Regulatory developments in 2022
The regulatory period 2022 to 2026 started in 2022. The law stipulates that the ACM must periodically establish a regulatory method, valid for a minimum of three and a maximum of five years, which is used to determine permitted income and tariffs for the corresponding period. The method must make it possible for network operators to achieve a reasonable return if they manage their activities efficiently. In the opinion of the regional network operators, the ACM has taken too few measures in its method decision for electricity to allow sufficiently for the break in the trend as a consequence of the energy transition.
The ACM has now acknowledged this as regards the exponential rise in the cost of network losses and the expected costs of congestion management, and has taken interim measures. These measures mean that the ACM will apply retrospective costing for the consequences in 2022 and 2023, using a method that is still to be determined.
Appeal proceedings for method decisions
The network operators have launched appeals against the method decisions for regional network operators for gas and electricity because the network operators believe that more adjustments have become necessary, in addition to the measures for network losses and congestion management, and this should lead to higher income. These proceedings are now in their final stages. The Dutch Trade and Industry Appeals Tribunal (CBb) is expected to publish its judgment in the second quarter of 2023.
Liander hopes that the regional network operators have been able to persuade the CBb that the method decision for electricity in particular needs to be adjusted. This is a legal assessment of the method. At the moment it is uncertain whether the CBb will be able to agree with the grounds for the appeal and if so, to what extent this will lead to higher income. This is a material matter of major importance that also affects the extent of our financing requirements.
Regulation in the longer term
The ACM and the network operators started a study of the regulatory method for the longer term in 2022. The energy transition signifies a break in the trend of network operators’ cost developments and raises the question of what requirements a regulatory method should meet when it comes to setting permitted income and tariffs.
As input, network operators have drawn up a list of bottlenecks that need to be taken into account when developing a new method. The primary requirement for a new regulatory method, according to the network operators, should be that revenue is in line with the development of actual costs. This touches on a more fundamental question of what the regulatory method should focus on. The focus should largely be shifted to the current social task of the energy transition. The focus in the present method is on efficiency, and these two aspects conflict.
The ACM hopes to be able to consult on alternative regulatory frameworks in the course of this year and then present a proposed pathway at the end of this year.