The European Commission adopted a proposal for a Regulation as regards future-proofing electricity bills through reducing system costs and fostering electrification and digitalisation.

The proposal provides that special tariff regimes are allowed for specific categories of user (energy-intensive industries, data centres, energy communities), provided regulators can demonstrate the relative impact of consumption profiles on overall network costs, and cost-reflectivity is respected. (The Commission’s earlier guidelines are relevant). The proposal indicates that optimal location, time-of-use and consumption profiles of data centres can support efficient connection and integration into the electricity system. This should be incentivised in network tariffs, particularly when data centres render services to the energy system (flexibility, storage, clean energy production).

In the case of scarcity of available grid capacity, regulators may prioritise categories of system users for connection. Criteria for prioritisation may consider the impact of potential projects on solving network congestion as well as economic, environmental and social benefits. The proposal states that, when approving conditions on access to grid, regulatory authorities should also be allowed to prioritise users in the same category with flexible consumption patterns contributing to on-site storage and on-site generation of additional clean energy and sustainable use of resources.

The draft Regulation proposes to replace Article 18 of the Electricity Regulation with new Articles 18 to 18d.

Network charges

Network charges must be cost-reflective, transparent and non-discriminatory. The regulatory framework for setting them is developed significantly, including by the introduction of the following features.

• Charges must provide incentives to system users (which includes customers) to adjust their use of the system to support its cost-efficient functioning.
• Tariffs must provide incentives to system users for reduction of peak load consumption, including through adding a capacity element to the tariff structure. They must contain time-of-use elements to reflect use of the network.
• Tariffs must reflect the costs created by system users which withdraw electricity from and inject it into networks. They must provide incentives to system users to withdraw / inject electricity in a way that supports efficient functioning of networks.
• Tariffs must provide locational investment signals.
• Tariffs must not discriminate between system users connected at distribution level and those connected at transmission level, extending this protection, previously limited to producers, to all system users including customers.
• Tariffs must not disincentivise effective and timely third-party access, aggregation, energy communities, self-generation, self-consumption, storage or participation in demand response.
• Network charges applicable to storage installations must reflect any benefits created for the network and are limited to the costs they create for networks (avoiding “double charging”).
• Tariffs must enable the use of flexible connections but this cannot delay network reinforcements.

Member States are permitted to partially cover network costs through State funds subject to four requirements (relating to non-discrimination, preservation of efficiency incentives, temporariness/limitation to decarbonisation-related additional costs, and no detriment to competition/internal market functioning), plus a saving clause on State aid notifications. The intent, among other things, is to reduce waiting times for grid connections.

There are expanded transparency obligations around information underlying system costs. Regulatory authorities must set common performance indicators for the efficient operation and development of the network. ACER has an assisting role and must carry out a comparative efficiency assessment of transmission system operators (with a first report deadline and four-yearly repetition).

Smart electricity grid indicators & innovation

Regulatory authorities must promote the deployment of non-wire, smart and digital solutions when they efficiently enhance the usable capacity, flexibility and reliability of networks.  A new Article 18a builds out the framework for measuring and enabling that deployment.

Smart metering

Member States must ensure the deployment of smart metering systems covering at least 50% of all final customers by 31 December 2030 and 75% by 31 December 2033.

Taxation

Member States must promote the uptake of electricity as an energy source by adopting a supporting taxation framework in accordance with the terms of a new Article 18c. This includes applying a tax differential on excise duties between electricity and natural gas, such that electricity is not taxed higher than natural gas.

Next steps

The proposal now moves through the ordinary legislative procedure. Its qualified majority legal basis and the political urgency behind it mean it may progress relatively rapidly.

The proposal is accompanied by an Electrification Action Plan to support a goal of 46% of final energy consumption being met by electricity by 2040. The Plan includes actions to reduce the gap between electricity and fossil energy costs; to lower costs for electrification of industry, transport, and heat; and to increase access to grid and charging infrastructure. It signals an update to the EU hydrogen strategy.

This is a significant package placing electrification at the heart of competitiveness, decarbonisation and energy security. The challenge will be in evolving, at pace, the granular detail of grid and market rules and functioning to enable delivery.