DTe Provides Clarity on Energy Tariffs for 2002

DTe, the regulator of the energy market, today announced how the gas transmission companies, including Gasunie, will have two apply their tariffs and conditions for access to the gas transmission network in 2002. DTe also explained what this will mean for consumer energy tariffs as of 1 January 2002. By doing so, DTe has provided clarity to ensure that the next step in the liberalisation of the energy markets will be implemented successfully.

Access conditions of gas transmission companies

DTe today issued instructions that are binding on all gas transmission companies, including Gasunie. In accordance with these binding instructions, the gas transmission companies are required to ensure that their tariffs and conditions are in line with the gas guidelines determined earlier this year by DTe.

DTe has required Gasunie to reduce all transmission-related tariffs for the coming four years by a nominal amount of 5%. In 2005, DTe will review the tariffs and the further route from tariff reduction to a full cost orientation will be set out. The tariff reduction implies that Gasunie will have to work approximately 25% more efficiently. Together with the tariff reduction of 6.5% in 2001, Gasunie will have to realise total cost savings of approximately EUR 1 billion in the period up to 2005. The binding instruction also relates to amendments to the tariff structure (in preparation for an entry-exit tariff system in 2003) and the tradability and flexibility of transmission contracts. The entry-exit tariff system that Gasunie is required to introduce is comparable to the British system, which already applies this method. Gasunie is also required to introduce a balancing market (for the procurement and sale of gas for balancing), as well as transmission contracts for periods shorter than a month, with a view to introducing more market forces. The regional transmission companies are also required to base their tariffs on efficient costs and to ensure that their tariffs and conditions do not obstruct market forces. Contracts must be tradable and, in addition, daily contracts must be offered. Capacity, namely cubic metres per hour per year, must be used as the tariff basis, or unit of calculation.

Tariff levels for consumers

DTe expects tariffs for households to only change to a limited degree in 2002. The gas bill of an average family with two children will fall by 0.5%, while the electricity bill will fall by approximately 4%. The fall in gas prices is largely a consequence of lower transmission tariffs resulting from the efficiency discounts (price caps) imposed by DTe, while the cost of gas procurement (given a stable oil price) will remain unchanged, since all transmission companies will still be required by law to purchase from Gasunie. The fall in the price of electricity is due to the fact that procurement costs will fall by approximately 10% as a result of an increase in market forces. Energy companies will be given an incentive to procure electricity at competitive prices through a system of competition measurement (yardstick competition), which will involve comparing their performance in the area of procurement to the average for the industry. A discount (price cap) will be imposed on companies that are less efficient than this average. In addition, through subsequent monitoring it was ascertained that one company had wrongfully passed on procurement costs relating to the free part of the market to consumers. This correction resulted in a fall in tariffs of 2%. DTe wishes to point out, however, that tariffs may increase again in the course of 2002. The reason for this is that the correction for inflation is higher than the efficiency discounts (price cap) imposed on the gas companies.

The next phase in the process of liberalisation

On 1 January 2002, the next step will be taken on the road to the full liberalisation of the energy market. As of that date, many thousands of customers will be free to choose their own energy supplier. DTe has received confirmation from all the network managers that they will be ready in good time to enable this group of customers to switch suppliers. In 2002, this will also apply to small consumers who wish to switch from one supplier of green energy to another.