NMa makes draft method decisions GTS available for perusal

The Netherlands Competition Authority (NMa) today has made available for perusal the draft method decisions for the regulation of Dutch gas transmission system operator Gas Transport Services B.V. (GTS). The draft method decisions concern the regulatory periods of 2006-2009 and 2010-1013. Jaap de Keijzer, member of the Board of the NMa explains: ‘With these method decisions, we want to give as much clarity as possible to stakeholders. It is important to support an investment climate in which efficient investments can be made for the security of supply and the development of the Dutch gas market, as well as to ensure that network users are charged reasonable tariffs.’

Different method decisions

GTS is the network operator of the Dutch gas transmission system. The method decisions cover the method of how the tariffs of GTS’ different tasks should be regulated. In contrast to the regional network operators, management of the national gas transmission system requires different method decisions: one for transport, one for balancing, and one for quality conversion. The latter involves converting high-calorific gas to low-calorific gas, for example, for households.




Background information

The fact that the NMa had to re-issue method decisions is the result of two rulings by the Dutch Trade and Industry Appeals Tribunal (CBb).




First, in its ruling of November 30, 2006, the CBb allowed the appeal filed by GTS against the NMa’s method decision for the period of 2006-2009. The CBb concluded that, among other things, the regulatory format laid down in the method decision did not fit well within the existing legal framework. Following this ruling, the then Minister of Economic Affairs, Maria van der Hoeven, set a new regulatory framework for GTS on July 7, 2008. The Minister did so by imposing a policy rule, called the ‘Policy Rule on the exercise by the board of the competition authority of the power, as referred to in Section 82, paragraph 2, of the Dutch Gas Act.’ The NMa subsequently decided not to issue a new regulatory method for the period of January 1, 2006 until December 31, 2008, but rather to concentrate on setting a new regulatory method for the period of 2009 until 2012. 




Next, the CBb on June 29, 2010, allowed the appeals that the association of Dutch energy companies EnergieNed and the association for business consumers of electricity and natural gas VEMW had filed against the method decisions for the period of 2009-2012. The CBb was of the opinion that the minister, by setting concrete parameters to GTS’s capital expenditures, had impinged on the independent decision-making process of the NMa, the designated autonomous administrative authority with the required specialist expertise, it was entitled to when it issued GTS’s method decision. In addition, the CBb reversed the decision in which the NMa had refused to re-regulate the period of January 1, 2006 until December 31, 2008. This means that the NMa still had to set a regulatory method for both regulatory periods. By issuing the draft method decisions it made available for perusal today, the NMa has complied with that obligation.




GTS’s asset value

In its draft method decisions, the NMa comes to the conclusion that it would be best to value GTS’s assets as of December 31, 2005, in a similar way as in the first method decision of 2005. This is lower than the valuation in the 2008 method decisions, which is based on the minister’s policy rule. Lower valuations are one of the reasons of lower tariffs. In principle, GTS has to balance this difference.




Mr. De Keijzer comments: ‘The difference between the tariffs that should have been used between 2006 and 2011, and the tariffs that have actually been used and are still used, could lead to an adjustment of future tariffs. A rough estimate of that difference is EUR 1 billion. The NMa still needs to look into whether, and if so how such differences are settled. In that context, we obviously look at what investments GTS already has lined up, and how these investments are financed.’




Important dates

Parties have the opportunity to react within six weeks to the draft method decisions that were made available for perusal today. The NMa is aiming to issue the final method decisions by the end of August 2011, after which the so-called x-factor decisions will follow soon, based on which GTS will be able to submit tariff proposals. In December 2011, the NMa will issue the tariff decisions in which the tariffs are laid down that will take effect January 1, 2012.