Current regulatory debates in Germany and Europe - UNECOM
Current regulatory debates in Germany and Europe - UNECOM
Current regulatory debates in Germany and Europe - UNECOM
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<strong>Current</strong> <strong>regulatory</strong> <strong>debates</strong> <strong>in</strong><br />
<strong>Germany</strong> <strong>and</strong> <strong>Europe</strong><br />
Christoph Müller<br />
EnBW Transportnetze AG<br />
May 2009<br />
Energie<br />
braucht Impulse
<strong>Current</strong> <strong>regulatory</strong> <strong>debates</strong> <strong>in</strong><br />
<strong>Germany</strong> <strong>and</strong> <strong>Europe</strong><br />
History of regulation <strong>in</strong> <strong>Germany</strong><br />
Incentive Regulation <strong>in</strong> the German Electricity Supply Industry (Yes, we can)<br />
› “Mass production regulation”<br />
› The TSO situation<br />
The build<strong>in</strong>g of a “Deutsche Netz AG”<br />
The Third Package of the <strong>Europe</strong>an Commission<br />
2
Structure of the German Electricity Supply Industry<br />
Generation<br />
Four major power<br />
generators (hold<strong>in</strong>g approx.<br />
60% of generation)<br />
Major Stadtwerke with<br />
own power plants<br />
IPP<br />
Industry, other<br />
private power<br />
producers<br />
Trad<strong>in</strong>g<br />
approx. 175 traders<br />
participat<strong>in</strong>g at the EEX<br />
OTC Trad<strong>in</strong>g<br />
Energy brokers<br />
Transmission<br />
Four TSOs<br />
Distribution<br />
900 lokal <strong>and</strong> regional<br />
network operators<br />
5 foreign companies<br />
operat<strong>in</strong>g networks <strong>in</strong><br />
border regions<br />
Supply<br />
900 <strong>in</strong>cumbent suppliers<br />
approx 100 new<br />
entrant supplier<br />
Green-electricity<br />
supplier<br />
3
History of regulation<br />
Pre 1998<br />
Monopoly Industry<br />
Rate of Return regulation on state level<br />
1998 to 2005 Negotiated network access<br />
Manifested itself <strong>in</strong> a negotiation between<br />
associations for the broad rules <strong>and</strong><br />
<strong>in</strong>dividual negotiation for actual network<br />
access<br />
2006 to 2008 Regulated network access<br />
St<strong>and</strong>ardized rate-of-return regulation on<br />
federal <strong>and</strong> state level (each state could opt<br />
for federal or state regulation)<br />
2009 to ? Regulated network access<br />
St<strong>and</strong>ardized <strong>in</strong>centive regulation organized<br />
on federal level<br />
calculations (mostly)<br />
on current cost basis<br />
current cost basis<br />
for pre-2006 assets<br />
historic cost basis<br />
for post-2006 assets<br />
4
Network charges <strong>in</strong> <strong>Germany</strong> January 2009<br />
12,00<br />
11,00<br />
10,00<br />
9,00<br />
Max<br />
Durchschnitt aller Netzbetreiber<br />
8,00<br />
7,00<br />
7,89<br />
7,83<br />
7,12<br />
6,94<br />
7,38<br />
EnBW AG<br />
M<strong>in</strong><br />
6,46<br />
Ct/kWh<br />
6,00<br />
5,00<br />
4,00<br />
4,18<br />
4,15<br />
4,93 4,60<br />
4,16<br />
5,08<br />
3,00<br />
2,00<br />
1,00<br />
0,00<br />
3.800<br />
4.000<br />
12.500<br />
3,68<br />
Low Voltage load<br />
profiled customers<br />
Entgelte netto ohne KA,<br />
KWK, etc.<br />
<strong>in</strong>kl. E<strong>in</strong>tarifzähler<br />
30.000<br />
