(Bloomberg) — EON SE, Germany’s biggest utility, filed to
close two unprofitable gas-fired power plants used to ensure the
country has enough supply to meet peaks in demand.

The plants “have no prospect of operating profitably when
the current contract with the network operator expires in March
2016,” EON said Monday in a statement.

Germany is paying some plants to guarantee stable power
supply as the country increases reliance on volatile generation
sources such as solar and wind. Grid operator TenneT TSO GmbH
pays a share of the fixed costs at the Irsching 4 and 5 plants
in Bavaria as part of a 2013 deal in which EON agreed to make
the facilities available for generation for three years.

EON had to give a year’s notice before shutting Irsching,
leaving it with a deadline this month for a decision. The grid
regulator, Bundesnetzagentur, can reject decommissioning plans
to keep the plants available as reserve generators if they are
deemed necessary for the operation of the entire system.

Irsching owners “have to consider legal action” if plant
shutdowns are opposed, EON and its other owners said in the
statement. “It would be better for all sides to find a
regulatory framework that covers the actual costs of maintaining
the units as reserve capacity and dispatching them to stabilize
the network,” they said. “This would mean amending the
Ordinance on Reserve Power Plants to cover the costs of newer,
technologically advanced power plants.”

The 550-megawatt Irsching 4, wholly owned by EON, began
operating in 2011. The 846-megawatt Irsching 5, which started up
the previous year, is 25 percent owned by Nuremberg-based N-Ergie AG, 16 percent by Mainova AG in Frankfurt and 9 percent by
HSE AG, a Darmstadt, Germany-based power supplier.

Renewables, Coal-Fired

Gas-fed plants are struggling to compete with renewables
and coal-fired facilities in Germany. The difference between the
cost of the fuel and the price paid for the power generated, the
so-called spark spread, for the month ahead was minus 16.06
euros a megawatt-hour on Monday.

The decision puts pressure on Bavaria’s state government,
which has called for Irsching to continue operating. Germany is
considering splitting its electricity market into two zones,
Spiegel reported this month, as Bavaria blocks links to
transport renewable power from northern Germany. Splitting the
market would probably increase prices in the southern state.

EON traded almost unchanged at 14.06 euros at 12:07 p.m. in
Frankfurt.

To contact the reporters on this story:
Tino Andresen in Dusseldorf at
tandresen1@bloomberg.net;
Weixin Zha in Frankfurt at
wzha2@bloomberg.net;
Stefan Nicola in Berlin at
snicola2@bloomberg.net

To contact the editors responsible for this story:
Will Kennedy at
wkennedy3@bloomberg.net
Randall Hackley, Amanda Jordan