Incentive regulation

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The incentive is an official instrument of market regulation monopolistic markets. In Germany it has been used since January 2009 to set network usage charges for electricity and gas; this instrument should lead to falling energy prices for consumers . New electricity and gas providers and renewable energies should also benefit from this. An incentive regulation is under discussion for the rail infrastructure.

Incentive regulation for energy networks

Networks are considered to be natural monopolies that should be subject to state regulation. The incentive regulation is intended to create incentives for the operators of gas and electricity networks to reduce costs in order to pass these on to consumers. The network operators are given upper limits for their fees (price caps) or the upper limits for revenues (revenue caps). In Germany, there are revenue caps for around 1,600 network operators. A nationwide efficiency comparison determines company-specific estimates for cost efficiency. All network operators must then measure themselves against the most efficient operator. Less efficient companies have a few years to reduce the individual inefficiency identified by the Federal Network Agency as the competent authority. In addition, the revenue cap of each network operator is reduced annually by a percentage (sectoral productivity factor) set by the regulatory authority.

Pure cost-cutting instruments can lead to quality and stability losses in the network. Certain regulations are therefore provided to ensure the necessary network investments (investment lump sums and exemptions). An additional quality regulation enables the regulatory authority to add or reduce the network revenues of individual companies depending on the network quality determined. Small network operators can participate in a simplified procedure.

background

According to the Federal Statistical Office , energy costs for consumers have risen by over 30 percent since 2000. In 2005 private households had to spend 6.3 billion euros more on energy than in the previous year. The network costs make up around a third of the energy bill for electricity and around a quarter for gas . The network operators received around 21 billion euros in network charges in 2006 alone, but only reinvested around a tenth of this amount in the networks. This is seen as an indication of a lack of competition on the energy market and excessive network charges.

Share of network charges in electricity and gas prices for private households

The electricity and gas networks are in the hands of a few large energy groups. The transmission grids (380 kilovolt level) were owned exclusively by the four large groups E.ON , RWE , Vattenfall and EnBW until 2009 . At the same time, they had 80 percent of the power plant's output. The accusation: their monopoly-like position leads to excessive charges for the transmission of gas and electricity as well as to the hindrance of competition and the feed-in of renewable energies; the networks are not efficient. Small municipal utilities, which are often at the end of the chain and operate regional networks, would be left out in this situation. The electricity and gas networks in Germany should therefore necessarily be regulated more tightly by the Federal Network Agency.

Incentive Regulation Ordinance (ARegV)

Basic data
Title: Ordinance on the incentive regulation
of energy supply networks
Short title: Incentive Regulation Ordinance
Abbreviation: ARegV
Type: Federal Ordinance
Scope: Federal Republic of Germany
Issued on the basis of: Sections 21a, 24, 29 EnWG
Legal matter: Commercial administrative law , energy law
References : 752-6-11
Issued on: October 29, 2007
( BGBl. I p. 2529 )
Entry into force on: November 6, 2007
Last change by: Art. 3 VO of December 23, 2019
( Federal Law Gazette I p. 2935, 2936 )
Effective date of the
last change: 		December 31, 2019
(Art. 4 of December 23, 2019)
Please note the note on the applicable legal version.

The Incentive Regulation Ordinance ( ARegV ) sets an upper revenue limit for the companies concerned that corresponds to the total permissible network costs including imputed depreciation and return on equity. The upper revenue limit of a company that an operator is allowed to cover with the revenue from network charges and other revenues is determined before the start of the regulatory periods for each year of the coming regulatory period, with one regulatory period lasting five years. The network operator can make an individual adjustment of the revenue caps to the price development. If there are also unforeseen changes, an adjustment can be requested in order to avoid unreasonable hardship. The regulatory authority can also make adjustments based on quality criteria.

The company determines the upper revenue limit through a cost review. The data must be confirmed by an auditor. The Federal Network Agency enters the difference between the revenue cap and the actual revenue annually in a regulatory account. If the actual revenues exceed the upper limit by five percent for gas and electricity, the network charges must be adjusted immediately.

The basis of cost accounting is based on the provisions of the Electricity Network Fee Ordinance (StromNEV) and the Gas Network Fee Ordinance (GasNEV) passed in 2005 . In addition, so-called cost components that cannot be influenced over the long term are included in the evaluation of the network costs. These include, among other things, legal requirements, concession fees , operating taxes, upstream network levels, certain investments, additional costs for the operation of underground cables , company and collective bargaining agreements on additional wage and utility services (if they were created by December 31, 2006 and recognized in the network fee approval procedure of the BNetzA), Works council activities (in the case of the statutory reimbursement of costs by the network operator), procedural regulations for cross-border electricity trading and for access to the natural gas transmission networks.

