New TenneT 2011 tariffs

28-10-2010 Electricity transmission operator TenneT has submitted a proposal to the Netherlands Competition Authority (NMa) for tariffs in 2011. Transmission tariffs will rise in the coming years to make it possible to strengthen the grid, promote market forces and facilitate integration of renewable energy sources.

Over the coming years TenneT will invest billions in reinforcing the high-voltage grid and establishing a European energy market. In the Netherlands TenneT will invest 3 billion euro in the next 5 to 7 years. The investments are part of a multi-year programme that includes a new power line through the Randstad, the highly-urbanised western part of the Netherlands. These and other lines are necessary for such reasons as to facilitate new connections required for numerous new power stations that are planned. TenneT is also working vigorously on regional grid expansions, among other things so as to connect all of the renewable energy initiatives (including combined heat and power plants and wind farms) timely to the grid.

Method decisions
Tariffs are going to increase in the coming years to finance all these investments. The new decisions recently adopted by NMa on the method of determining prices provide the basis for TenneT to set its tariffs. It should be noted that TenneT intends to lodge an appeal against the Method Decision because the current tariffs – despite the raise – will not be sufficient to cover the investment costs of the past few years. The tariff increase will continue for several years, as future investments will have a knock-on effect on tariffs.

Amended transmission tariffs
The tariffs fall into the categories of system services tariff and transmission tariffs. The tariff increase is related principally to the growing number of investments in recent years to strengthen the Dutch high-voltage grid. The proposal further incorporates some back-calculations rooted in the past that have been worked into the tariffs in accordance with regulations. The transmission tariffs for extra high-voltage grids will go up by 14% under the proposal. Transmission tariffs for high-voltage grids will rise by 12% on average.

Amended system services tariff
The system services tariff will go down by 21% as a result of the method decision. The result of the transmission services going up and the system services going down is an average rise of 4% for an average household or an average industrial user. TenneT will carry out several new system duties assigned to it in the next years. An example of such a new duty is the setting up of systems and processes for developing the north-west European market. Among other things TenneT is cooperating with Belgium and France on establishing market couplings with Germany, Luxembourg and the Scandinavian countries. The new mechanism is scheduled to start up on 9 November 2010 and will provide more stable and harmonised market prices in the region. A larger market can also absorb the increasing sensitivity that accompanies the ongoing growth of renewable energy sources.

The tariff charged by TenneT represents approximately 3% of the total energy bill. A rise of 4% of this part of the energy bill means therefore a rise of 65 eurocents a year for an average household. The tariffs charged by TenneT is among the lowest in Europe. The Netherlands has a high degree of security of supply and a highly reliable national high-voltage grid. The tariffs proposal is currently under evaluation by NMa, after which the competition authority will lay down the tariffs.

The proposal for the transmission tariffs and system services tariff for 2011 can be found on the website of the Office of Energy Regulation.