First BGH Decisions Concerning Incentive Regulation Ordinance

In its first decisions concerning the Incentive Regulation Ordinance (Anreizregulierungsverordnung – ARegV), the Federal Court of Justice (Bundesgerichtshof – BGH) clarified some controversial issues regarding the ARegV.

Pursuant to Sections 20 et. seq. German Energy Act (EnWG) grid operators have to grant third parties access to their grids in a non-discriminatory way. Since 1 January 2009 ARegV provides for revenue-capped grid charges. Calculating the individual caps has been controversial between the Federal Network Agency (Bundesnetzagentur – BNetzA), the grid regulator responsible for applying ARegV, and many utilities.

In the cases at hand, the court confirmed the calculations of BNetzA only partly. With respect to a number of issues, the court ordered BNetzA to recalculate caps based on its decisions.

The court confirmed BNetzA insofar as the agency calculated with a lump-sum investment allowance (pauschalierter Investionszuschlag) of 1% per year pursuant to Section 25 ARegV. It dismissed the grid operators demand for an annual rise of 1% (first year: 1%, second year: 2%, etc.). It also considered the interest rate for debt capital used by BNetzA as accurate.

In many other points the grid operators prevailed.

The court found in particular that BNetzA did not take due consideration of the latest rulings of BGH in determining the base level for the revenue caps. For this purpose the result of a cost verfication has to be taken into account (Section 6 para. 2 ARegV). The latest rulings interpret some of the provisions concerning the cost verfication in a different way than BNetzA. The same applied to the calculation of the lump-sum investment allowance (pauschalierter Investionszuschlag) in accordance with Section 25 ARegV, the court held.

A new calculation is also necessary with respect to the inflation adjustment factor, BGH said. As cost prices for grid operators can differ from consumer prices, this may be part of the formula. However, the court ruled that a general sector-related productivity rate (genereller sektoraler Produktivitätsfaktor) pursuant to Section 9 para. 1 ARegV, which is part of the regulation formula (Section 7 ARegV in connection with Annex 1), may not be applied as it lacks a basis in Section 21a EnWG that gives the authority to issue ARegV.

Furthermore, the factor in the formula reflecting considerable changes in the supply activities of the grid operator (Erweiterungsfaktor – amendment factor, Section 10 ARegV) has to be applied as of the first year of the regulation period, BGH ruled.

Finally BGH confirmed the legal opinion of the previous instance, which had been contested by BnetzA, that grid operators may have the right to ask for an amendment of the revenue cap under the conditions of the hardship clause in Section 4 para. 4 sent. 1 no. 2 ARegV if their costs rise to an unanticipated extent compared with the year 2006, which is relevant for the cost verification.

Source: BGH (Decisions of 28 June 2011, case ref. nos. EnVR 48/10 and EnVR 34/10)

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