In its judgment of 17 September 2026 in joined cases C-722/24 and C-756/24, the ECJ adopted a broad interpretation of the term “direct line” as defined in Article 2, point (41) in conjunction with Article 7 Electricity Market Directive (Directive (EU) 2019/944). The matter arose from two Latvian cases in which the national regulator had refused authorisation for electricity lines outside the distribution system. Although the ECJ’s judgment may reinvigorate the German debate on customer systems, it remains to be seen how the German legislature will make use of this new leeway.
Main proceedings and questions referred
The two main proceedings involved a producer and a customer, respectively, seeking to establish a physical electricity connection outside the public distribution system. In both cases, however, the Latvian regulator found that the requirements for such a “direct line” had not been satisfied.
- In C-722/24, the company Elektro bizness, which operates a cogeneration plant, wanted to connect an additional industrial customer via an approximately 400 m long electricity line to its existing 7.6 km underground cable, which already supplies six customers without the intermediation of the distribution system. The regulator refused the request on the grounds that the electricity line did not form part of the generation site.
- In C-756/24, the municipal public transport operator Jelgavas autobusu parks applied for authorisation of a 6.5 km electricity line connecting a planned hydrogen generation plant and a biomass cogeneration plant in order to procure electricity directly and at lower cost. The grid connection was intended to serve only as a backup. This request was also refused.
The Latvian Supreme Court (Augstākā tiesa) referred both cases to the ECJ for a preliminary ruling. The questions referred concerned the interpretation of the term “direct line” in Article 2, point (41) Directive (EU) 2019/944: Can a line connecting a customer to a producer’s existing electricity line be regarded as a direct line, even if it extends beyond the location of the generation site and already supplies other customers? And does maintaining a back-up connection to the distribution system preclude a line from being regarded as a direct line?
Key takeaways from the judgment
The ECJ’s answer to both questions points clearly to a broad interpretation:
- The term “direct line” extends to situations where several customers are connected to an existing electricity line. A direct line need not be located in the immediate vicinity of the generating installations and may therefore cover longer distances.
- Customers using a direct line need not be completely separated from the distribution system and may, in particular, maintain a back-up connection (Article 4, Article 6(1) Directive (EU) 2019/944). Direct lines are therefore not confined to “island solutions” and can be used to supplement the distribution system.
- The classification of infrastructure as a direct line depends exclusively on whether electricity is supplied to the customer without the intermediation of the distribution system and not on whether a parallel grid connection exists or would be technically feasible.
Practical implications: Customer systems under German law
On 28 November 2024 the ECJ ruled (C-293/23) that the German statutory provisions on customer systems (section 3, nos. 24a and 24b Energy Industry Act (Energiewirtschaftsgesetz)) are incompatible with the Electricity Market Directive (see our article here). Although existing systems can currently still be operated as customer systems, substantial legal uncertainty surrounds new investments. Operators of industrial, business and commercial networks, hospitals, universities or residential neighbourhoods that previously classified their infrastructure as unregulated customer systems could find these classified as distribution systems, with the associated unbundling and network charge obligations. Consequently, the regulatory classification of the infrastructure situated behind a grid connection has become a key issue whenever new line infrastructure is connected to the grid. In the absence of legislative clarification, companies must currently proceed with investment decisions despite the unresolved legal framework.
The latest ruling on direct lines opens up new avenues for Germany to develop a revised framework consistent with EU law, with the ECJ emphasising both consumers’ freedom of choice and the expansion of renewable energy. The German legislature could adopt the broader interpretation of the term “direct line” and extend the scope of unregulated grid infrastructure in Germany accordingly, at least in part. This could have far-reaching implications for contracting models, industrial parks with on-site generation and hydrogen projects. For now, however, both the legislative approach and the position of the regulatory authorities remain uncertain.
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