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The German Energy Industry Act: Key Elements of Grid Fee Calculation


The German Energy Industry Act: Key Elements of Grid Fee Calculation (bar chart)
  • All grid fees must be approved ex-ante. All ex-ante approvals can be revoked by the BNetzA at any time.
  • The permitted proportion of equity financed assets is restricted to 40%.
  • Current cost accounting for rate of return and imputed depreciation will continue to apply for all investments until December 31, 2005.
  • All investments as from January 1, 2006, will yield interest based on the method of inflation-adjusted historic cost accounting and be subjected to imputed depreciation.
  • Tax treatment:
    – No recognition of corporation taxes (incl. taxes on fictitious profit) until the incentive regulation has entered into force but recognition of „Gewerbesteuer” (trade tax).
    – Recognition of the taxes on fictitious profit as from the introduction of incentive regulation. At the same time, adjustment of the required rates of return.
Improved conditions for upcoming incentive-based regulation as of 2009:

  • Improved returns on equity
    7.56% for existing electricity and gas assets and 9.29% for new investments
  • Special treatment of investment in growth and restructuring
    Fast track treatment of large budgeted growth investment projects by the regulator to ensure adequate and timely remuneration for utilities
  • Increase of expected average efficiency
    Average efficiency of German electricity distribution companies estimated 94% indicating average company-specific efficiency targets of only 1.0% p.a. ("individual X factor")

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