ACM’s draft method decisions for gas and electricity networks
Across Europe, several regulators are consulting on how their frameworks should evolve to respond to the challenges that energy networks face due to climate commitments and the broader macroeconomic environment. The Autoriteit Consument & Markt (the Netherlands Authority for Consumers and Markets, ACM) has now entered this debate with its draft method decision for gas and electricity networks. These proposals have been shaped by consultation with stakeholders and informed by historical legal challenges on aspects of the ACM’s previous decisions.
Upon review of the decision, we summarise the key aspects and share our reflections on the following topics.
- The proposed shift from incentive regulation to cost-plus regulation, which the ACM considers to be more suitable given the uncertainty of the energy transition.
- The process tests and monitoring of costs and KPIs, which are proposed as efficiency safeguards—a significant departure from the ACM’s current practice of ‘top-down’ benchmarking.
- Details on the ACM’s ‘investigate and intervene’ (O&I) process to identify and deal with potential inefficiencies, the definition of the ‘evidently inefficient’ costs that will be disallowed, and the increased overarching transparency requirements.
- The shift from a real-plus to nominal WACC regime for electricity networks and the WACC parameters.
- The ACM’s considerations on the impact of the gas phasing-out, high investment requirements in electricity, and the change in the regulatory regime on WACC.
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Dr Srini Parthasarathy
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