ACM wishes to call a halt to commercial activities of distribution system operators in the energy market

The Netherlands Authority for Consumers and Markets (ACM) has observed that, in the energy market, distribution system operators (DSOs) have set up all sorts of businesses that engage in commercial activities that could be carried out just as well or even better by private companies. ACM recommends limiting such activities in order to prevent DSOs from having advantages that other, commercial companies do not have. For example, DSOs are often able to take out loans easier and at more affordable rates for commercial activities. However, it also carries potential financial risks. “If non-profitable investments need to be paid for with revenues from statutory tasks, security of supply may be at risk. It is essential that we learn from what we have seen with the housing corporations. It would thus be wiser to call a halt to risky commercial activities,” said Remko Bos, Director of ACM’s Energy Department, during the roundtable discussion in the Dutch House of Representatives about the role of network operators.

Sustainable energy market

DSOs have many other businesses, next to a network operator. Network operators are charged with the statutory task of transporting electricity and natural gas. Businesses and consumers pay for this service through the grid tariffs. The other businesses engage in all sorts of commercial activities. The entire DSO is a government-owned enterprise, owned by municipalities and provinces. Remko Bos adds: “The market must introduce initiatives for a sustainable energy market. Competition is needed so that sustainability is able to get off the ground. Through their commercial activities, DSOs are not allowed to derive improper benefits that other businesses do not enjoy, because it disrupts the market. Competition is not only good for quality and price, but it also promotes innovation.”

Connecting wind turbines

The Netherlands faces a daunting task to shift to more sustainable forms of energy generation. In that transition, network operators play an important role, especially when it comes to developments that directly involve those networks such as connecting wind turbines or solar panels or injecting electricity from such sources. These developments fall under the statutory tasks of network operators.

Exception because of a temporary activity

However, it is possible that certain socially desirable initiatives are not undertaken by any of the market participants. Remko Bos explains: “In those situations, it is conceivable, for example, that DSOs or network operators are granted a temporary task. For network operators, such tasks should be very closely related to network management, as a result of which it can be done much more efficiently.” Other temporary activities that, in principle, have a commercial nature, could then be transferred to the DSO. DSOs obviously cannot pay for these activities with revenues from the grid tariffs.