Home Europe & UK Bundesnetzagentur sets return on equity for electricity and gas networks
Bundesnetzagentur sets return on equity for electricity and gas networks

Bundesnetzagentur sets return on equity for electricity and gas networks

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The Bundesnetzagentur today announced the new return on equity for electricity and gas network operators, setting a rate of 6.91% for new facilities and 5.12% for old facilities. The current rates are 9.05% for new and 7.14% for old facilities.

“The new rates we have set reflect the low interest rates seen in the capital markets for quite a while. We were obliged in the interests of the consumers to take this development into account and reduce the rates,” said Jochen Homann, Bundesnetzagentur President. He added, “The Bundesnetzagentur uses established methods to determine the rates, thus ensuring reliable framework conditions. The rates guarantee that the network operators are in a position to take on the large investments required for the energy transition. Investments in networks remain attractive.”

“Should the capital market turn, contrary to expectations, and an increase in interest rates make investment considerably more difficult across the country, then we would be able to step in and adjust the rates set,” said Mr Homann, explaining the legal framework.

Base rate plus risk premium

The return on equity is the rate before corporation tax and is made up of a base rate, based on the ten-year average for risk-free investments, and an appropriate risk premium to reflect the risk incurred by the investing undertakings. The base rate was lowered from 3.8% to 2.49% and the risk premium set at 3.15%.

A comparison with recent decisions from other European regulators shows that the range determined for the return on equity corresponds to that in other countries.

Rates apply from 2018 and 2019 

The new rates will apply from the beginning of the next regulatory periods, ie from 2018 for gas network operators and 2019 for electricity network operators, and will remain in place for the duration of each five-year period.

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Anand Gupta Editor - EQ Int'l Media Network

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