Dutch Gas Users Face Higher Costs

Dutch gas network operator GTS may be allowed to raise the tariffs for capacity in order to recover the value of lost investments faster, according to major energy users’ group VEMW. It said in a September 1 statement that the competition and markets regulator ACM might use this approach in order to compensate the transmission system operator (TSO) for lower gas demand and Groningen gas throughput. ACM is seeking responses to its proposal for the next five-year price control period, 2022-2026, published August 31.

By opting for accelerated depreciation – instead of depreciation of investments – the regulator ACM places the risks and costs unilaterally on the grid users, said VEMW.

VEMW says the costs of the gas transmission network are still borne by a large group of gas customers and this group will shrink as more and more companies and households 'switch off gas'. The smaller that group of gas users becomes, the higher the tariffs per customer must be to reimburse GTS's costs. Models show that these rates could increase by 40%-80% by 2030.

VEMW head Hans Grunfeld said that ACM should allow GTS to write down investments instead of writing them off early. The risk of the investments should not be placed unilaterally with grid users, because they have no direct influence on the causes of declining grid use. Those causes are the result of political choices. That is why the effects on network use must be transferred to the network operator and its shareholder, the state, through a write-down of investments, he said. 

However, according to the ACM document, there is still plenty of fat to be cut from GTS: comparison with other European TSOs shows that GTS can still lower prices. For instance, its weighted average cost of capital is lower as interest rates have fallen. So ACM's draft method decision will mean that GTS will receive about 15% less income in 2026 than in 2020, depending on the amount of gas transported, it says. VEMW will prepare an opinion in consultation with its members, working to an October 12 deadline.