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In­cen­tive reg­u­la­tion of gas and electricity net­work op­er­a­tors

Free market economies, such as the Federal Republic of Germany, rely on competition to ensure that prices are affordable, that there is a balance between supply and demand and that companies are constantly driven to seek out new products and cost effective production technologies. A few sectors of a national economy, however, may prove to be the exception. Electricity grids and gas networks are categorised as "natural monopolies", in which competition is limited or does not exist at all. To prevent the network operators from making monopoly profits and to keep the networks operated as cost efficiently as possible, electricity and gas network operators are regulated.

The operation of energy networks is a capital-intensive business. The "Energiewende" will therefore require investments from the network operators. The expansion of the grid of power and gas lines needed for the "Energiewende" will cost billions. German network operators need a long-term planning horizon and reliable economic framework conditions for such investments. At the same time, there will hardly be any "competitors" for network operation: From an economic standpoint, it does not make sense for anybody to construct additional parallel power lines or gas pipelines. Consumers and third parties seeking network access (i.e. suppliers), however, have a great interest in the price for access to and use of the electricity grid and gas network being calculated fairly. This legal task is fulfilled by the Bundesnetzagentur with a specific regulatory approach known as "incentive regulation".

Continuous improvement of the regulation

There is no one ideal regulatory approach for regulated industries. This is why the Bundesnetzagentur is continuously evaluating the incentive regulation together with the industry associations, the network operators, network users and political representatives involved. Additionally the Bundesnetzagentur adapts the administrative procedures to new developments and proposes changes to the framework.

A comprehensive expert opinion commissioned by the Bundesnetzagentur (German language only) from 2014 draws comparisons between the regulatory approaches of Austria, Italy, the United Kingdom, the Netherlands, Norway and the United States. The expert opinion describes which supplementary incentive regulation instruments exist in the above-mentioned countries in comparison with those existing in the German system.

Date of modification: 2015.07.13