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Rate of return of 6.94% for energy transport and distribution network operators (ANRE)

George Niculescu - Moldova Invest

Bucharest

Rate of return of 6.94% for energy transport and distribution network operators (ANRE)

The regulatory committee of the National Energy Regulatory Authority (ANRE) unanimously approved on Tuesday a regulated rate of return (RRR) for electricity and gas transport and distribution network operators of 6.94% for the fifth regulatory period, announced the institution’s president, George Niculescu, at a press conference.

Today (Tuesday, ed.), unanimously, the regulatory committee adopted a rate of return for the fifth regulatory period, amounting to 6.94%. I note that the rate of return for the fourth regulatory period was 6.39%,” said George Niculescu.

He emphasized that there are criteria by which distribution operators receive an additional percentage, depending on the level of investments they make in developing the networks.

If we look at the minimum investment value, which is approximately 1.6 billion lei per year for all distribution operators, we see that this value applies to the rate of return approved today in the regulatory committee of 6.94%. If distribution operators exceed this minimum investment level, the rate of return will be 7.94%. The regulatory authority is not a barrier to the investments of distribution operators in electricity and natural gas distribution networks. Therefore, we are introducing this principle through which we reward and incentivize distribution operators who understand the need for investments and actually make these investments. This method is more efficient than granting a higher WACC (weighted average cost of capital) for the minimum investment value, as there is a risk that at the end of the fifth regulatory period, we will find that distribution operators maintain their investments at the minimum level for which they receive an increased rate of return,” George Niculescu specified.

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Regarding the impact on the consumer, for low voltage, cumulatively over five years, the increase in the bill is estimated at 50 – 55 lei per MWh. “This value can change depending on investments,” Niculescu added.

Additionally, the head of ANRE emphasized that there will be a coercive measure if performance indicators are not met.

We agree that distribution networks need investments. We are willing to reward these investments with an additional percentage, but energy consumers in Romania need to understand what they are paying more for. And here I refer to certain performance indicators, which are also included in the methodological principles currently under public debate. We are talking about very clear targets regarding the digitization of distribution networks, because we, at the Authority, also want to have a higher degree of network digitization compared to the current level, as well as the improvement of certain indicators related to response times in case of failures, etc.,” Niculescu explained.

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A 0.5% bonus will also be granted if these performance indicators are met.

If these performance indicators are not met, I am in discussions with the specialized department and colleagues from the regulatory committee for this bonus to become a coercive measure, because we want these targets to be met, and distribution operators who do not meet them to face a coercive measure if this does not happen,” added the head of ANRE.

According to an ANRE press release, when setting the RRR for the fifth regulatory period, the goal was to achieve an optimal balance between maintaining the interest in making necessary investments to ensure the quality of electricity and natural gas transport and distribution services and ensuring a reasonable level of profits for transport and distribution operators, according to the provisions of art. 76 para. (1) and art. 178 para. (1) of the law. Additionally, the aim was to support the development, in the most profitable way, of safe, reliable, efficient, and non-discriminatory systems that are consumer-oriented, in line with the general objectives in the field of electricity and natural gas.

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ANRE has set the value of the regulated rate of return on invested capital based on the data presented in the study contracted through a tender on SEAP – ‘Establishing the elements for calculating the weighted average cost of capital for the fifth regulatory period, for natural gas and electricity transport and distribution activities,’ prepared by the consultant Pricewaterhouse Coopers Management Consultants SRL (PwC), as well as based on specialized information included in the annual reports issued by the Council of European Energy Regulators (CEER),” the press release states.


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