Recent judgment risks forcing costly parallel connections for operators within industrial areas

Introduction

A recently issued judgment from the Land and Environment Court of Appeal ("MÖD") establishes an order that risks forcing costly parallel connections for operators within industrial areas.

The Land and Environment Court of Appeal ruled on 5 November 2025 (case no. M 3008-25) to uphold the Swedish Energy Markets Inspectorate's ("Ei") decision in a case concerning exemption from the requirement for a grid concession for an internal electricity network within the area of a metal industry. The judgment illustrates how a restrictive interpretation of the Ordinance (2007:215) on exemptions from the requirement for a grid concession under the Electricity Act (the "IKN Ordinance") risks creating significant obstacles for industry without providing any corresponding societal benefit.

Brief overview of the legal regulation

According to the main rule, a high-voltage line may not be constructed without permission (grid concession), pursuant to Chapter 2, Section 1 of the Electricity Act. If a concession-requiring high-voltage line is constructed or used without such permission, criminal liability follows under Chapter 13, Section 1 of the Electricity Act.

The IKN Ordinance regulates in which cases a concession is not required. The ordinance does not allow scope for a general reasonableness assessment regarding whether an exemption should be granted. The exemptions in the ordinance are exhaustive, that is, there must be an explicit exemption for a specific situation.

Internal electricity networks within the area of an industrial facility may be constructed and used without a grid concession, according to Section 8 of the ordinance. The same applies between parts of such an area which are separated only by a traffic route.

On electricity networks that may be used without the support of a grid concession (including networks within industrial areas), transmission of electricity may take place on behalf of another party if there are considerable grounds for it, according to Sections 23–24 of the IKN Ordinance. When assessing whether there are considerable grounds, consideration shall be given to how the transmission affects the network operations conducted by the relevant grid concession holder and to the costs of connecting the relevant electricity users to the network used with the support of the grid concession.

The rules on concession requirements in the Electricity Act, together with the provisions in the IKN Ordinance, aim, amongst other things, to avoid unnecessary societal costs and to enable rational use of existing infrastructure within, amongst other areas, industrial zones.

Background and facts

A company, A, has since 2004 conducted operations manufacturing stainless steel in a heavy plate mill and billet rolling mill at an industrial facility on a self-owned property. The operations are conducted under an environmental permit.

The industrial area in question is partly supplied with electricity from an old power station and from a substation owned by the regional grid company via a 130 kV overhead line. For at least a hundred years, the metal industry in question has conducted its operations in a geographically defined area that in practice is completely isolated from the area concession holder's (i.e., the local electricity grid company's) network.

The part of the industrial operations that included production at the billet rolling mill subsequently came to be transferred to a new operator, B, and the part of the property where the billet rolling mill was located was subsequently subdivided into a new property, which was acquired by the new operator. Companies A and B conduct their operations within the framework of the same environmental permit under a special service and cooperation agreement. It is company A that pays the grid fee to the area concessionaire, purchases electricity for the area, and operates and maintains the internal network, whilst company B in turn pays a fixed price for these services to company A.

Company A submitted an application to Ei requesting that the authority declare that the industrial area's internal line network still constituted a so-called non-concessional network ("IKN"), on the grounds that the line network had neither been rerouted, expanded, nor otherwise altered as a result of company B now taking over the operation of the sub-operation at the billet rolling mill.

Ei issued a decision stating that the line network was not exempt from the grid concession requirement, with reference to the fact that it was no longer a question of an area for an industrial facility according to Section 8, since the line network, through the property subdivision, was now laid across two properties with different owners and transmission thus took place on behalf of another party, and that company A lacked control over company B's property. Since Ei concluded that it had now become a question of an area with several industrial facilities, the authority did not proceed to examine whether transmission of electricity could take place on behalf of another party (B). The authority's decision was appealed to the Land and Environment Court ("MMD").

The Land and Environment Court's assessment

The MMD considered that it was still a question of one area for an industrial facility and that Section 8 of the IKN Ordinance was thus applicable, since no actual change had otherwise occurred to the industrial area and since company A had control over the network through agreement to carry out necessary maintenance.

