DTe: New Price-Cap For Electricity Grid Managers

The Office for Energy Regulation (DTe) has determined the new price-cap (efficiency discount) (the so-called x factor) for electricity grid managers for the second regulatory period from 2004 up to and including 2006. The x factors vary from -3.6 to a maximum of 6.3 per annum. By means of this x factor, the regulator aims to ensure that electricity grid managers will operate more efficiently. The tariffs are set at a level based on this x factor. The x factor that has been set amounts to a reduction of approximately EUR 344 million for electricity grid managers in the second regulatory period.

After consultation with the electricity grid managers, DTe has reached agreement on the method used in setting the x factor in the second regulatory period and has determined the x factor on the basis of this. The x factor consists of two components. The first component is intended to bring the grid managers to the same level of efficiency. The second component is intended as an incentive to all grid managers to operate as efficiently as possible. This latter component is based on the estimated average change in productivity of the sector as a whole and is measured retrospectively. This method is referred to as yardstick competition.

The table below provides the individual x factors determined for the second regulatory period and the total reduction during the second regulatory period of three years (2004 up to and including 2006).