Federal Network Agency Opens Consultation on Quality Element for Incentive Regulation

The German grid regulator, the Federal Network Agency, has opened a consultation process for the introduction of network reliability as a quality element in the Incentive Regulation Ordinance (Anreizregulierungsverordnung – ARegV).

The Agency sets revenue caps for network operators pursuant to a complex process laid down in ARegV. To ensure that necessary investments are made, the ARegV contains special incentivizing provisions, e.g. for investment budgets. The approval of the investment budget ultimately allows network operators to include certain additional costs in their calculation of grid fees as provided for in the Incentive Regulation Ordinance.

Furthermore, the ARegV provides that surcharges or reductions on the grid access fees can be stipulated by the regulator if the network operators exceed or miss quality targets concerning the network reliability (Netzzuverlässigkeit) and network performance (Netzleistungsfähigkeit). The Federal Network Agency has some leeway in introducing quality elements in the regulation.

For the electricity sector, quality elements shall be introduced at the beginning of the second regulation period at the latest (the first period started 1 January 2009 and lasts for five years). The Agency decided to start by focussing on the quality element “network reliability”. Network reliability is described in ARegV as the ability of the network to transmit energy without interruptions while maintaining product quality.

The parties concerned are asked to comment on key issues presented by the Agency’s paper by 17 January 2011.

Source: Federal Network Agency

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