ELIA GROUP 2011 FINANCIAL REPORT
ume needs and prices) instead of incurred costs in the base year and, as such, only the productivity factor is applicable to such costs. While the mechanism for the current regulatory period is fixed for ancillary services and grid losses, for redispatch costs it is still subject to approval from 2011 onwards. Furthermore, this model is subject to approval or change in the second regulatory period starting in 2014. •
emporary non-influenceable costs (TNIC) and influenceable T costs (IC): these costs include return on equity depreciation, cost of debt and of imputed trade tax and are subject to an incentive mechanism as set by the BNetzA, which contains an efficiency factor (only applicable to IC), a productivity factor improvement and an inflation factor (applicable to both TNIC and IC) over a five-year period. In addition the current incentive mechanism provides for the use of a quality factor, but the criteria and implementation mechanism for such a factor are yet to be described by the BNetzA. The various defined factors give the TSOs a medium-term objective to eliminate what are deemed to be inefficient costs. As regards the cost of debt, the allowed cost of debt related to influenceable costs is capped at the lower value of the actual cost of debt in the base year or the implied cost of debt based on the 10-year average of the ‘Umlaufsrenditen festverzinslicher Wertpapiere inländischer Emittenten’ (10-year average yield of the domestic fixed income securities as published by the Bundesbank) in the base year.
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s for return on equity, the relevant laws and regulations set A out the provisions relating to the allowed return on equity, which is included in the TNIC/IC for assets belonging to the regulatory asset base and the PNIC for assets approved in investment budgets. For the first regulatory period (20092013), the return on equity is set at 7.56% for investments made before 2006 and 9.29% for investments made since 2006, based on 40% of the total asset value regarded as ‘financed by equity’ with the remainder treated as ‘quasi-debt’. The return on equity is calculated before corporate tax and after imputed trade tax. For the next regulatory period, the German regulator has calculated 2011 return at a value equal to 9.05%, despite the current lowering of capital market indices to foster attractive enough conditions for grid investment, vital for the timely implementation of energy policy. For the new tariff period, return on investment made before 2006 is set at 7.14%.
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I n addition to the revenue cap, 50Hertz is compensated for costs incurred related to its renewable energy obligations, including EEG and CHP/KWKG obligations, subject to specific regulatory mechanisms aimed at a balanced treatment of costs and income.
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CHANGES IN TARIFF REGULATIONS
Progress was made in 2011 following discussions with the regulator to improve the regulatory framework for new investments in grid infrastructure; the coverage of grid management and development costs; return on capital; and the conditions under which new offshore farms should be connected. On this basis, the ARegV is to be amended for the benefit of system operators in the first half of 2012. The cap applicable in 2011 was 3% higher than in 2010. The cap used as a basis for tariffs, applicable since 1 January 2012, is some 15% higher than in 2011. As at 31 December 2011, 50Hertz had obtained approval for 44 of the 75 investment budget requests made since 2008. The approved investment budget accounts for €2.501 billion. 50Hertz was also successful in a case brought before the Higher Regional Court of Düsseldorf regarding the organisation of investment budget approvals by the BNetzA. In its decision of 23 March 2011, the court ruled as illegal the ‘amount to prevent double recognition’ and the dismissal of interest charges on borrowed funds. Discussions on the regulation of this issue are due to conclude in the first quarter of 2012. In the context of discussions to enhance the regulatory framework for grid investment, the legislator is also looking into the possibility of a target-cost (t-0) approach instead of the current time-frame of two years (t-2), enabling faster depreciation.