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ACM’s response to review of funding of electricity infrastructure

The Netherlands Authority for Consumers and Markets (ACM) recognizes the broad strokes of the analysis in the “Interministerial Policy Review (IBO) of Funding of Electricity Infrastructure,” as well as the identified policy options for reducing the rising costs of energy bills. The analysis reveals that there is no easy solution to the ever rising costs of energy bills: multiple pathways in parallel are needed. For the affordability of energy, the IBO points to the importance of coordination and guidance by the Dutch central government, which has system-level responsibility. ACM also plays a role in that, because it regulates system operators and sets the network tariffs.

ACM’s approach is in keeping with the IBO’s three cornerstones: curbing cost increases through a more-efficient utilization of the grid, distributing costs differently, and streamlining the decision-making process. A more flexible and more intensive (in a responsible manner) utilization of available grid capacity will curb the increase in costs. For example, ACM has implemented multiple measures against grid congestion such as the mandatory offering of flexibility. On the basis of the idea that current and future users pay for the costs they cause, ACM will explore an alternative distribution of the investment costs. In addition, ACM will adjust the regulatory framework in order to streamline the assessment and implementation of investment plans.

Saving costs through a more efficient utilization of the grid

The tariff increase projected by the IBO is similar to ACM’s previous projections. The challenge lying ahead is enormous. Making smart choices about electricity consumption, grid utilization, and investments may reduce this investment task to some extent.

The first step is energy savings. Additionally, costs can be saved through a more flexible grid utilization, for example, by offering discounts on transmission tariffs for reduced power consumption during peak hours. In that context, ACM has already introduced various new tariff structures. As a result thereof, larger companies that use their connections less during peak moments can get discounts of up to 65 percent.

Other measures that ACM is working on to make a more efficient utilization of the grid possible are: system operators using reserve capacity more often (the ‘shoulder lane’), group transport agreements, a feed-in tariff, and location-based tariffs. In addition, ACM, together with the Ministry of Climate Policy and Green Growth (KGG), is also exploring opportunities for a more intensive utilization of the grid.

A different distribution of costs, also temporally

ACM sets the network tariffs to compensate the costs of system operators. In that context, the basic principle is a fair distribution of the costs so that users pay for the costs that they cause. The IBO points out that future users benefit more from certain investments, as a result of which current users pay part of the bill of future users today. Investment costs should therefore be distributed differently among different generations (fewer costs now, more costs later). This calls for further research into, among other topics, the safeguarding of intergenerational fairness and the legal opportunities within a European context. ACM will work on this with great diligence.

The IBO comes to the conclusion that the high costs for current users justify the use of public funds, for example, by subsidizing the investments of system operators or by compensating certain groups for the high network tariffs. The IBO rules out a discount for certain groups by way of redistribution through the network tariffs. ACM agrees with that. A discount by way of redistribution is inconsistent with the basic principle that users pay for the costs they cause. Such a discount for certain groups needs to be raised by all other grid users.

Streamlining the decision-making process

The IBO calls attention to the decision-making processes with regard to investments and network tariffs. Streamlining those processes will help ACM be able to better assess scenarios, plans, and the implementation by system operators. ACM is already adjusting its regulatory framework accordingly. In addition, ACM supports the proposal to involve the Dutch House of Representatives more in the decision-making about large-scale investments and the consequences thereof. In its capacity as an independent expert, ACM is able to provide the information in that context.

European harmonization

The IBO also points out the importance of European harmonization of the methods for setting transmission tariffs. Since member states set the network tariffs differently, these network tariffs can vary greatly. That creates an unlevel playing field for companies. ACM had previously already called attention to this. When announcing the Clean Industrial Deal, the European Commission said it would put forward recommendations for harmonizing the methods for setting the network tariffs.

ACM’s role

ACM contributes towards the transition to sustainable energy, and has already taken various measures in that context. In addition, ACM is the sole body that is authorized to set the network tariffs independently.

See also

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