ACM takes into account the price cap for natural gas when setting the maximum tariffs for heat
When setting the maximum tariffs for heat, the Netherlands Authority for Consumers and Markets (ACM) will make sure that households that are connected to a heat network will also benefit from the price cap (in Dutch: prijsplafond). The maximum price for heat will be linked to the price cap for natural gas (up to a yet to be determined consumption threshold), and will be set at 47.39 euros per gigajoule (GJ). The Dutch Heat Act stipulates that households that are connected to a heat network cannot pay more for their heating than they would have paid if they had had natural-gas-based heating.
Manon Leijten, Member of the Board of ACM, explains: “Because of the ‘no-more-than-otherwise’ principle laid down in the Dutch Heat Act, a price cap must also be introduced for heat. We will do so by taking into account the price cap for natural gas when setting the maximum tariffs”.
No more than otherwise
Heat companies are monopolists, which means that households that are connected to a heat network cannot choose from which supplier they get their heat. In order to protect consumers against unreasonably high tariffs, ACM each year sets the maximum tariffs for heat. Heat companies cannot set their tariffs above these maximum tariffs. The Dutch Heat Act stipulates that ACM must set the heat tariffs that consumers have to pay per gigajoule (GJ) of heat on the basis of the natural-gas price of 1 January. This is called the ‘no-more-than-otherwise’ principle (in Dutch: niet meer dan anders) or the ‘natural-gas reference’.
Price cap for heat consumers
The Dutch cabinet has announced that, from January 1, 2023, households only pay a maximum of 1.45 euro per m3 for the first 1,200 m3 of natural gas they consume. ACM will take into account this price cap when setting the tariff that heat consumers have to pay per GJ. As a result, heat consumers will be compensated with regard to a large share of their consumption, just like households that consume electricity and natural gas. With regard to heat consumption above the volume threshold, a maximum tariff will apply that is based on the natural-gas price of January 1, 2023. In December 2022, ACM will announce the volume threshold itself as well as the maximum tariff for consumption above that volume threshold.
Amendment to the Dutch Heat Act is necessary
Many heat suppliers have to purchase natural gas in order to produce heat. In addition, heat suppliers cover their risks by linking purchase contracts to the natural-gas prices (also called ‘hedging’), as a result of which any increase (or decrease) in the natural-gas prices will also have an effect on the costs. Other heat suppliers use geothermal energy or other sustainable technologies for water heating. ACM had already previously indicated to be a proponent of setting the maximum heat supply tariffs on the basis of the costs (efficient costs) of heat suppliers. Such a change requires an amendment to the Dutch Heat Act.