Cost ex­am­i­na­tion

Cost examination tasks

The starting point for setting revenue caps is a comprehensive examination of an operator's network costs. Under section 54 of the Energy Industry Act (EnWG) this task is the responsibility of the competent regulatory authority of the respective federal state or of the Bundesnetzagentur.

The cost examination is based on the audited financial statement for the specific business activity in the regulated network sectors completed in accordance with commercial law for corporations (HGB). For Ruling Chamber 8 this means electricity network operational activity (see section 6b EnWG). The financial statements for individual business activities must be published each year together with the energy utility's annual financial statements in the electronic Federal Gazette. A separate determination was made in 2019 concerning financial statements for individual business activities.

However, separate requirements apply for some assessment items in the regulation apart from HGB.

Some features of the regulation include

  • different depreciation periods
  • designated index series to be used for determining current values
  • for network transfers, the purchase price is not used to determine the value, rather the imputed residual value

and many others.

Balance-sheet costs and imputed costs of grid operation may be recognised only insofar as they are in accord with the costs of an efficient and structurally comparable grid operator (section 21 EnWG). Using the profit and loss statement as a basis, an imputed cost statement is to be prepared for determining network costs.

Each cost examination takes place in the last but one calendar year before a new regulatory period begins. It is based on the operators' annual financial statements for the last full financial year. The third regulatory period for the electricity sector began in 2019.

Thus two years prior to the start of the regulatory period the companies complete the regulatory authority's formal data sheets and submit all cost data for the fiscal year that took place three years before the start of the new regulatory period. An example of this would be completing a data form in 2017 for the 2016 fiscal year for the regulatory period that begins on 1 January 2019.

The regulatory authority examines the operational necessity of the costs claimed on the basis of the annual financial statements completed under German commercial law and adapted for the purposes of the cost examination. Included are all costs incurred on grounds of cause or amount, especially those costs incurred by services purchased from areas outside the network operator's sector because a primary goal is to avoid cross subsidisation of competitive areas from network operation such as the generation or the sale of energy (sections 6(1) and 6b EnWG).

Determining the base level of costs (cost examination)

Each network operator’s actual costs provide the basis for setting the revenue caps and, in turn, the network charges. Before the beginning of a regulatory period, the regulatory authorities determine the base level used to set the revenue cap by a cost examination carried out in accordance with the network charges ordinances.

Regulation of loss energy costs

One cost element for companies that is subject to regulation is loss energy, which is the energy required for the compensation of technical power losses. Loss energy costs thus include costs of procuring energy in compliance with section 10(1) of the Electricity Network Access Ordinance (StromNZV) and in the Bundesnetzagentur's Determination of the Tendering Procedure for Loss Energy (BK6-08-006) from 21 October 2008. Because the costs for loss energy depend on general electricity price trends, this cost element is currently subject to its own cost adjustment mechanism as "volatile costs" within the meaning of section 11(5) ARegV. The ruling chamber issued a determination on this matter and annually publishes the applicable reference price. The costs are concurrently included in efficiency benchmarking.

Procedure-specific documents / determinations on data collection

Ruling Chamber 8 will gradually publish all revenue cap determinations for the third regulatory period in the Decisions database.

An overview of the proceedings (TSO standard procedure, DSO standard procedure and simplified procedure) along with the corresponding file number are listed by regulatory period here: Revenue cap proceedings by regulatory period (Document in German.)

Date of modification: 2021.08.31