Capacity auction revenues to go back to consumers and businesses

The revenues that Dutch transmission system operator TenneT has raised through capacity auctions will have to go back to consumers and businesses. This has been the result of extensive talks between TenneT and the Netherlands Authority for Consumers and Markets (ACM). The draft decision that contains this proposal will now be put out for consultation with consumers and businesses.

Assessing investment plans on efficiency

By late-2014, TenneT had raised a total of EUR 721 million in auction revenues. Over the next 10 years, these funds will be deducted from the transmission tariffs. At the same time, several of TenneT’s major investments in cross-border connections will no longer be financed directly by the auction revenues, but they will be covered by including them in the tariffs. Henk Don, Member of the Board of ACM, explains: “Consumers and businesses have raised those auction revenues. That is why these funds must be returned to them, and should not be parked in TenneT’s bank account. As TenneT’s investments will be included in the tariffs from now on, they will fall under ACM’s regulatory regime. And that means that ACM is able to assess them on efficiency, thereby making sure that consumers and businesses do not end up paying too much for the transmission of electricity.”

Settlement with tariffs to be as quickly as possible

These revenues are raised through auctioning cross-border capacity on electricity cables. Capacity is auctioned if it is scarce. Mr. Don adds: “In the future, scarcity of transmission capacity will continue to exist, and capacity will therefore continue to be auctioned. More and more revenues will thus be raised through such auctions. However, these funds will be settled with the tariffs as quickly as possible, and will thus no longer sit idle in TenneT’s bank account for years.”

Providing certainty with regard to investments

ACM has also laid down in what way in its regulation it will deal with major investments in cross-border connections, allowing TenneT to take that into account in its financial planning. More specifically, it concerns the investments in the cable to Denmark (the Cobra cable) and the cable to Germany (between Doetinchem in the Netherlands and Wesel in Germany). ACM wishes to provide certainty about the way it will take into account certain risks that the construction of such connections entails, enabling TenneT to make these investments. At the same time, ACM makes sure that consumers and businesses will not pay too much for these cables, as only the efficient costs can be included in the tariffs.