ACER publishes its latest report on how electricity network tariffs are set in Europe


ACER publishes its latest report on how electricity network tariffs are set in Europe

What is it about?

Every two years, ACER publishes a practice report on electricity transmission and distribution tariff methodologies.

This third edition of ACER’s electricity network tariffs report:

  • Reviews the tariff methodologies across EU Member States and Norway;
  • Focuses on selected topics (i.e. cost models, cost cascading, injection charges, connection charges, reactive energy charges and time-of-use network tariffs ); and
  • Provides recommendations to regulators on how to improve national tariff setting.

What's the relevance of ACER's network tariffs report?

Network tariffs recover the costs to grid operators in developing and operating transmission and distribution networks, which assets are playing a key role in the energy transition.

Network tariffs are designed at national level in multiple ways. Regulators seek to find the right balance between various tariff-setting principles such as cost recovery, cost reflectivity, efficiency, non-discrimination, transparency, non-distortion, simplicity, stability, predictability and sustainability. The integration of renewables, increased demand via electrification, a more active role of network users and affordability in the context of the energy crisis all add further complexity. Hence, the need for ACER’s regular assessment of whether the tariff methodologies continue to be appropriate.

National regulatory authorities (NRAs) are required to take ACER’s report into consideration when fixing or approving transmission or distribution tariffs, or their methodologies.

What does ACER recommend?

The Report provides recommendations to the NRAs:  

  • To evaluate the pros and cons of applying incremental or forward-looking cost models;
  • To collect network costs, classified by different voltage levels;
  • To differentiate a proposed list of cost categories and identify for each of them the most appropriate cost drivers for allocation to the tariff structure;
  • To set an appropriate tariff basis for injection charges;
  • To consider connection cost-sharing between current and future network users;
  • To monitor the evolution of costs due to voltage control and reactive energy management, and to review reactive energy charging where costs deem significant; and
  • To investigate the need for time-of-use signals, evaluate their impacts and avoid optionality where they are introduced to reflect system costs.

The report also reiterates previous ACER recommendations (e.g. on frequency of setting tariff methodologies and updating tariff values, stakeholder involvement, transparency and structure of tariffs).

What are the next steps?

ACER plans to:

  • Continue to engage with stakeholders into discussions on best practices in tariff setting; and
  • Issue the next edition of the Report (planned end of 2024/early 2025) and monitor how NRAs are taking the ACER recommendations into consideration.

Access the report.