The court also noted that the IKN Ordinance had been amended since the time of the application, and that it was no longer required that the internal line network within an industrial facility should originally have been used exclusively on the network owner's own behalf for it to be permissible to transmit electricity on behalf of another party, but considered in any case that this criterion was also fulfilled despite the metal industry having changed owners and names a number of times.

The MMD therefore remitted the case to Ei for examination of whether there were considerable grounds for transmission on behalf of another party according to Section 23 of the IKN Ordinance.

The Land and Environment Court of Appeal's assessment

Ei appealed to the MÖD, which initially noted that the question was whether the transfer of the (sub-)operation and the subdivided property meant that the area could still be described as an area for an industrial facility in accordance with Section 8 of the IKN Ordinance. For its interpretation of the applicable rules, the court turned to the preparatory works for the IKN Ordinance (FM 2007:1), which provides an example of when transmission on behalf of another party is permitted within industrial areas. The example concerns the situation where the internal network was originally used only for transmission on one's own behalf, but where the industrial operations have subsequently been reduced or discontinued and buildings and facilities have instead been let to other companies, to which transmission of electricity has come to take place.

The MÖD noted that, unlike the example given in the preparatory works, in the present case the two industrial operations are conducted by two different operators on two different properties, which are owned by the respective operators, and that it is therefore a question of two different industrial facilities. Against this background, the MÖD concluded that the exemption in Section 8 of the IKN Ordinance refers to an industrial facility and that the line network in question – which was now considered by the court to serve two different industrial facilities – was therefore not exempt from the concession requirement. The fact that the operations are conducted under the same environmental permit did not, according to the court, lead to a different assessment.

Concluding reflections – An interpretation that contradicts the ordinance's purpose

The MÖD's interpretation appears overly narrow. The preparatory works for the IKN Ordinance expressly state that transmission of electricity on behalf of another party should be permissible on internal networks within areas for industrial facilities, and as an example it is stated that within many industrial areas, buildings and other facilities within the area have been let to other companies and individuals.

Furthermore, the ordinance has been revised on several occasions since the preparatory works were drafted in 2007, and the exemption rules have thereby been expanded and supplemented with further exemptions. The parts of the ordinance that specifically concern areas for industrial facilities were expanded during the court proceedings, which the MMD both commented on and took into account, but which the MÖD completely disregarded in its reasoning. Against this background, it appears remarkable that the MÖD in its reasoning primarily bases its assessment on the old preparatory works, and allows a pure change of ownership to mean that what was one industrial facility instead becomes two.

It is not uncommon for parts of older mills and industries to have been sold off and today be operated by different owner groups. The exemption from the concession requirement within the area of an industrial facility reasonably aims to ensure that existing infrastructure can be retained and utilised within the framework of the industrial operations conducted in the area. If every legal entity that has acquired part of an industrial area must have its own connection to the area concession holder's electricity network and its own electricity network subscription, this leads to significant costs. This is because entirely new connection lines then need to be drawn from the network to the area, despite there being no technical need for this. Such unnecessary new connection requirements for the area concessionaire also take up their resources when these could instead be put to better use elsewhere by carrying out network reinforcements or connecting new areas in the ongoing electrification transition that we are in the midst of.

In summary, it is remarkable that a regulation that expressly aims to avoid unnecessary parallel electricity networks, through the MÖD's judgment, instead leads to operators potentially being forced to finance precisely such technically unnecessary parallel connections to their industrial facilities. By focusing on legal ownership relationships rather than the actual geographical and technical reality, the court creates unnecessary obstacles to industry's development without any corresponding societal benefit.

The judgment thereby makes it more difficult for industry to handle structural transformations and ownership changes within already established industrial areas in a cost-effective manner. This is a development that benefits neither industry nor rational use of electricity infrastructure.

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Judgment: Land and Environment Court of Appeal, judgment issued 5 November 2025 in case no. M 3008-25