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NMa Publishes Draft Decisions on the Regulation of Grid Managers

The Netherlands Competition Authority (NMa) this week published draft method decisions for grid managers in the electricity sector. In the draft method decisions, NMa sets out its proposed policy with regard to tariff regulation in the third regulatory period. The regulator asks parties in the energy sector to respond to these draft decisions. NMa will use the responses to the draft decisions as the basis for its final method decisions.

NMa regulates the grid managers because they, by nature, are monopolists and are therefore not stimulated by competition to ensure that they achieve an optimal price/quality ratio. In the draft method decisions, NMa indicates how it wishes to stimulate these companies to operate more efficiently (through the so-called price-cap or 'x factor') and to ensure that the quality of the network is good (through the so-called quality term, the 'q factor'). In its draft method decisions, NMa has continued the main features of the regulatory system applied in past years.

In the case of regional electricity grid managers, the x factor and the q factor will be determined on the basis of the draft method decisions for the period from 2007 up to and including 2009. The x factor is based on the most efficient grid manager (yardstick competition). The results of research carried out by NMa into so-called regional differences between grid managers have also been included in the draft method decision. Such differences may justify an increase or decrease in a tariff. By means of the q factor, the regional grid managers are financially rewarded or penalised (quality regulation) for the quality of their networks, based on the number of interruptions in the network which consumers experience.

In the case of TenneT, the manager of the national high-voltage grid, the x factor will be calculated for the period from 2007 up to and including 2010 on the basis of the method decision. This x factor is determined (partly) on the basis of TenneT's efficiency, compared to other operators of national high-voltage grids (TSOs) in Europe. NMa carries out such research for every regulatory period.

Parties may respond to the draft method decisions in relation to regional grid managers up to and including 9 April 2006 and to the draft method decision in relation to TenneT up to and including 21 April 2006. The documents can be obtained as of today from DTe's website (