3,43<br />
2000 h<br />
2,75<br />
2900 h<br />
2,33<br />
5000 h<br />
1,56<br />
6000 h<br />
1,39<br />
8000 h<br />
1,17<br />
2000 h<br />
1,74<br />
4000 h<br />
3,34<br />
1,25<br />
Low Voltage Medium Voltage High Voltage<br />
Entgelte lastprofilgemessener Kunden netto, ohne KWK, KA etc.<br />
ohne Lastprofilmessung<br />
2,86<br />
1,07<br />
5000 h<br />
2,49<br />
0,95<br />
6000 h<br />
8000 h<br />
2,13<br />
0,78<br />
2000 h<br />
2,83<br />
1,17<br />
4000 h<br />
1,72<br />
0,81<br />
5000 h<br />
1,39<br />
0,67<br />
6000 h<br />
1,21<br />
0,58<br />
0,97<br />
8000 h<br />
0,47<br />
5
Network Charges for a (load profiled) domestic customer<br />
- Includ<strong>in</strong>g meter<strong>in</strong>g<br />
- without any taxes (KWKG, KA, …)<br />
8,00<br />
7,50<br />
7,00<br />
Ct/kWh<br />
6,50<br />
6,00<br />
5,50<br />
5,00<br />
E.ON (BAG)<br />
Vattenfall (BEWAG)<br />
Vattenfall (HEW)<br />
RWE Net (RWE)<br />
RWE Net (VEW)<br />
EnBW (REG)<br />
Durchschnitt aller <strong>and</strong>eren<br />
4,50<br />
Jan 05<br />
Feb 05<br />
Mrz 05<br />
Apr 05<br />
Mai 05<br />
Jun 05<br />
Jul 05<br />
Aug 05<br />
Sep 05<br />
Okt 05<br />
Nov 05<br />
Dez 05<br />
Jan 06<br />
Feb 06<br />
Mrz 06<br />
Apr 06<br />
Mai 06<br />
Jun 06<br />
Jul 06<br />
Aug 06<br />
Sep 06<br />
Okt 06<br />
Nov 06<br />
Dez 06<br />
Jan 07<br />
Feb 07<br />
Mrz 07<br />
Apr 07<br />
Mai 07<br />
Jun 07<br />
Jul 07<br />
Aug 07<br />
Sep 07<br />
Okt 07<br />
Nov 07<br />
Dez 07<br />
Jan 08<br />
Feb 08<br />
Mrz 08<br />
Apr 08<br />
Mai 08<br />
Jun 08<br />
Jul 08<br />
Aug 08<br />
Sep 08<br />
Okt 08<br />
Nov 08<br />
Dez 08<br />
Jan 09<br />
6
Network Charges for a medium voltage customer (4000 h/a)<br />
- Includ<strong>in</strong>g meter<strong>in</strong>g<br />
- without any taxes (KWKG, KA, …)<br />
2,600<br />
2,400<br />
E.ON (BAG)<br />
Vattenfall (BEWAG)<br />
Vattenfall (HEW)<br />
RWE Net (RWE)<br />
RWE Net (VEW)<br />
EnBW AG<br />
Durchschnitt aller <strong>and</strong>eren<br />
2,200<br />
2,000<br />
1,800<br />
1,600<br />
1,400<br />
Jan 05<br />
Feb 05<br />
Mrz 05<br />
Apr 05<br />
Mai 05<br />
Jun 05<br />
Jul 05<br />
Aug 05<br />
Sep 05<br />
Okt 05<br />
Nov 05<br />
Dez 05<br />
Jan 06<br />
Feb 06<br />
Mrz 06<br />
Apr 06<br />
Mai 06<br />
Jun 06<br />
Jul 06<br />
Aug 06<br />
Sep 06<br />
Okt 06<br />
Nov 06<br />
Dez 06<br />
Jan 07<br />
Feb 07<br />
Mrz 07<br />
Apr 07<br />
Mai 07<br />
Jun 07<br />
Jul 07<br />
Aug 07<br />
Sep 07<br />
Okt 07<br />
Nov 07<br />
Dez 07<br />
Jan 08<br />
Feb 08<br />
Mrz 08<br />
Apr 08<br />
Mai 08<br />
Jun 08<br />
Jul 08<br />
Aug 08<br />
Sep 08<br />
Okt 08<br />
Nov 08<br />
Dez 08<br />
Jan 09<br />
Ct/kWh<br />
7
Incentive Regulation <strong>in</strong> <strong>Germany</strong><br />
First <strong>regulatory</strong> period will run from 2009 to 2013 (electricity) / 2009 to 2012 (gas)<br />
Revenue cap determ<strong>in</strong>ed by<br />
› Start year 2008 (i.e. costs of the year 2006)<br />
› Changes <strong>in</strong> costs hat cannot be <strong>in</strong>fluenced by the network operator<br />
› Pensions, additional labor costs (exclud<strong>in</strong>g wages)<br />
› Connect<strong>in</strong>g network charges<br />
› Apprentices, company K<strong>in</strong>dergarten<br />
› In dispute: distribution losses <strong>and</strong> other ancillary services<br />
› Inflation (two year time lag)<br />
