Belgium: Transmission Rate Increase
Share on LinkedIn20 Nov 2023
Today, the Commission for Electricity and Gas Regulation in Belgium ("Creg") approved the tariff proposal for Belgium's Electricity System Operator - Elia. The plan from Elia, on which this decision is based, results from the necessity of investments of around €6.4 billion in the high-tension network in the period 2024 through 2027.
As expected, these costs will likely be passed on to the end users/consumers. While it is estimated that the transmission costs for domestic consumers could double, for businesses, this could lead to an increase in transmission costs in excess of 70 percent as of 2025.
The fact that Elia was requesting an even higher increase is certainly not going to calm the nerves of businesses which have already been facing higher energy costs due to the conflict in Ukraine.
Network operators have a monopoly position in the regions they work in and face limitations as to the tariffs they can charge for their services. In essence, they cannot pass on more costs than they actually incur, in contrast to many energy suppliers currently reporting record profits.
While investments in the transmission network are a necessity if Belgium and the neighbouring countries are serious about the energy transition, increases of this magnitude in network charges on top of the high energy prices demanded by suppliers are leaving businesses with increasing challenges. Most businesses will be unable to absorb the increased costs and will be forced to pass at least a portion of the costs onto the end customers. This does not bode well for the so-called core inflation rate in Belgium, which was recorded at 6.55 percent in October after 6.95 percent in September.
We hate to be the bringer of bad news, but we must keep our clients up-to-date about changes in the local markets. NUS will, therefore, continue to monitor the situation and report vital information back as soon as it becomes available.
More: Energy Market Commentary, Energy Regulation
