

The Court of Justice examined the legal consequences of the European Commission's refusal to allow a Swiss transmission system operator to participate in European platforms for exchanging standard balancing-energy products.

The judgment addressed the legal effects of the Commission's decision and the admissibility of the challenge.

Relevance to hydropower balancing contracts:

The case illustrates the importance of transparent and legally structured participation in balancing platforms.

For Morocco, it provides comparative guidance when considering access to regional balancing arrangements and cross-border electricity cooperation.

9. Austrian Power Grid and Others v ACER (2023)

Case: T-606/20, Austrian Power Grid and Others v ACER, judgment of 15 February 2023.

Legal principle: Governance of electricity-balancing platforms and regulatory competence.

The General Court examined the framework for adopting terms, conditions and methodologies governing the European platform for exchanging balancing energy from frequency restoration reserves with automatic activation.

The judgment addressed the institutional competence of ACER and the procedural framework for approving balancing-market arrangements.

Relevance to hydropower balancing contracts:

It demonstrates that balancing-market rules must be established through transparent and legally authorised procedures.

Contractual freedom cannot be used to circumvent applicable regulatory requirements governing balancing services.

5. Application of competition law to different contractual arrangements

6. Legitimate commercial justifications

Not every restrictive hydropower balancing contract violates competition law.

Hydropower balancing arrangements may be necessary to maintain electricity-system stability and protect public safety.

Legitimate justifications include:

1. Reservoir management: Contracts may require minimum water reserves to guarantee future electricity generation.

2. Environmental protection: Water-release schedules may be necessary to protect aquatic ecosystems and downstream communities.

3. Grid security: Exclusive operational coordination may sometimes be justified by technical requirements.

4. Emergency capacity: Long-term reserve agreements may guarantee electricity availability during emergencies.

5. Investment protection: Minimum-capacity commitments may be necessary to finance new hydropower infrastructure.

6. Operational efficiency: Integrated balancing arrangements may reduce transaction costs and improve system reliability.

However, these justifications should be objectively demonstrable, proportionate and not unnecessarily restrictive of competition.

7. Enforcement and remedies in Morocco

Under Morocco's competition framework, potential violations may be addressed through the Competition Council's statutory powers, subject to applicable procedural requirements.

Possible enforcement measures include:

Investigation of suspected anti-competitive agreements.

Examination of dominant-market positions.

Assessment of discriminatory contractual provisions.

Investigation of restrictive tender arrangements.

Review of notifiable economic concentrations.

Directions or remedies available under the applicable legislation.

Financial sanctions where statutory conditions are satisfied.

The National Electricity Regulatory Authority (ANRE) also has an important sector-regulatory role.

Coordination between the Competition Council and ANRE can be particularly valuable because balancing-market investigations require both competition-economic expertise and technical electricity-market knowledge.

8. Recommended competition-compliance framework

Hydropower operators, electricity suppliers and balancing-service purchasers should adopt the following safeguards.

9. Hypothetical case study

Facts:

Assume that three major hydropower operators in Morocco control a substantial proportion of the country's available flexible generation capacity.

They enter into long-term balancing contracts with one electricity supplier.

The contracts contain the following provisions:

The operators agree not to supply balancing services to competing electricity suppliers.

The operators coordinate their reserve-capacity bids.

Independent generators must purchase additional services to obtain balancing access.

The operators withhold available capacity during periods of high electricity demand.

Competing balancing-service providers are denied access to essential operational infrastructure.

Competition-law analysis:

Issue 1 – Anti-competitive agreement: Coordination of bids and allocation of customers may constitute prohibited collusion under Law No. 104-12.

Issue 2 – Abuse of dominance: If the operators individually or collectively possess a dominant position, unjustified capacity withholding and discriminatory access restrictions may constitute abuse.

Issue 3 – Exclusive dealing: Long-term exclusivity may unlawfully foreclose competing balancing-service providers.

Issue 4 – Essential infrastructure: Refusal to provide access may raise competition concerns where the infrastructure is indispensable and access is technically feasible.

Issue 5 – Consumer welfare: Artificially increased balancing costs may ultimately increase electricity procurement costs and harm consumers.

Possible remedies:

Removal of unjustified exclusivity provisions.

Independent and transparent capacity procurement.

Objective balancing-service access conditions.

Prohibition of bid coordination.

Transparent pricing methodologies.

Appropriate infrastructure-access arrangements.

Monitoring of capacity availability and dispatch practices.

The ultimate legal assessment would depend on evidence of market power, contractual effects, objective justifications and the applicable statutory requirements.

10. Critical legal and economic challenges

Several challenges deserve particular attention in Morocco.

A. Natural monopoly characteristics

Hydropower infrastructure requires substantial investment and may not be economically replicable. This can create structural barriers to entry.

B. Renewable-energy integration

Increasing solar and wind generation can increase demand for flexible balancing services. Hydropower operators may consequently acquire greater strategic importance.

C. Water scarcity

Water availability is an important constraint. Competition authorities must distinguish legitimate water-conservation decisions from strategic capacity withholding.

D. Cross-border electricity cooperation

Regional electricity interconnections may create opportunities for balancing-service competition. Contractual territorial restrictions could undermine those opportunities.

E. Concentration of balancing capacity

Where a small number of generators control most flexible capacity, market power can become more significant during periods of peak demand.

F. Regulatory coordination

Competition enforcement must be coordinated with electricity regulation, environmental requirements, water-management obligations and grid-security rules.

11. Conclusion

Competition law in hydropower balancing contracts is essential for ensuring that electricity-system reliability does not become a justification for unnecessary market foreclosure.

In Morocco, Law No. 104-12, as amended by Law No. 40-21, provides the principal competition-law framework, while Law No. 20-13, as amended by Law No. 41-21, governs the institutional framework of the Competition Council.

The central competition concerns are bid rigging, capacity withholding, discriminatory access, exclusive dealing, excessive pricing, infrastructure foreclosure and anti-competitive information exchange.

The comparative cases involving E.ON, RWE, BEH Electricity, OPCOM, Distrigaz, SSE Generation, Swissgrid and Austrian Power Grid demonstrate different aspects of competition and regulatory governance in energy markets.

The fundamental legal principle is that hydropower balancing contracts must preserve legitimate operational reliability while preventing dominant electricity operators from using control over flexible generation capacity to exclude competitors.

Academic qualification: The comparative precedents above should not be cited as Moroccan judicial decisions. They provide persuasive analytical guidance; a Morocco-specific opinion would additionally require examination of the relevant domestic regulatory instruments, contracts and Competition Council decisions.