ACM to work out new regulatory method for system operators
The Netherlands Authority for Consumers and Markets (ACM) is working on a new regulatory methodology with which ACM will set the tariffs for system operators from 2027 onwards. Over the past 18 months, ACM has conducted an extensive consultation among all stakeholders. This consultation process began with a written consultation to which 20 stakeholders responded. On the basis of these responses and discussions with system operators and users of the grid and gas network (or representatives thereof), ACM has opted for a regulatory methodology with which ACM assesses in advance the system operators’ costs whenever they expand, upgrade, or adjust their grids or gas networks. At the moment, ACM assesses these costs only afterwards. This change is aimed at having the new method be better able to anticipate the major challenges that system operators and system users currently face with regard to grid capacity shortages and, by extension, the necessary investments. In addition, the methodology ensures that this will take place in an effective manner because the costs must ultimately be borne by all system users.
Over the next few months, ACM will work out the new regulatory methodology, and will also involve system operators and system users in that process. ACM expects to set the draft method decisions in 2025, and will then also be able to tell more about what the new regulatory methodology will look like. In 2026, ACM will set the definitive method decisions, so that ACM is able to set the tariffs on the basis of this new methodology starting in 2027.
From ex ante assessments to ex post assessments
Today’s energy system is undergoing profound changes compared with 20 years ago. A transition from fossil fuels to sustainable energy sources is taking place, and demand for energy keeps on growing. All of this leads to increased congestion on the grid with major consequences for consumers and businesses.
It is essential to strike the right balance between what is necessary for the energy transition and for system users’ affordability. In this process, system operators play an important societal role. That also calls for effective oversight over system operators by ACM. Part of that oversight is tariff regulation, meaning that ACM determines what tariffs system operators are allowed to charge.
ACM wishes to move towards a tariff regulatory regime where it can conduct ex ante assessments. The current methodology looks back on how system operators have performed. These are broad-stroke assessments, and, when they are conducted, the works will already have been carried out, and, as such, the costs will already have been incurred. As a result, it is not possible for ACM to make any changes. In addition, the courts have also been critical of the current methodology (for example, of the benchmark). That is another reason for ACM to revise the methodology.
With the new methodology, system operators are better able to do the work that is necessary for the energy transition. With regard to the grid, system operators will have more scope to make investments in grid expansions on time or investments in any other measures for dealing with grid congestion. With the new regulatory method, ACM is able to assess in advance whether thereto-related plans and processes are efficient, and also whether these can be executed efficiently. That offers ACM a better overview as well as the opportunity to guide system operators on time. In that context, ACM will continue to take a critical look at costs, because these are paid for by grid users.
The broad strokes of the new methodology
In the new methodology, system operators will see their costs compensated plus a reasonable return on top of that. In order to ensure that no unnecessary costs (inefficient) are made, ACM will set requirements on system operators with regard to how they come to their decisions, for example by monitoring the trends of certain cost items, by assessing the processes of system operators, and by comparing these with each other. In addition, ACM wishes that it is clearer to grid users what system operators do in helping them overcome their challenges. They can do so, for example, by providing more insight into the decisions they have taken, the progress thereof, as well as the costs. The measures imposed by ACM are not without obligations. ACM can step in if things are not going well.
Working together towards a future-ready energy system
ACM emphasizes that the creation of a future-ready energy system is a collaborative effort. All market participants in the energy chain, from system operators to system users and local governments, play a crucial role. That is why, over the next few months, ACM will organize public consultations to gather opinions and ideas from direct stakeholders, and, in that way, further work out the new regulatory methodology.