FebeliecTariffs – a lawyer’s opinion from a (Dutch-speaking) lawyer’s perspective

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

Tariffs in, because of and due to Belgium

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

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

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

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)

Tariffs as a stable income base for lawyers

Dedicated to Paul Blondeel

Dedicated to Guido Camps

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)

A lot of fees paid by the CREG

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

100000

200000

300000

400000

500000

600000

700000

Amount

To be doubled (at least) for claimants and intervening parties

1 2 3 4 5 6 7 8 9 10 11 12 13 140

200000

400000

600000

800000

1000000

1200000

1400000

Chart Title

Year Amount Amount

Tariffs as a way to avoid political courage

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

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)

Tariffs are simple

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.

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

Non-discriminatory

• Equal categories should be treated equally

• Unequal categories cannot be treated equally

• Objective criteria

• Proportionality

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

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.

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.

Tariffs as an invitation to open minded discussions

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

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

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

Thank you for your attentiontim.vermeir@blixtlaw.eu and sometimes on Twitter @timvermeir