New regulatory framework for Dutch transmission system operator TenneT

Today, the Netherlands Competition Authority (NMa) established the new regulatory framework that is used in setting the tariffs for the national transmission grid operator TenneT TSO B.V (TenneT). The NMa wants this regulatory framework to act as an incentive for TenneT to operate more efficiently.

The NMa regulates TenneT because the operator is a monopolist by nature and is therefore not stimulated by competition to strive for an optimal price-quality ratio. TenneT has thus far already undergone three regulatory periods (2001-2003, 2004-2006 and 2007) in which the NMa stimulated TenneT to operate more efficiently through the so-called efficiency discount, or the 'x-factor.' However, the NMa sees opportunities for TenneT to improve efficiency even further.


That is why the NMa has established a new regulatory framework for TenneT. The NMa carefully weighed the importance of having transmission tariffs as low as possible against the importance of having a national transmission grid of excellent quality. Several studies were commissioned by the NMa in order to help it make this assessment as carefully as possible. In addition, by establishing this new framework, the NMa implements the Independent Grid Administration Act (WON), based on which TenneT became administrator of the high-voltage grid on January 1st, 2008.


The NMa explains in today's published decision how it plans to stimulate TenneT in the next period (the fourth regulatory period) to operate more efficiently. The decision describes the method that will be used in calculating the tariffs of the national transmission grid in the period of January 1st, 2008 until December 31st, 2010. Based on that method, the NMa has come to the conclusion that TenneT has to save 2.1 per cent per year on its revenues in the next three years.


The decision was taken as a result of an inquiry procedure with regard to a draft decision that was published in the first half of 2008. The inquiry procedure has led to the NMa receiving diverse reactions from TenneT, regional grid administrators and buyer interest groups. These reactions resulted in making several changes to the final decision.


The transmission tariffs for consumers will be set on December 31st, 2008 at the latest.