Revenue caps and revenue regulation
In our market economy, competition drives down prices and balances supply and demand while motivating companies to reduce their costs and seek new products and solutions.
Whereas competition among the electricity suppliers functions well and electricity generation is sold on the power exchance, the electricity and gas supply networks are "natural monopolies" where competition is limited or even non-existent. As a rule it does not make economic sense for several companies to build their own parallel electricity or gas infrastructure within the same supply area. Nor is there generally any incentive from a business point of view for companies to set up their own parallel power line or pipeline network in competition with an established operator. To ensure that the operators do not make monopoly profits but still operate their networks as cost-effectively as possible, the electricity and gas network operators are subject to regulation
In the interests of private consumers, commercial and industrial customers and energy utilities, the charges for transporting electricity and gas must be calculated appropriately and transparently. Under the incentive regulation regime (ARegV), the regulatory authority does not determine an individual network charge (a price on the price list). Instead, it examines costs and monitors compliance with the legal provisions governing price-setting, in particular section 17 of the Electricity Network Charges Ordinance (StromNEV). Using its supervisory instruments, the regulatory authority can also examine network charges or price elements on an individual basis.
Tasks of Ruling Chamber 8
Ruling Chamber 8 assumes responsibility for a large number of tasks involving the economic regulation of electricity network operators, which it mainly does through examining costs and setting revenue caps. It also carries out further proceedings that impact costs alongside setting the revenue caps.
A core element of the incentive-based regulatory regime are the five-year regulatory periods. Before the beginning of each regulatory period, the regulatory authorities set a revenue allowance for each network operator that is applicable during the period. This first involves assessing a company's necessary operating costs. These costs feed into an efficiency benchmarking exercise and provide the basis for setting an appropriate allowance. The allowed revenue is sufficient to enable the company to fulfil its network operator obligations.
Since the revenue allowance is set before the beginning of each regulatory period, they are blind for the network operator's actual costs and revenue throughout the entire period. This gives operators an incentive to increase productivity and lower costs. The network operator can keep revenue for a certain period of time even when costs are reduced, but must also bear cost increases in some items under the approved revenue cap.
Network operators can achieve a reasonable return on capital employed in addition to the profits from reducing their costs. The rate of return on equity is set by Ruling Chamber 4 before the start of each regulatory period in accordance with the provisions of the Electricity and Gas Network Charges Ordinances (StromNEV and GasNEV). The imputed rate of return on equity is factored into the revenue cap.
Scope of activity
On the following pages you can find lists of proceedings determining the revenue cap for each company and proceedings-specific overviews of the related sub-decisions for determining respective revenue caps. These include:
- Cost examination
- Efficiency benchmarking
There are also numerous independent formal proceedings on the topics below that affect revenue caps:
- Incentive regulation account
- Adjustment of capital expenditure
- Network takeovers, section 26 of the Incentive Regulation Ordinance (ARegV)
- Quality Regulation
- Research and development
Given the numerous unique tasks at the European and national level, there are many distinct features in the regulation of transmission system operators (TSOs).
Network operators' notification duties
Important information for distribution system operators (DSOs) about adjustments to the revenue cap for the 2021 calendar year
The following pdf document reflects the legal opinion of Ruling Chamber 8 while taking account of the Network Charges Modernisation Act (NEMoG).
(Hinweise für Verteilernetzbetreiber Elektrizität zur Anpassung der Erlösobergrenze und zur Bildung der Netzentgelte für das Kalenderjahr 2022 - Stand: 14.09.2021 (pdf / 331 KB) German language pdf document / 303 KB)
No changes may be made to the structure of the files in the course of completing the forms. Please use the Bundesnetzagentur's energy data portal to submit data electronically. All documents must be encrypted using the encryption program provided before they are submitted via the energy data portal.
