Cabinet Approves Changes for Network Charges for Large Electricity Consumers and Revision of Incentive Regulation

Today the Federal Cabinet finally approved changes to the network charges regime for large electricity consumers. The Federal Council had already approved the revision, on 5 July 2013, subject to certain conditions, which the Cabinet accepted. The revision shall address concerns raised by the European Commission and German courts.

The revision falls within the competency of the Federal Ministry of Economics and Technology (BMWi) and covers changes of the  electricity and gas grid charges ordinances (StromNEV and GasNEV), the Incentive Regulation Ordinance (ARegV) and the Electricity Grid Access Ordinance (StromNZV).

1. Energy Intensive Companies Exemption

One of the most important changes is the amendment of Sec. 19 para 2 Electricity Grid Charges Ordinance (Stromnetzengeltverordnung – StromNEV) dealing with a grid fee exemption for energy intensive end consumers.

Already in 2005 the government introduced a scheme whereby energy intensive companies could receive a reduction of grid fees. In 2010 only 30 companies exercised this option. With the amendment of the StromNEV in 2011 the conditions for such exemption were lowered (7000 hours of use and 10 GWh consumption). In addition, qualifying energy intensive companies were completely exempted from the network charges. As a result, in 2011 about 200 companies did not pay grid fees.

The full exemption from grid fees had drawn much criticism from various sources, not least consumer protection agencies. The Higher Regional Court of Düsseldorf recently held that the provision was void and the European Commission launched an inquiry to assess compliance with EU state aid rules. The amendment of the StromNEV shall reflect these particular concerns.

A full exemption of grid fees is no longer provided. Energy intensive companies shall again contribute towards the grid costs.

The amendment reintroduces staggered reductions of the grid fees. In case of an electricity consumption at the delivery point of at least 10 GW and 7,000 hours the amendment provides for a reduction of the grid charges to 20% of the published grid charges, to 15% for a consumption of at least 10 GW and 7,500 hours and to 10% for a consumption of 10 GW and 8,000 hours.

These amendment will in principle enter into force on the after promulgation of revision, which is expected soon. However, exemptions that have already been granted shall expire 31 December 2013. Otherwise the new exemption regime shall apply retroactively as of 1 January 2012.

Further modification of the grid fee exemption will enter into force on 1 January 2014. On 1 January 2014 a so-called “physical component” will be  introduced. This component shall reflect the positive effect which energy intensive consumers have towards the network. The higher the consumption, and the more regular the consumption is, the more positive the effect is to the network stability. Nevertheless the stagger shall not be changed. But they become thresholds to which the grid fees can be reduced.

BMWi pointed out that even the previous system of exemptions from the network charges was commercially much less relevant than the EEG surcharges.  While the EEG surcharge for 2013 was 5.277 ct/kWh, the exemptions of the previous system only amounted to exemptions worth EUR 237 million, for about 200 companies, leading to an additional burden of only 0.329 ct7kWh for consumers.

2. Pooling of Points of Supply

Further amendments of the Electricity Grid Charges Ordinance relate to the requirement for pooling (Sec. 17 StromNEV). Pooling means that several supply points of one customer connected to a grid are aggregated if electricity is transmitted at the same time. It is often used by industrial consumers, who can thus reduce costs.

In September 2011 the Federal Network Agency (BNetzA) ruled that with very few exceptions Sec. 17 StromNEV in principle provided for an individual calculation of grid charges for each point of supply. The agency granted a grace period until the end of the first regulation period in December 2013 for pooling agreements that were in place prior to 1 January 2011. Only in specific cases can, and – if the requirements are met – must grid operators aggregate points of supply.

The amendments of the StromNEV are aimed at providing a regulatory framework for pooling.

3. Investments in High Voltage Distributions Networks

Furthermore, the Federal Cabinet approved amendments of the  Incentive Regulation Ordinance (ARegV). These amendment aim to improve the conditions for investment in high voltage levels of distributions networks that previously only covered transmission networks. Furthermore, reasearch and developments costs will be taken into account to give incentives for necessary for fundamental research (like testing new technology in pilot projects).

4. First Reactions

In a first reaction BDEW, the German Association of Energy and Water Industries, was sceptical about the changes. While the revisions brought some improvements, it also made things worse in other areas. This included the partially retroactive effect of changes. It remained to be seen what the revisions bring in the longer run.

Source: Federal Ministry of Economics and Technology

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