› General X-Factor of 1,25% (determ<strong>in</strong>ed <strong>in</strong> the decree)<br />
› Individual X-Factor (com<strong>in</strong>g out of a benchmark, next slide)<br />
› Rate of return (now determ<strong>in</strong>ed for the years 2009 to 2013)<br />
› Further details that almost certa<strong>in</strong>ly have to be settled by the courts<br />
8
Mass production regulation<br />
The (black box) benchmark<br />
The regulator has undertaken a benchmark (that we do know)<br />
› Approx. 240 network operators took part, TSO benchmarked separately<br />
Typical approach: Benchmark <strong>in</strong>forms regulators about performance, efficiency, …<br />
<strong>Germany</strong> is the first country (?) to use benchmark results directly<br />
› Network operators are scored between 60% <strong>and</strong> 100% efficiency<br />
› Revenue caps are adjusted that 100% is reached over 10 years (gas: 9)<br />
› I.e. 90% efficiency translates <strong>in</strong>to 1% <strong>in</strong>dividual X Factor<br />
› Straight forward application justifies “best of five” (60%, 2xDEA, 2xSFA)<br />
Network operators were <strong>in</strong>formed about their benchmark results<br />
› Average efficiency at 92%<br />
› Regulator th<strong>in</strong>ks benchmark results are too high (… “w<strong>in</strong>ners curse” …)<br />
9
The future of German network regulation<br />
„However, the Regulator is <strong>in</strong> no way<br />
at its wits‘ end <strong>and</strong> has numerous new, creative<br />
<strong>and</strong> <strong>in</strong>novative ideas.“<br />
„Dennoch ist die Bundesnetzagentur mit ihrem Late<strong>in</strong><br />
ke<strong>in</strong>eswegs am Ende und hat zahlreiche neue,<br />
kreative und <strong>in</strong>novative Ideen.“<br />
Speaker’s notes of Mr Kurth for the press conference 7th July 2008<br />
Regul ator y credibil ity? Increas<strong>in</strong>g beta’s!<br />
10
The TSO situation<br />
General pr<strong>in</strong>ciple of regulation (?!): The regulator should seek that <strong>in</strong> any given<br />
year revenues <strong>and</strong> efficient costs of the regulated company are <strong>in</strong> l<strong>in</strong>e<br />
German Regulator follows a strict two-year-lag regard<strong>in</strong>g all costs<br />
› Overruled by the Highest Court <strong>in</strong> 2008<br />
› Regulator will change its practice with economic effect from 2014ff<br />
Two year lag is “only risk/chance” with normal distributed cost changes<br />
› TSO situation is different: Systemically / cont<strong>in</strong>uously ris<strong>in</strong>g costs<br />
› Caused by new build renewables <strong>and</strong> (long term) ris<strong>in</strong>g wholesale prices<br />
Past year-by-year costs <strong>in</strong>creases are <strong>in</strong> the area of allowed return on capital<br />
› TSO <strong>in</strong> danger of mak<strong>in</strong>g losses<br />
› Shor t-fall can never be recaptured<br />
11
The “ Deutsche Netz AG”<br />
EU forced EON to divest 4800 MW <strong>and</strong> its TSO <strong>in</strong> an antitrust case<br />
EON started to lobby for a “Deutsche Netz AG”<br />
› Motives for outsiders unclear<br />
› RWE, VE, EnBW would have to divest their TSOs to form Netz AG with EON<br />
Vattenfall announced to sell its TSO<br />
RWE argues for one balanc<strong>in</strong>g zone under the leadership of RWE<br />