If the supply task of a network operator changes, adjustments to the revenue caps can be requested from the regulatory authority on an annual basis. The factors here are: the area of ​​the supply area, the number of connection or exit points, annual maximum load, other parameters set by the regulatory authority .

The efficiency comparison, which the Federal Network Agency carries out before each regulatory period, results from the total costs of network operation after deducting the non-influenceable cost shares and standardization of the capital cost share. This efficiency value is given in percent and must not fall below 60 percent. When comparing efficiency, various existing differences between the individual network operators are taken into account: supply task (see above), geographical, geological and topographical features, line length.

The Federal Network Agency can make surcharges or discounts with regard to the network quality. The stipulation here is the uninterrupted and stable supply of electricity and gas.

Investment budgets of the transmission system operators (TSOs) must be recognized by the regulatory authority, provided they are for grid stability, for integration into the national or international grid, for needs-based (Section 11 EnWG ) expansion, within the framework of the Renewable Energy Sources Act (EEG) and the expansion of offshore wind energy (including underground cables) are required.

At the request of a distribution network operator (DSO), a flat-rate investment surcharge can be granted at the beginning (2009). This may not exceed one percent of the standardized cost of capital . The possibility of a flat-rate investment surcharge only exists for the first regulatory period (up to and including 2013).

Network operators with fewer than 30,000 electricity or 15,000 gas customers can take part in a simplified procedure for determining the efficiency comparison. An averaged efficiency value is then assumed for this.

In the event of disputes regarding the determined efficiency value, the network operator is obliged to provide evidence. Any inefficiencies found must be remedied within a period set by the regulatory authority, but no later than ten years. Otherwise it should not be possible to cover the network costs through revenues.

Once all the data has been determined, the upper revenue limit is converted into the network fee.

Evaluation and amendment of the Incentive Regulation Ordinance

In the ARegV, an evaluation by the Federal Network Agency is planned for December 31, 2014. The Federal Network Agency handed over the evaluation report to the Federal Ministry for Economic Affairs and Energy on January 21, 2015. In addition to analyzes of the network operators' investment behavior, this also includes suggestions for the further development of incentive regulation. In its "10-point agenda for the energy transition", the Ministry of Economic Affairs declared that it would present a draft ordinance to amend the ARegV in spring 2015. While during the discussion of the proposals the Federal Network Agency proposed a further development of the current regulation called "ARegV 2.0", network operators suggested the "Investment Cost Difference" (IKD).

The amendment to the Incentive Regulation Ordinance approved by the Federal Cabinet at the beginning of August 2016 takes into account that 95% of renewable energy is fed directly into the distribution grids, which require an investment of around 50 billion euros. Three quarters of the necessary distribution network expansion will be required within the next 10 years (by 2025). According to the former State Secretary Rainer Baake in the BMWi, the amendment made these investments possible without neglecting the cost-efficiency concept, whereby the return on the capital employed is currently falling further, which has the effect of reducing investment.

Web links

Individual evidence

  1. ↑ see e.g. B. Monopolies Commission , special report 60: Railway 2011: Competition policy under pressure to act ( PDF; 1.2 MB )
  2. ^ Felix Dehmel: Incentive regulation of electricity transmission networks: A system analysis with regard to selected return effects . ( kobv.de [accessed on May 24, 2019]).
  3. ^ BNetzA: Evaluation report according to § 33 Incentive Regulation Ordinance . pdf, 3.4 MB
  4. ^ BMWi: Central energy transition project for the 18th legislative period . pdf, 235 kB
  5. ↑ CDU / CSU energy expert Bareiß: New incentive regulation strengthens the distribution networks, share check, August 4, 2016
  6. ↑ Cabinet approves Incentive Regulation Ordinance, BMWi, press release of August 3, 2016 ( Memento of October 11, 2016 in the Internet Archive )
  7. ↑ Einhellig, L. et al .: Return on Equity for Network Operators. In: Energiewirtschaftliche Tagesfragen, Volume 66, Issue 5, pp. 36ff. Martin Czakainski, accessed September 13, 2019 .