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 the 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 2019 to 31 December 2021 is implemented by the Energy Agency on the basis of the Legal Act on the methodology for determining network charge for the natural gas distribution system and Legal Act on the methodology for determining the regulatory framework of the natural gas system operator (unofficial translation).

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.

Economic regulation is based on the regulated annual income method and the regulated network charges of the transmission system operator arising from:

• the determination of eligible costs;
• in addition to the network charge taking into account all other regulated annual revenues from the implementation of the activities of the transmission system operator as sources to cover the eligible costs referred to in the preceding indent;
• the obligations of the transmission system operator to transfer the surplus of network charge and use it for the purposes of covering eligible costs in the next regulatory period;
• the rights of the transmission system operator to take into account the deficit in the network charges when determining the regulatory framework in subsequent years.

Incentives

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

• the realised eligible costs
• obtaining free European funds

If the operator of the distribution system incurs higher or lower eligible costs than those recognised by the regulation, that difference is reflected in its profit or loss.

If the operator of the distribution system obtains free European funds for investments, it will be granted a one-off incentive equal to 0.5% of the present value of the asset in the year in which the asset built from these sources was put into service.

Deviations from the regulatory framework

After each year of the regulatory period, the gas system operator must identify deviations from the regulatory framework. Deviations are identified as the difference between the actual eligible costs and the actual 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 it establishes that deviations are not calculated in accordance with the methodology.