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.
Download
Contact
Dr Srini Parthasarathy
PartnerContributors
Related
Download
Related
Oxera responds to Ofgem’s call for input on AI assurance
We welcome Ofgem’s recent call for input on AI assurance. The transition to a net-zero, highly dynamic energy sector relies on the successful integration of AI, and we support the development of a framework that addresses the unique economics, innovation drivers and risks of the… Read More
Options for greater public control in the water sector
Recent years have seen significant debate about the successes and failures of privatisation in UK utilities sectors and, in particular, whether changes in water company ownership would improve public outcomes. While past governments avoided calls to review the ownership model, the landscape has now shifted materially. With the increasing… Read More