Economic regulation of companies that carry out activities related to the electricity system is required where full competition cannot be guaranteed. The Energy Agency with economic regulation replaces normal competitive effects to avoid the abuse of market power of monopolistic market participants. The regulatory regime provides companies with opportunities and incentives similar to those they would otherwise meet in a competitive market.

Regulation in the regulatory period from 1 January 2023 to 31 December 2023 is implemented by the Act determining the methodology for setting the network charge, the criteria for establishing eligible costs for electricity networks, and the methodology for charging for the network charge.

Setting the network charge

The methodology for determining the regulatory framework defines the grounds of economic regulation of the electricity operators’ activities and determines their eligible costs. The methodology is based on the method of the regulated network charge. With the determination of the network charge and other revenues, and by taking into account deviations from previous years the methodology ensures the covering of all electricity system operators’ costs incurred during the regulatory period.

Network charge calculation

The methodology for charging the network charge defines the procedures and elements required for the electricity system operators to account for the network charge and to classify customers into different consumer groups. For calculating the network charge, the method of a postage stamp is used, which means that a uniform tariff for the network charge calculation is applied throughout Slovenia within an individual consumer group. For allocating of costs by voltage levels, the gross method to calculate the network charge for the transmission and distribution system is used.

Incentives

The regulated network charge method is also based on incentives depending on:

• actual eligible costs
• the effectiveness of smart grid investements
• achieved quality of supply level
• provision of free-of-charge ancillary services
• obtaining free funds
• realised investments in smart grid projects

If the electricity system operator incurs higher or lower eligible costs than the recognised eligible costs, the difference is reflected in its profit or loss.

The incentive for achieved level of supply is determined in relation to the deviation of the achieved level of continuity of supply from the reference level, and it results in the decrease or increase in eligible costs.

Where a system operator provides one or more system services free of charge that are not due to a legislative requirement, the system operator shall receive an incentive amounting to 10% of the savings value equal to the value that the system operator would pay for the purchase of that ancillary service.

If the electricity system operator obtains free funds for investments, it will be granted an incentive of 6% of the acquired funds in the year in which the asset was put into service. Likewise, if the electricity system operator obtains free funds to cover the costs of research and innovation, it shall receive an incentive of 6% of the revenues recorded in the accounting books of an individual year.

If the electricity system operator achieves a lower annual average purchase price from the cap price of electricity meters under the methodology, it is entitled to a an incentive equal to 50% of the realised annual savings in the procurement of electricity meters.

If the electricity system operator invests in smart grids to the extent that fulfil the conditions and criteria set out in the methodology, it shall receive an incentive of 4% of the amount of operating fixed assets for six years from the date on which the asset was handed over. In addition, if the electricity operator proves that it has used the approach of taking into account the entire power system (transmission and distribution) when planning and implementing the solution, it will be granted an incentive of 3%  of the amount of operating fixed assets as on 31 December for six years from the date on which the asset was handed over. For the investments in smart grids that have acquired a time-limited incentive, for the success of the project, an incentive of 5% of the asset purchase value is recognised if the conditions determined in the methodology are met.

Deviations from the regulatory framework

After each year of the regulatory period, the electricity system operator must identify deviations from the regulatory framework. Deviations are identified as the difference between the recognised eligible costs and the recognised resources intended to cover the eligible costs including the accumulated surplus or deficit of the previous years’ network charges. The Energy Agency shall issue a specific decision when establishes that the derogations are not calculated in accordance with the methodology. The Energy Agency monitors the implementation of the regulatory framework during the regulatory period by examining the monthly turnover of the network charge, by carrying out analyses of the cost eligibility criteria, and by verifying the calculated deviations from the regulatory framework.

When the Energy Agency determines that within the regulatory period a significant changes in electricity consumption in comparison to the planned consumption occurred that result in a change of the planned network charge for transmission and distribution system of more than 10%, the amendments of the regulatory framework are made already during the regulatory period.