DEVELOPMENTS IN TRANSMISSION AND DISTRIBUTION NETWORKS IN THE NETHERLANDS M.J.J. Bielders J.P. Hodemaekers M.A.M.M. van der Meijden NV REMU NV REMU NV REMU Postbox 8888 Postbox 8888 Postbox 8888 3503 SG Utrecht 3503 SG Utrecht 3503 SG Utrecht the Netherlands the Netherlands the Netherlands tel. 31.30.2975001 tel. 31.30.2975614 tel. 31.30.2975600 fax 31.30.2976635 fax 31.30.2975988 fax 31.30.2975988 e-mail: [email protected] e-mail: [email protected] e-mail: [email protected] SUMMARY distribution, production and other commercial activities. The administration and supervision of this legal entity In the next few years the networks for electricity transmission must be wholy independent from its shareholders. and distribution will have to take into account a number of Furthermore, the shareholder must refrain from any new, environmentally determined aspects, such as interference with the tasks this entity is legally bound to deregulation of electricity supply,non-discriminatory access perform. The Regulator (DTE), a part of the "Dutch of producers suppliers and customers, generating energy at Competition Authority" (NMA), has a number of local level using sustainable sources and co- important legal powers. generation,energy conservation by customers, performance The regulator determines: of networks, asset management within the framework of - the pricing structure for the use of infrastructure; deregulation, optimizing networks in connection with - the pricing level for the infrastructure for each dispatch, costs in connection with producers and customers network manager; not being able to operate optimally, technological - the capacity plan for each network manager (5 developments and the role of the regulator in the area of years); infrastructure. - various technical regulations, such as network code, measuring code and connection conditions; The above aspects will play an important role in the - the system of accounting used by the network Netherlands in the coming years and will mean a number of manager; fundamental changes to how infrastructure is designed, - an efficiency discount for the network manager on engineered and administered. the basis of a benchmark. DEREGULATION AND THE MARKET IN THE Moreover, settlement of disputes between the network ELECTRICITY INDUSTRY manager and his or her customers, and quality monitoring of the infrastructure can also be included among the tasks of the In December 1996 the European Union adopted a directive DTE. It is within the scope of this paper to report that no which requires member states to deregulate their energy pricing structure for the infrastructure has yet been set. In the supply at a certain pace. This means allowing market forces to most likely scenario, the structure should have the following influence the production and distribution in Europe. characteristics: Infrastructure will remain a natural monopoly for the most part - Cascade structure, i.e. a structure with a charge per where everyone has negotiated or regulated non- voltage step, where the charge for (a) voltage level(s) on discriminatory access. top is included in that below. - A point charge system. This entails, among other things, With regard to electricity, the Dutch government has opted that for all voltage levels the charge does not include any for: element that is determined by distance. - freedom in the production of electrical energy; - Producers pay no infrastructure charges. - accelerated deregulation of electricity distribution to - Consumers pay 100% of the network costs. customers; - Connection charges must be completely settled in one 1-8-1999 customers > 2 MW payment. Connection charges will only be superficial. 1-1-2002 customers > 3 x 80 A The cost unit or cost units in the charges for the infrastructure 1-1-2007 all customers affected; are an important point of discussion, both within the sector - a rigidly regulated infrastructure (Regulated TPA). and with the DTE. It is yet to be decided whether this will be The legal, organizational and administrative aspects of the utilisation period-led system, a operation-hours-led system, or electricity infrastructure must be strictly separated from a combination of both. EFFECTS OF DEREGULATION ON THE certainly warranted. Methods will have to be developed to ADMINISTRATION OF THE ELECTRICITY control these more significant and dynamic circumstances, INFRASTRUCTURES which will certainly need to include risk-management in the financial-economic sphere. In the next few years, a number of aspects will play a role that is either new, or that will change in terms of stress and Performance importance. These aspects are: asset management, earnings yield, Deregulation means competition with regard to price and benchmark, investment selection, accommodating the market, quality of service. Quality of service is a combination of responsibility, robustness of the system, prices for regulating quality of supply and quality of communication. Future capacity and reactive load management, infrastructure expectations are that the quality of supply at the point of performance, capacity plans, negotiations with the Regulator, delivery to the individual customer rather than n-1 will be the transmission restrictions, etc. basic criterion for designing supply networks. The design of electricity infrastructure will take place on the basis of a The Regulator (DTE) statistical approach to the quality of supply. The quality of supply includes voltage quality and availability, among other In the Netherlands the Regulator is called "Dienst Uitvoering things. Availability will be determined by the frequency and en Toezicht Elektriciteitswet"(DTE) and is the service for the duration of outages. Enactment and Supervision of the Electricity Act. The Regulator (DTE) will be an important player in a number Liability of areas and will be a body with whom the network manager must maintain optimal relations. The price structure of the Previously, infrastructure performance and liability played infrastructure, its price levels, the capacity plan, the technical roles that were dictated by the sector itself. The sector was not conditions, the performance of the infrastructures, the liable and the sector determined the criteria regarding efficiency discounts and the benchmark are a number of performance, such as n-1 criteria. The network manager's aspects of major significance for the relation between DTE customers will no longer accept this absence of liability, a and the network manager. They are also aspects that are of trend that has been extremely marked in the Netherlands in the fundamental importance to the network manager with regard last few years. to revenues, investment plans, management and technology. Since 1998 there has been an arrangement with the consumers' Within the framework of these rules of play, various aspects organization making energy companies liable. Consumers will and, occasionally, field of tension, the network manager must not be interested in internal criteria, but in the output. They decide upon his policy and activities. This is a new dimension will call the network manager to account over outage that will present a major challenge. frequency and duration. In the case that a network manager falls outside a specific range, the DTE will then assume an Financial-Economic Aspects important role. The above implies that this will influence the design, the The network manager will have to operate as a private implementation of technology, the management of the enterprise. This means that there will have to be a yield on electricity infrastructure, and the technical and financial- total capital invested. The network manager will have to economic considerations that will have to be made. operate in the sphere of financial and economic realities, while remaining within the confines of charges allowed by the Management of the infrastructure Regulator (DTE), performance and the desire for a return on investment. This will be the setting in which the network The network manager has contracts with producers, manager will have to earn money with his assets, i.e. with his consumers, suppliers, traders, etc. The execution of these electricity infrastructure. Asset management and where any contracts 24 hours a day will take on an extra dimension available Euros can be spent for the best possible added value. compared with the current situation. A network manager who, What is described above differs considerably from the present for whatever reason, is unable to honour his contracts and situation in which financial-economic considerations daily commitments will suffer financial consequences. regarding production, infrastructures and distribution are Transmission restrictions, reactive load management and integrated in both planning and operational stages. In the new system services (incl. control capacity), the concern regarding situation there will be absolutely no financial-economic link system robustness such as outage frequency and duration will between these three components. This also means that the all play an important role in these considerations. Hence, optimization in the vertical chain will diminish substantially, technical-financial optimization in the day-to-day management having repercussions on how the infrastructure will be used in will play an increasingly important role compared with the a financial-economic respect. current situation. This will mean a more stringent link will The general conclusion that the financial-economic aspects of arise