EnBW argues for <strong>Europe</strong>an approach <strong>and</strong> is not will<strong>in</strong>g to jo<strong>in</strong> EON, VE or RWE<br />
› EnBW started a cooperation with Swissgrid<br />
Political pressure is build<strong>in</strong>g to form a Netz AG<br />
12
TSOs <strong>in</strong> <strong>Europe</strong><br />
RTE (Frankreich)<br />
TERNA (Italien)<br />
National Grid (Engl<strong>and</strong> u.<br />
REE (Spanien)<br />
RWE TSO (Deutschl<strong>and</strong>)<br />
E.ON Netz (Deutschl<strong>and</strong>)<br />
PSE-Operator (Polen)<br />
TenneT (Holl<strong>and</strong>)<br />
VE-T (Deutschl<strong>and</strong>)<br />
Elia (Belgien)<br />
EnBW TNG (Deutschl<strong>and</strong>)<br />
CEPS (Tschechische Republik)<br />
swissgrid (Schweiz)<br />
HTSO/DESMIE (Griechenl<strong>and</strong>)<br />
Transelectrica (Rumänien)<br />
REN (Portugal)<br />
MAVIR (Ungarn)<br />
JP EMS (Serbien)<br />
APG (Österreich)<br />
ESO EAD (Bulgarien)<br />
Belenergo (Weißrussl<strong>and</strong>)<br />
National Grid (Schottl<strong>and</strong>)<br />
SEPS (Slowakei)<br />
Eirgrid (Irl<strong>and</strong>)<br />
Energ<strong>in</strong>et (Dänemark West)<br />
Lietuvos (Litauen)<br />
HEP-OPS (Kroatien)<br />
Elkraft Systems (Dänemark Ost)<br />
ELES (Slowenien)<br />
L<strong>and</strong>snet (Isl<strong>and</strong>)<br />
ISO Bih (Bosnien &<br />
MEPSO (Mazed<strong>in</strong>ien)<br />
SONI (Nord Irl<strong>and</strong>)<br />
CEGEDEL Net (Luxemburg)<br />
Moldelectrica (Moldavien)<br />
Latvenergo (Lettl<strong>and</strong>)<br />
EESTI (Estl<strong>and</strong>)<br />
EPCG (Montenegro)<br />
TIWAG (Österreich)<br />
VKW (Österreich)<br />
13 0 100 200 300 400 500<br />
TWh
TSO network charges <strong>in</strong> Europa<br />
ETSO comparison 2007<br />
14<br />
Quelle: ETSO Transmission tariffs 2007
TSO Network charges <strong>in</strong> <strong>Germany</strong> <strong>in</strong> 2009<br />
Full year averages - 6.000 h/a utilisation hours<br />
1,00<br />
0,90<br />
0,80<br />
ct/kWh<br />
0,70<br />
0,60<br />
0,50<br />
0,40<br />
VE-T transpower EnBW TNG RWE TSO<br />
15
The <strong>Europe</strong>an TSO Debate<br />
EU pushes for stronger unbundl<strong>in</strong>g of TSO<br />
› EU Commission argued for ownership unbundl<strong>in</strong>g<br />
› Compromise of EU Council <strong>and</strong> EU Commission: Strong legal unbundl<strong>in</strong>g<br />
EU Commission emphasizes three benefits from OU<br />
› Less regulation<br />
› More competition<br />
› More <strong>in</strong>vestments<br />
Regulation: A monopoly always needs to be regulated<br />
Competition: Becom<strong>in</strong>g more <strong>and</strong> more a question of believe<br />
› Electricity wholesale prices just reached total generation costs <strong>in</strong> 2008 …<br />
› … <strong>and</strong> broke down s<strong>in</strong>ce then<br />
› Significant number of <strong>in</strong>dependent traders <strong>in</strong> the market<br />
16
Central trad<strong>in</strong>g place EEX<br />
1400<br />
1200<br />
1000<br />
Snap shot of the<br />
EU Sector Inquiry<br />
(next slide)<br />
1044<br />
1133<br />
1273<br />
1150 1165<br />
1319<br />
TWh<br />
800<br />
600<br />
517<br />
602<br />
400<br />
391 397<br />
342 338<br />
200<br />
0<br />
150<br />
154<br />
117<br />
124<br />
33 49 60<br />
86 89<br />
2002 2003 2004 2005 2006 2007 2008<br />
EEX-Spot EEX-Term<strong>in</strong> Altogether<br />
17
