BNetzA and Grid Operators Reach Agreement for ARegV Investment Budgets

The German grid regulator, the Federal Network Agency (BNetzA) and reportedly 38 grid operators have reached a settlement regarding investment budgets pursuant to the Incentive Regulation Ordinance (ARegV), which determines the revenue caps for the grid fees German network operators can charge.

Last year the Higher Regional Court of Düsseldorf (OLG Düsseldorf) handed down a number of rulings regarding investment budgets. Based thereon, BNetzA and the grid operators agreed on the procedure for handling applications for investment budgets in the future. The parties also agreed not to appeal the OLG decisions. 

While ARegV aims to promote a cost efficient operation of the German networks, it also contains elements such as “approved investment budgets” that shall ensure the necessary investments into the grids (Section 23 ARegV). The approval of an investment budget by the Federal Network Agency allows grid operators to include the additional costs in their calculation of grid fees. Investment budgets are granted for special expansion and restructuring projects such as the connection of renewable power plants like offshore wind farms and new conventional power plants to the grid. Unlike transmission system operators, distribution system operators can however only apply for investment budgets under restricted conditions pursuant to Section 23 para. 6 ARegV.  In all other cases, they can only try to recover costs claiming a lump-sum investment allowance (pauschalierter Investitionszuschlag) pursuant to Section 25 ARegV or the coverage factor (Erweiterungsfaktor) pursuant to Section 10 ARegV.

Thus far 700 applications for investment budgets with a total volume of over EUR 30 billion have been submitted to BNetzA. To date investment budgets totalling roughly EUR 14 billion have been approved.

The four transmission system operators welcomed the settlement as a signal for more legal certainty in view of the urgently needed grid expansion in Germany. They highlighted the agreement reached with respect to the debt capital needed to finance individual projects and the costs for expansion and restructuring investments, which shall as of now be reduced based on the individual project, hence only proportionately with regard to replacement investments.  The transmission system operators called for further improvements of ARegV in the next ARegV amendment that is allegedly planned in spring 2012.

The Federal Association of the Energy and Water Industry (BDEW) also welcomed the settlement, which it hopes to be a precedent for all grid operators. The association demanded changes to ARegV so that investment budgets are more easily available for distribution system operators. Despite the recent changes to ARegV, which have meanwhile been approved by the Federal Council, most of the investments in the distribution grids will still not be covered by investment budgets, BDEW says. According to a BDEW study on distribution grids, there is a need for an expansion of  by 195,000 to up to 380,000 kilometres until 2020, the association points out.

Source: Federal Network Agency; Joint Press Release Transmission System Operators; BDEW

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