The Electricity Market Act was revised
The revised Electricity Market Act took effect on 1 September 2013. It requires distribution system operators to improve supply reliability and preparedness. It also includes more detailed regulations on electricity consumers’ rights and changes to electricity invoicing. The supply reliability and preparedness requirements were taken into account in regulation principles concerning the electricity distribution business during 2013.
The following changes had the largest effect on Elenia:
● In future, distribution networks must be designed, built and maintained in a manner that prevents power outages caused by storms or snow from lasting for more than six hours in zoned areas and 36 hours in other areas. In the archipelago, the supply reliability can be adjusted to the local conditions. Distribution system operators must meet these requirements gradually over a period of 15 years. The period can be extended on justified grounds.
● In addition, the revised Electricity Market Act includes more detailed requirements on the supply reliability of the national grid and high-voltage distribution networks. High-voltage networks must be designed, built and maintained to sustain falling tree damage.
● In future, electricity lines of 110 kV or higher are subject to a project permit granted by the Energy Authority.
● Electricity network operators must comply with a general preparedness obligation for fault situations and exceptional conditions.
● Distribution system operators are obliged to provide their customers with information on the duration of the fault and the resumption of power supply.
● The standard amounts of the statutory damages paid to customers for power outages were increased in the revised Electricity Market Act. The increases will be implemented gradually by 2018.
● The definition of a connection line was expanded to cover connection lines maintained jointly by several power plants.
● Distribution system operator can no longer charge for the additional meter reading when a customer decides to change electricity supplier, which gives customers more choice.
● Distribution system operators are expected to provide customers with additional information on supply reliability, preparedness and other aspects when signing contracts and sending invoices and power outage notifications.
● They are also obligated to submit the necessary location information on underground cables in digital format to designers and constructors free of charge.
● A mistake in an invoice is considered to be a service error.
● Consumers must be offered various options for paying their electricity bills.
● When a contract ends, the final invoice must be submitted to the customer within six weeks.
Elenia has carried out development work related to supply reliability and technology for years. For this reason, the company is prepared for the changes in the Electricity Market Act and sees them as a positive development.
The effects of regulatory outage costs were limited in efficiency incentives
According to a decision issued by the Market Court on 21 December 2012, the regulatory methods applied during the 3rd regulatory period were changed by limiting the effects of regulatory outage costs in efficiency incentive. The change limits the financial risk incurred by distribution system operators in major power disruptions in the same manner as it is limited in quality incentive. The change applies to the entire regulatory period 2012–2015.
New security of supply incentive
In accordance with the revised Electricity Market Act, the Energy Authority implements a new supply reliability incentive that supports the achievement of the goals of the Act. The new incentive will be applied during the second half of the 3rd regulatory period (2014–2015). Premature replacement investments and new maintenance and preparedness measures carried out to improve security of supply are taken into account as follows:
- The regulatory asset value (RAV) of prematurely demolished (i.e. if the asset is replaced prior to the end of its regulatory asset life) 20kV and 0.4kV overhead lines, pole mounted transformer stations (excluding transformers) and disconnectors are recovered through a reduction of adjusted actual profit in the year in which the asset is demolished; and
- Additional costs relating to tree clearance outside line corridors and the development and operational expenses of outage communication systems (e.g. SMS messages) are considered as pass through costs in the calculation of adjusted actual profit for the respective year
Network component information
The Energy Authority has further specified the definitions of components reported as part of network assets with regard to customers’ connection lines and areas controlled by the national grid company. In addition, the Energy Authority further specified the principles of calculating the average age of network components in 2013.