Presentation on the legal aspects of regulated electricity and natural gas network tariffs in Belgium

1. Febeliec
Tariffs – a lawyer’s opinion from a (Dutch-speaking) lawyer’s perspective

2. Possible topics
• Tariffs in, because of and due to Belgium
• Tariffs as a stable income basis for lawyers
• Tariffs as a way of avoiding political courage
• Tariffs as a simple principle
• Tariffs as an invitation to open-minded discussions

3. Tariffs in, because of and due to
Belgium

4. Division of competence in Belgium
• Regions are competent
• for distribution of electricity (< 70 kV) and natural gas
• for tariffs for the use of distribution systems, except for Elia/Fluxys part of
distribution systems
• for onshore renewable energy
• Federal state is competent
• for transportation and storage of energy, if a common policy must be
established for the entire Belgian territory
• for tariffs for Elia/Fluxys systems
• for prices

5. 6th State reform as a perfect excuse
• Eg. Discussions on netvergoeding/capacity tariff
• Competence of Council of State vs. competence of court of appeal
• No further comments
• Eg. PVDA-saga

6. PVDA’s phyrric victory
• Increase of distribution tariffs in 2011 (‘unforeseen’ increase of RES costs)
• Challenged before court of appeal of Brussels
• Court of appeal comes up with own reasoning (based upon (un)lawful legal
basis)
• Court of appeal nontheless wants to uphold annuled decisions, but is not
allowed to do so (contrary to Council of State / Constitutional Court) =>
prejudicial question to Constitutional Court, which dismisses request of
court of appeal
• CREG challenges decision of Court of Appeal before Supreme Court
• Supreme Court upholds decision of Court of Appeal

7. PVDA’s phyrric victory and sysiphic response
of politics
• Flemish minister claims the Court of Appeal did not annul the tariffs
decisions
• But Court stated: “On the basis of the aforementioned elements, it should be
decided that the challenged decisions could not have been taken by the CREG on the
basis of the legal basis invoked by her and that the claim justifies the annulment of
these decisions”
• Flemish minister claims that “the consequences of possible annulment
judgements are dependent upon its content and the acts of the competent
regulator, in this case the CREG”
• No ‘official’ comment from CREG/federal minister, but the odds are that
they will proclaim their institutional incompetence
• Thus, all stakeholders wait for Godot to decide how annuled tariff increase
will be passed through to the customers (again)

8. Tariffs as a stable income base for
lawyers

9. Dedicated to Paul Blondeel

10. Dedicated to Guido Camps

11. A lot of procedures
• Approximately 700 cases introduced against decisions of the CREG
(2002-2015), of which
• 473 were waived
• 80 were founded and led to annulment
• 60 were unfounded or inadmissible
• 100 led to interim judgements
• Most of the cases were introduced by DSO’s (Eandis (160), Infrax
(105), Ores (250))
• Almost all cases were tariff related (including discussions on saldi and
iRab)

12. A lot of fees paid by the CREG
0
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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Amount

13. To be doubled (at least) for claimants and
intervening parties
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Chart Title
Year Amount Amount

14. Tariffs as a way to avoid political
courage

15. Tariffs as a way to avoid increasing (direct)
taxes
• Public Service Obligations (especially Renewable Energy) to avoid
European Commission state aid scrutiny
• But, cave ‘Turteltaks’ and State Aid
• Public Service Obligations (eg. Strategic Reserve) as a way to avoid
clear cut choices on allocating responsibility for peak demand

16. Tariffs as a way to avoid clear division between
commodity, grid costs and public levies
• Market model – Supplier as SPOC
• Access to the systems (and subsequent final payment obligation of
tariffs): only for end consumers?
• If yes, supplier is acting for the account and on behalf of end consumer => no
financial burden on suppliers.
• If not, both suppliers, aggregators, producers, and off takers should pay part
of the tariffs (and of the related taxes, levies and PSO’s)

17. Tariffs are simple

18. General principles on tariffs
Member States shall ensure the implementation of a system of third
party access to the transmission and distribution systems based on
published tariffs, applicable to all eligible customers and applied
objectively and without discrimination between system users.

19. Thus, the open door principles are:
• Tariffs have to be objective
• Tariffs have to be transparent
• Tariffs have to be non-discriminatory
• Tariffs have to be cost-reflective

20. Non-discriminatory
• Equal categories should be treated equally
• Unequal categories cannot be treated equally
• Objective criteria
• Proportionality

21. Non-discriminatory
• Producers and consumers can be treated differently
• Amongst consumers, some objective categories can be treated
differently if the unequal treatment is proportionate for the goal

22. Cost-reflective
• Court of Appeal Brussels 25 March 2015
• The [defending] parties rightfully indicate that the obligation for cost-
reflective tariffs is related to the tariff level and the costs of the system
operator (SO). The tariffs can cover the costs of the SO, and guarantee a fair
profit margin.
• Monopoly profits for the SO should be avoided. Monopoly profits could have
negative effects incompatible with competition law. More specifically they
could stimulate cross subsidies of commercial activities with profits from
regulated activities, and could be a burden for new-entrants to commercial
energy markets. Monopoly profits could also be the consequence of
predatory or excessive prices that a monopolist can enforce, which is also
contradictory to competition law.

23. Cost-reflective
• Court of appeal 25 March 2015
• The concept could also mean the allocation of costs. The relevant norms do
not impose one way of cost allocation. (…)
• Thus it cannot be expected that there should be a one-to-one relation
between the system costs and the tariff profits. With regard to the cost
allocation, there is a policy margin for the CREG.
• A one-to-one allocation of the costs in the tariffs is not mandatory, but also
not possible. The CREG alleges acceptably that Elia's costs for its legal tasks
are not one-to-one attributable to each specific tasks or system user. The
material structure of the system is such that it is impossible to allocate the
cost related to a specific part of the system to a specific system user, and
because of the physical characteristics of electricity it cannot be said that only
a part of the system is used for the supply of a specific quantity of electricity.

24. Tariffs as an invitation to open
minded discussions

25. Cost reflectiveness as cornerstone of political
and regulatory responsibilities
• Prohibition on cross subsidisation, predatory pricing, unfair profit margin
for the essential tasks of a system operator
• Thus, regulator has to regulate (monitor) the fulfilment of these
requirements
• Not more, not less
• Thus, policy makers (parliament, governments, based upon preparation by
administrations) can set the general (and even specific) guidelines for these
tasks
• Thus, not the task of SO or regulator to initiate policy making
• Competence to set out general guidelines (even specific) approved by
Constitutional Court and (implicitly) by European Commission

26. Clear, actual, open ended, stable and swift
legislation
• Transpose directives within deadlines
• Avoid stupid legislation
• Avoid changing legislation every three months (although the pace has
slowed considerably)
• Actualise Grid Code (only legislative act which has not been amended since
2002)
• Dare to make clear political choices
• Cut the crap on energy pacts and deals: legislate (that’s why you were
elected)
• Refederalise or regionalise: I do not care, but division of competences is
millstone around energy policy neck

27. Rethink procedural questions
• It is not very convincing that the final fate of tariffs lies with one
chamber president of the Court of Appeal of Brussels
• It is not very convincing that one cannot overcome a defeat in a
appeal procedure
• If an appeal decision is negative, start debate with all stakeholders
involved on the way forward as soon as possible, and decide as soon
as possible (eg. PVDA, Injection tariffs, …)
• Respect political choices (if any)
• Stuborness is not a prerequisite for the appointment as a regulator

28. Thank you for your attention
tim.vermeir@blixtlaw.eu and sometimes on Twitter @timvermeir