ACM: increase in transport tariffs necessary due to high energy costs

The Netherlands Authority for Consumers and Markets (ACM) has approved the tariff proposals for 2023 of the distribution system operators (DSOs) and of transmission system operator (TSO) TenneT, which operates the Dutch national high-voltage grid. In October 2022, the system operators indicated that they needed to raise the transport tariffs because they incurred much more costs, due to the high energy prices, when purchasing electricity and natural gas for compensating transport losses. When natural gas or electricity is transported, some of that energy is lost. System operators must buy energy to supplement the network or grid, and those purchases have become more expensive.

A second reason for why the system operators had to raise their tariffs is that, as part of the energy transition, they needed to make major investments in upgrades to their networks. Those costs must be borne first, before any benefits are reaped. These costs are spread out over multiple years. Part of those costs are now incorporated into the tariffs.

Each year, ACM sets the tariffs of system operators because households and businesses cannot choose from which company they wish to take out transport services. ACM sets the tariffs on the basis of the efficient costs including a reasonable return. ACM makes sure that system operators earn sufficient revenues in order to be able to make necessary investments. On the other hand, ACM ensures that the tariffs of system operators are not higher than reasonable, and it stimulates system operators to work as efficiently as possible.

Manon Leijten, Member of the Board of ACM, explains: “System operators incur higher costs due to the high energy prices, and they need to make additional investments in order to upgrade their grids for electrification as part of the energy transition. ACM understands that the rising tariffs come at an unfortunate time. We assessed the proposed tariffs using the methodology that stimulates system operators to work efficiently, and that offers them leeway for investments in the energy transition. The tariffs meet those criteria, and that is why we have approved them.”

Tariff increases

The system operators have proposed to increase the consumer tariffs by, on average, 10 euros per month. The Dutch cabinet already took this proposal into account when setting the supply tariffs for the price cap that is supposed to come into effect on January 1, 2023. The transport tariffs will go up for businesses too. In 2023, small and medium-sized businesses, which often have large-scale connections to the distribution system, pay approximately 30% to 53% more for the transport of electricity, and approximately 15% to 35% more for the transport of natural gas, depending on the system operator. For large companies, which are connected to the high-voltage grid (HS grid), transport costs go up by half (51%). Over 40 percentage points of that increase is caused by the higher energy prices. In 2023, large-scale users with direct connections to the national extra-high-voltage grid (EHS grid) operated by TSO TenneT need to pay, on average, 84% more. The lion’s share of that increase (71 percentage points) is caused by the higher energy prices. ACM also sets the maximum tariffs that those system operators are allowed to charge for the energy meter. These metering tariffs are only adjusted for inflation.

The energy transition

In order to achieve the climate goals, many businesses are switching from fossil fuels to electricity generated by wind and solar farms. More and more households have solar panels, electric cars, and heat pumps. As a consequence, more and more electricity needs to be transported. Over the next few years, system operators must therefore make major investments in grid upgrades.

In order to make sure that system operators have sufficient financial leeway for all necessary investments, ACM in 2021 changed the methodology for setting the tariffs. DSOs are allowed to incorporate part of the costs into their tariffs as an advance, and TenneT, too, will be largely compensated for the high energy prices. In July 2022, ACM announced that DSOs in 2023 would already be given an advance for the high costs connected to grid losses. When setting the tariffs, ACM always seeks to strike the right balance between affordability, security of supply, and sustainability.

ACM: increase in transport tariffs necessary due to high energy costs

Tariff increases

The energy transition

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