Electricity Trad<strong>in</strong>g <strong>in</strong> <strong>Germany</strong> 2004/05<br />
Trad<strong>in</strong>g Volumes <strong>in</strong> <strong>Germany</strong> (2004/05)<br />
EnBW‘s OTC trad<strong>in</strong>g partners for<br />
Electricity consumption <strong>in</strong> <strong>Germany</strong><br />
Future<br />
market<br />
639 %<br />
OTC<br />
EEX<br />
565%<br />
74%<br />
11%<br />
65%<br />
EEX tr ader s<br />
24%<br />
Basis: EnBW-H<strong>and</strong>elsdaten Juni 2004 – Mai 2005<br />
F<strong>in</strong>ancial service providers (5)<br />
Other (53)<br />
<strong>Europe</strong>an power producers (43)<br />
F<strong>in</strong>ancial service providers,<br />
free traders (37)<br />
18<br />
Spotmarket<br />
19 %<br />
Juni 2004-Mai 2005, Quelle: EU Sector Inquiry<br />
OTC<br />
EEX<br />
Basi s: EEX-Teilnehmerliste<br />
Other (32)<br />
<strong>Europe</strong>an power producers (91)
Common accusation: TSOs do not <strong>in</strong>vest<br />
the congestion revenues<br />
19<br />
Source: „The Commission‘s<br />
impact assessment of the 3rd<br />
package proposals”, Christof<br />
Schoser, DG TREN Unit C2<br />
Internal Market for Electricity<br />
& Gas. Presentation given to<br />
the Council Energy Work<strong>in</strong>g<br />
Group, Brüssel, 18.10.2007,
Invest<strong>in</strong>g congestion revenues<br />
German TSOs are not free <strong>in</strong> usage of congestion revenues<br />
› Usage is part of the network charge approval of the Bundesnetzagentur<br />
› In the first approval congestion rents were used to lower network charges<br />
› I.e. the network charges of the years 2006 <strong>and</strong> 2007<br />
› In the second approval congestions rents are partly used for <strong>in</strong>vestments<br />
› Vattenfall <strong>and</strong> EON will <strong>in</strong>vest parts<br />
› RWE <strong>and</strong> EnBW use congestion rents to lower network charges<br />
Invest<strong>in</strong>g congestions rents is a signal for a bad <strong>regulatory</strong> environment<br />
› Why do we need subsidies for network enhancements?<br />
› Invest<strong>in</strong>g congestions revenues creates value by avoid<strong>in</strong>g “st<strong>and</strong>ard <strong>in</strong>vestments”<br />
20
TSOs: Some thoughts on the way forward<br />
21<br />
Any company <strong>in</strong>clud<strong>in</strong>g OU-TSOs will seek to make profit<br />
› Hop<strong>in</strong>g for a “benevolent TSO” is dangerous<br />
› TSO-OU means more difficulties for embedded <strong>and</strong> renewable generation<br />
› Regulation is still necessary<br />
The “<strong>Europe</strong>an copper plate” is the wrong target<br />
› Transport dem<strong>and</strong> does have reasons<br />
› The <strong>Europe</strong>an copper plate is <strong>in</strong>efficient <strong>and</strong> will probably be sunk cost<br />
More <strong>in</strong>vestment is needed …<br />
› … ma<strong>in</strong> issue <strong>in</strong> <strong>Germany</strong> is the current <strong>regulatory</strong> framework<br />
… <strong>and</strong> a <strong>Europe</strong>an congestion management system<br />
› Regional forums are not <strong>in</strong> l<strong>in</strong>e<br />
› Break<strong>in</strong>g up the German market will be a political issue<br />
› Companies mov<strong>in</strong>g <strong>in</strong> the right direction (PLEF, EnBW-Swissgrid, …)
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