Notification requirements under section 28 para 1 of the Incentive Regulation Ordinance (ARegV)
Operators are required to notify the regulatory authority by 1 January of a calendar year of the following:
- adjustments to revenue caps in accordance with section 4 (3) ARegV
- adjustments based on changes in non-controllable cost categories in accordance with section 4(3) sentence 1 para 2 ARegV and in cost shares in accordance with section 4(3) sentence 1 para 3 ARegV
Pursuant to section 4(3) ARegV an adjustment of the revenue cap is always made on 1 January of a calendar year when there is a change
- in the retail price index in accordance with section 8 ARegV
- in non-controllable cost categories in accordance with section 11(2) sentences 1 to 3, whereby the actual costs of; may be adjusted
- in the case of cost shares in accordance with section 11(2) sentence 1 para 4 to 6, 8, 13 and 15 to 17 costs expected in is the calendar year in which the revenue cap is to apply, may be adjusted
- in volatile cost shares in accordance with section 11(5), whereby cost expected in the calendar year in which the revenue cap is to apply, may be adjusted
The data form below can be used to calculate the adjustment to revenue caps and requires the submission of necessary data to the Bundesnetzagentur. Please refer to the "Ausfüllhilfe" sheet in the data form for assistance in completing the form.
Important information for network operators that take part in the minimal regulation (section 24 ARegV):
Pursuant to section 24(3) ARegV the adjustment of the permanently non-controllable costs is limited to the upstream network costs, the distributed generators' avoided network charges and the costs from retrofitting inverters in accordance with section 10(1) of the System Stability Ordinance. The annually updated "Important Information about Adjustments to the Revenue Cap and Setting of Prices" (Revenue Cap and Setting of Prices) is a useful resource for companies that take part in the simplified procedure.
Please submit the completed form using the Bundesnetzagentur's energy data portal (the form and the portal are only available in German) under the "Sonstige Datenübermittlungen Strom" (other data transmission – electricity) function and select "Anpassung der EOG nach § 4 Abs. 3 ARegV (Strom)" (adjustment to the revenue cap for electricity in accordance with section 4(3) ARegV).
Notification requirements under section 28 para 2 of the Incentive Regulation Ordinance (ARegV)
Section 28 para 2 ARegV was deleted by an amendment to the ARegV in 2016.
Data submission for an incentive regulation account is now located here Incentive_regulation_account.
Notification requirements under section 28 para 3 and para 4 ARegV
Network operators are required to notify the Bundesnetzagentur in writing by 1 January each year of any adjustments to the network charges. If any network charges are adjusted due to changed revenue caps in accordance with section 17(2) ARegV, network operators are required to submit simultaneously, both electronically and in writing, the data necessary to examine the network charges under section 17 ARegV, including the charges calculation and the documentation showing how the charges were determined. The data collection form (Erhebungsbogen) below must be used for this purpose. Please refer to the "Ausfüllhilfe" in the form for assistance in completing the form.
Please submit the completed form via the Bundesnetzagentur's energy data portal using the "Sonstige Datenübermittlungen Strom" (other data transmission – electricity) function after selecting "Verprobungsrechnung zur Überprüfung der Netzentgelte (Strom)" (charges calculation for examining the network charges for electricity).
Notification requirements under section 28 para 7 ARegV (only for the first regulatory period)
Network operators are required under section 28 para 7 ARegV to notify the regulatory authority of the difference between the flat rate investment mark-up pursuant to section 25(2) ARegV and the capital costs from the investments actually made.
Please use the data collection form below to report the required information. Please refer to the "Ausfüllhilfe" sheet in the form for assistance in completing the form.
Please submit the completed form via the Bundesnetzagentur's energy data portal using the "Sonstige Datenübermittlungen Strom" function and select "Abgleich des pauschalierten Investitionszuschlages nach § 25 Abs. 3 ARegV (Strom)" (Comparison of the flat rate investment mark-up in accordance with section 25(3) ARegV for electricity).
Date of modification: 2021.08.31