4 Energy regulation
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4 Energy regulationThe Danish Energy Regulatory Authority is the supervisory body and board of appeal of the energy sector. The Authority is served by a secretariat, which is made available by the Competition Authority and the Energy Agency. The Authority was set up as part of the liberalisation and legal reformation of the Danish electricity sector and commenced its activities on 1 January 2000. The Authority's principal task is to regulate the monopoly companies in the energy sector. This includes the grid and transmission companies, the companies with supply obligations in electricity and gas as well as the district heating companies. The Authority must ensure that grid owners do not derive unreasonable advantages from their natural monopoly status and that all consumers enjoy fair, uniform and transparent prices and conditions of supply. The aim of the Authority is to enhance eficiency and reduce the consumers' energy expenses. The Authority's tasks can be summarised under four headings:
4.1 Activities in 2002The Authority hears cases of fundamental importance or of signiicant social or inancial interest in the ield of energy legislation. A large proportion of the cases are brought in by consumers, particularly electricity consumers who are dissatisied with charges, conditions of supply or other matters related to their energy supply. Other cases are brought in by energy companies and may concern the interpretation of laws and regulations or the relationship with other companies. In addition, the Authority will take up cases of which it has become aware through notiications or the press. Finally, there are development-related cases and cases of a general, regulatory nature, such as eficiency improvements in the grid companies, international matters, consultations and ministerial cases. Production figures, Energy 1999-2002
4.2 Electricity casesDecision on assets in NESA The basis of the statement of the available capital and reserves is the assets found in the electricity companies before 1977 when the irst Electricity Supply Act entered into force. The statement of these assets was not laid down in the irst Electricity Supply Act in force from 1977 to 1999 nor in the current Electricity Supply Act. The Energy Regulatory Authority is to lay down the principles of stating these assets. In January, the Authority pointed out the problems with calculating the available capital and reserves to the Ministry of Economic and Business Affairs. The Minister therefore appointed a task force chaired by the Authority and with representatives from the Authority's secretariat and the attorney to the Government to analyse the problems pointed out by the Authority. The Authority took the recommendations of the task force into consideration. The Authority decided that NESA might state the value of the assets as at 1 January 1977 as the written-down historical costs. However, the Authority also declared itself willing to accept a statement based on the 1977 value if the company documents that adjustment is made for the technological obsolescence during the period from the actual time of acquisition. The company's calculation of the writing-up of the book capital and reserves as at 1 January 1977 must be authenticated without any reservations by a state-authorised public accountant and must allow for deferred taxes related to the writing-up. Regulation of electricity companies with universal service obligations The electricity companies with universal service obligations in Denmark are to offer to supply electricity to the consumers. Until the full market opening on 1 January 2003, the companies had a monopoly of supplying electricity to the households. The task of the Authority is to approve the prices of the electricity companies with universal service obligations and to adjust the companies' proit at year-end. Based on a reference price model, the Authority calculated a reference price for 2001 which makes up the Authority's proposal for the price of one kWh electricity in a company with universal service obligations that is operated eficiently. As the Authority sees it, companies with average sales prices below the reference price are eficient. Therefore, the proits of these companies do not need to be adjusted at year-end. Companies with prices exceeding the reference price are immediately considered ineficient. In 2001, 16 of 50 companies with universal service obligations had prices that exceeded the reference price. The Authority fully compensated 8 of the 16 companies for increased electricity purchase costs. The other eight companies were faced with a subsequent total adjustment of DKK 2.3 million, corresponding to an average price reduction in 2001 of 2 per cent for the companies concerned. The guidelines of the authority were in force until 1 January 2003. After this date, the electricity market was completely opened, and the companies with universal service obligations were exposed to competition. Average duration of case handling, Energy 2001-2002 (months)
Publication of price statistics These statistics reveal that the price paid by small consumers for electricity varies signiicantly between the various parts of Denmark. Adjusted for excise duties and contributions to environmentally friendly electricity production, the price of the most expensive company and the cheapest company differed by up to 30 per cent in 2001. Following the full market opening of 1 January 2003, all electricity consumers have a free choice of electricity supplier, which may enable them to reduce their electricity bill. An average Danish household with an annual consumption of 4,000 kWh would be able to save about DKK 126, inclusive of VAT, if the household could have changed from the most expensive company to the cheapest company in 2001. The Authority continuously monitors the price development among the largest companies and every month publishes price statistics at its web site. 4.3 Natural gas casesDONG was forced to lower its charges for transporting natural gasThe Energy Regulatory Authority decided that DONG had to lower its charges for transporting natural gas through its transmission system aligning the prices with the actual costs of DONG's activities. DONG is by far the largest natural gas supplier in Denmark. The Authority's analysis showed that DONG's charges for use of the transmission system exceeded the costs by 11 per cent, inclusive of charges for emergency supplies. DONG had notiied the Authority of new charges for making its transmission system available to other natural gas suppliers. In continuation of the decision of the Authority, DONG was required to suggest lower charges to the Authority. DONG is responsible for all natural gas supplies in Denmark; however, the objective of the energy reforms is to allow the customers to choose their supplier. If a customer chooses another supplier than DONG, DONG must make its pipe system available to the gas transport. In 2002, only 14 large companies enjoyed a free choice of supplier, but eventually all gas customers must be given that opportunity. The aim is to increase competition and thus ensure that the supply of natural gas becomes as cheap for the customers as possible. Therefore, it is important that the charge for gas transport on the DONG system – e.g. from the German border to companies in Denmark – does not prevent competition in the supply of natural gas to Danish customers. Face - Contents - Top/Bottom - Previous/Next Version 1.0 April 2003 • © Danish Competition Authority. Published by the Danish Competition Authority, http://www.ks.dk/ | ||||||||||||||||||||||||||||||||||||||||
