Post on 22-Mar-2022
DSO tariffs in IcelandSeminar on DSO tariffs in the Nordic countries
Dr. Silja Rán SigurðardóttirProject Manager - Electricity Regulation & Economy
3. November 2016
Icelandic DSO‘s
• There are six DSO‘s in Iceland• They operate subject to the Electricity Act No 65/2003
that implements directives 96/92 and 2003/54• The third Energy Package has not yet been implemented
into national law
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The Icelandic Electricity Market
Prior to 2003• One primary producer of electricity, Landsvirkjun, who also owned
and operated most of the transmission• A few smaller utilities, operating distribution systems for electricity,
hot and cold water, engaged in small scale electricity production and the sale of electricity to end users
2016• One TSO: Landsnet• Three main producers of electricity Landsvirkjun, Orka Náttúrunnar
and HS Orka• Six DSOs• Six entities engaged in the sale of electricity to end users
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Icelandic DSO‘s
• Icelandic DSO’s operate under revenue cap regulation, period of 5 years
• DSO tariffs need to be set at such a level that the level of total revenues does not exceedthe yearly allowed revenue derived from the cap
• Allowed revenue each year consist of allowed opex, allowed capex and depreciation that same year.
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Change in tariffs
• All change in tariff should be reported to the NRA with 6 weeks notice
• The NRA looks into the surplus and deficit boundaries from last allowed revenue settlement and may ask for further argument for the change.
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Surplus and deficit
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Allowed Revenue
Revenue Allowed Revenue
Revenue
Surplus year 1
S1
Surplus year 2
S2
Year 1 Year 2
The accumulated surpluses or deficits are not allowed to exceed 10% percentage of the Allowed Revenue
�� + ��
������ ��������≤ ��%
Allowed Revenue
Revenue
Allowed Revenue Revenue
Deficit year 1 Deficit year 2
-D2
Year 1 Year 2
−�� − ��
������ ��������≥ −��%
-D1
Urban and rural area tariffs
• Two DSO‘s in Iceland have both rural and urban area tariffs
• And thus rural and urban revenue caps respectively
• Rural tariffs are subsidized
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Subsidy and Equalisation Fee
• According to a legislation from 2015, rural tariffs are subsidized by charging the DSO‘s an extra 0,23 Eurocent/kwh equalisation fee.
• The rural prices are then adjusted to the highest urben prices for that particular year.
• Before 2015 rural prices were subsidized but according to a fixed amount provided by the government.
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27% 27%34% 37%
26%36% 36% 37%
50% 50%44% 42%
52%42% 42% 42%
19% 19% 19% 19% 19% 19% 19% 19%
3%3%
3% 2% 3%3%
3% 2%
-12% -10%-20%
0%
20%
40%
60%
80%
100%
120%
DSO A DSO B DSO C RURAL DSO 1 DSO D DSO E DSO F RURAL DSO 2
Fixed charge Energy charge VAT Equalization Fee Subsidy
Icelandic DSO‘s: Usage of 4500 kWh a year. Proportional tariff breakdown compared
Icelandic DSO‘s: Usage of 4500 kWh yearly usage - €/year
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€ 339€ 325
€ 423
€ 621
€ 376€ 402 € 396
€ 611
0
100
200
300
400
500
600
700
DSO A DSO B DSO C RURALDSO 1
DSO D DSO E DSO F RURALDSO 2
€/ye
arAverage urban = € 377Average rural = € 615
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Icelandic DSO‘s: Usage of 4500 kWh yearly usage. Tariff breakdown €/year
€ 92 € 88€ 144
€ 231
€ 96€ 145 € 143
€ 226
€ 171 € 163
€ 187
€ 259
€ 197€ 168 € 165
€ 256
€ 66 € 63
€ 82
€ 120
€ 73€ 78 € 77
€ 118
-€ 74 -€ 62
-200
-100
0
100
200
300
400
500
600
700
DSO A DSO B DSO C RURALDSO 1
DSO D DSO E DSO F RURALDSO 2
€/ye
ar
Fixed charge Energy charge VAT Equalization fee Subsidy DSO A
Increase/decrease in yearly payment (real value) 2005 til 2016, 4500 kwh usage
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-2,5%
-8,2%
29,1%30,5%
-3,3%
14,5%
3,8%
31,3%
13,0%
5,1%
30,9%
-10,0%
-5,0%
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
DSO A DSO B DSO C RURALDSO 1
DSO D DSO E DSO F RURALDSO 2
Average Averageurban
Averagerural
Development of DSO cost for a customer in terms of € cent/kwh with 4500 kwh yearly usage (real values)
13
5
6
7
8
9
10
11
12
13
14
jan-
05
jul-0
5
jan-
06
jul-0
6
jan-
07
jul-0
7
jan-
08
jul-0
8
jan-
09
jul-0
9
jan-
10
jul-1
0
jan-
11
jul-1
1
jan-
12
jul-1
2
jan-
13
jul-1
3
jan-
14
jul-1
4
jan-
15
jul-1
5
jan-
16
jul-1
6
€/kw
h
Average urban (€ cent/kwh) Average rural (€ cent/kwh)
Change in Fixed Price versue Energy Price?
Energy Price for undir 7300 kwh/year (35 til 80A) € cent/kwh
Fixed Price for undir 7300 kwh/year (35 til 80A) €/year
14
3,00
4,00
5,00
6,00
7,00
jan-
05
okt-
05
jul-0
6
apr-
07
jan-
08
okt-
08
jul-0
9
apr-
10
jan-
11
okt-
11
jul-1
2
apr-
13
jan-
14
okt-
14
jul-1
5
apr-
16
€ce
nt/k
wh
DSO Energy Price average all
DSO Energy Price average urban
DSO Energy Price average rural
60
80
100
120
140
160
180
200
220
240
260
jan-
05se
p-05
maj
-06
jan-
07se
p-07
maj
-08
jan-
09se
p-09
maj
-10
jan-
11se
p-11
maj
-12
jan-
13se
p-13
maj
-14
jan-
15se
p-15
maj
-16
€/ye
ar
DSO Fixed Price average all
DSO Fixed Price average urban
DSO Fixed Price average rural
110% increase in rural area31% increase in urban area
10% decrease in rural area1% decrese in urban area
Energy Efficiency Directive
• Iceland has not implemented the Energy Efficiency Directive.
• At the moment the government does not have any changes on the agenda as regards tariff design for the Icelandic DSOs.
• The implementation of the directive may, however, have some impact on the legal framework that the DSOs currently work under in the future and indirectly effect tariff design in Iceland.
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