Preview of future distribution grid regulation published

17.01.2025

Source: E & M powernews

The Federal Network Agency presents an interim status report on the future regulatory system for electricity distribution system operators and gas distribution and transmission system operators.

On January 16, the Federal Network Agency published a comprehensive interim report on the further development of the future regulatory framework for electricity distribution system operators and gas distribution and transmission system operators.

"We want regulation to become faster and simpler," said the agency's President, Klaus Müller. The agency wants to create both "attractive and stable framework conditions for grid operators' investments" and use every euro invested for the greatest possible benefit of grid users, he said.

Drafts of the specific regulations for the determination of incentive regulation and cost determination, which replace the previous ordinance regulations, will be published. In addition, the central considerations and justifications for these regulations will be published.

An expert opinion and a classification by the Federal Network Agency will be published for the further procedure on the method of determining the cost of capital rates, and a status paper will be published for the procedure on efficiency comparison methods. The decision-making and consideration process is not yet complete. Draft determinations for the procedures are to be submitted for consultation in the second quarter of 2025.

Regulatory period shortened to three years

The framework definition sets out the main pillars of the future regulatory system for determining permissible costs. Based on this, the individual elements will be methodically structured in various method definitions. A new feature is the length of the regulatory period of three years after a transition period of the familiar length of five years. In the transitional period of five years, the adjustment of operating costs is provided for via a separate adjustment instrument.

As in the previous regulation, there will be a simplified procedure for smaller grid operators. With a view to very small grid operators with their own cost level of up to EUR 500,000, a "procedure for micro-grid operators" is also to be made possible. The capital cost reconciliation is to be continued in its current form. For the gas sector, however, the capital cost deduction will be redefined annually due to the special regulations from the KANU 2.0 determination.

The catalog of permanently non-controllable cost components will be reduced compared to the current status. There will also be a general sectoral productivity factor and an efficiency comparison in the future. In order to incentivize the efficient use of redispatch, the costs will be included in the efficiency comparison. Quality regulation should also provide incentives to maintain the quality of supply in future regulation. The element of energy transition competence is new here.

Determination procedure electricity NEF/gas NEF

The concept of capital maintenance will be changed for the initial level. Only real capital maintenance is to be applied. Furthermore, a lump-sum determination of the cost of capital (WACC) and a lump-sum determination of the recognizable current assets will be introduced. According to the current draft, trade tax will continue to be calculated on an imputed basis.

Return on capital and efficiency comparison

In preparation for a further exchange date on the return on capital, the expert opinion prepared on behalf of the Federal Network Agency and a classification of the Federal Network Agency will be published. With regard to the efficiency comparison, the Federal Network Agency will publish a paper summarizing the state of play on key issues. There is still a need for in-depth technical discussion, particularly with regard to the heterogeneity of grid operators and the appropriate consideration of forward-looking grid expansion.

Next steps for the Federal Network Agency

The publications represent the preliminary state of consideration. The publication already gives the industry the opportunity to submit comments on the tenor and considerations. The formal consultation of completed drafts will begin in the second quarter. The timetable for 2025 is already being published so that interested stakeholders can prepare themselves for which technical discussions will be held and when.

The central ordinances for the area of energy regulation will cease to apply, based on the decision of the European Court of Justice from September 2021 on the independence of the Federal Network Agency. The ordinances will therefore be replaced by the authority's specifications, which are strongly oriented towards the requirements of EU law. The Düsseldorf Higher Regional Court and the Federal Court of Justice will review the decisions of the Federal Network Agency.

The interim status of the new distribution grid regulation is available on the Internet.

Author: Susanne Harmsen