Legal framework
Policy and law
What is the government policy and legislative framework for the electricity sector?
The legislative framework for the electricity sector in the Netherlands is based mainly on European regulations and directives. The European directives contain certain goals that should be achieved by the individual member states; however, each member state is free to decide how such goals can be achieved. The European regulations have a direct effect in the Netherlands, which means that individuals may immediately invoke a European provision at a national or European court. It also has effects the other way around, as individuals have to perform their activities in, for example, the electricity sector in accordance with the provisions of the European legislation.
The first European Directives, specifically the Electricity Directive implemented in 1997, have been amended twice, most recently by the third Electricity Directive 2009. The package of directives is better known as the Third Energy Package Directives and Regulations. The European legislative framework has been the basis for the development of energy law in the Netherlands. With the implementation of the first line of European directives in 1998 in the Dutch Electricity Act, the first energy law in the Netherlands became a fact.
The Electricity Act is still the main source of energy regulation in the Netherlands. The Act was amended by the Act of 12 July 2012 to implement the Third Energy Package Directives and Regulations. The Authority for Consumers and Markets (ACM) has been appointed as the national regulatory authority to supervise compliance with the Act.
In addition to the Electricity Act, subordinate regulation has been developed and implemented to regulate the implementation of the Electricity Act (eg, the network codes). The codes contain provisions regarding tariffs, measuring services, system operation and technical conditions and procedures.
The EU has set targets for renewable energy generation, the reduction of carbon dioxide emissions and measures to halt global warming. By 2020, the Netherlands should generate 14 per cent of its energy from renewable sources, up to 16 per cent in 2023. The Dutch renewable energy goals have become even more ambitious as a result of a successful liability case brought against the state by Dutch citizens and the Urgenda Foundation. The District Court of The Hague decided in its ruling to order the state to increase its target for the reduction of carbon dioxide emissions from 14-17 per cent to 25 per cent in 2020.
In 2017, the Rutte III government presented its energy policy for the next four years in the Coalition Agreement. The main goal of the Dutch government is to achieve a reduction of 49 per cent in carbon dioxide emissions, compared to 1990. In 2013, 47 organisations signed the Agreement on Energy for Sustainable Growth (the ‘Energy Agreement’). The signatories of the Agreement have a shared responsibility and commit themselves to achieve four goals (eg, a 14 per cent share of renewable energy in the Netherlands by 2020, and a 16 per cent share by 2023, an average energy efficiency saving of 1.5 per cent per year and creating at least 15,000 additional jobs by 2020, compared to 2013.). In addition to the previous Energy Agreement, the government aims to conclude a Climate Act and Climate Agreement to achieve the long-term goal of a decrease of 95 per cent in carbon dioxide emissions by 2050, (again) compared to 1990. The first proposals for the introduction of a Climate Act and Climate Agreement were presented mid-2018. The Climate Act does, in its current format, not contain any concrete measures to achieve the objective, nor does it contain any sanctions if the target cannot be achieved. The Climate Agreement contains some concrete measures that are very promising at first sight, although the measures have to be further specified before they can be implemented and enforced by other parties.
2Organisation of the market
What is the organisational structure for the generation, transmission, distribution and sale of power?
The market for supply of power has been liberalised since 2004. Since the liberalisation, households, companies and other consumers are entitled to choose their own supplier rather than being supplied by their local supplier. The supply market for companies is fully liberalised; however, a supplier that supplies to households and small consumers is still required to obtain a licence. There are currently over 50 active suppliers of electricity in the Netherlands.
The Electricity Act regulates the production, transportation and supply of electricity. The Dutch electricity grid is divided in the high-voltage grid, which is regulated by the transmission system operator (TSO) TenneT, and the low-voltage distribution grid, which is regulated by distribution system operators (DSOs). Since the introduction of the Unbundling Act in 2008, the management of the grid and the generation, transmission, distribution and sale of power should be carried out by different entities (see questions 9 and 14).
The transmission grid is operated by TenneT, the Dutch TSO. TenneT is the transmission grid operator and manages the high-voltage grid, with a voltage of 110kV or more. The electricity is directly transmitted by TenneT from the source to the regional distributors, who then supply the electricity to households and companies. The low-voltage grids are managed by DSOs. There are currently seven DSOs for electricity in the Netherlands.
Besides managing and maintaining the national grid, TenneT is also responsible for collaborating with regional grid operators and neighbouring countries. Via the NorNED cable and the BritNED cable, interconnections were created in 2008 and 2011 with the transmission grids of Norway and the United Kingdom, respectively. The COBRAcable shall link the national power transmission grid to Denmark and is scheduled to be completed in 2019.
The trading of electricity takes place on several markets, such as the forward market, day-ahead market, intra-day market, balancing market and the imbalance market. The day-ahead market in the Netherlands is organised by power exchange APX. Households, companies and any other party who is connected to the grid in the Netherlands has a Programme Responsibility, which means that any connected party is obliged to secure that their input and output programme is in equilibrium before the start of each 15-minute period. All of the connected parties are obliged to inform the grid operators regarding their production, consumption and any needs for transportation. Based on the received information, the grid operators shall manage the grid. If the actual production, consumption or transportation needs differ from the information provided to the grid operators, imbalances occurs and imbalance penalties shall apply. The amount of such imbalance penalties is determined on the imbalance market, where prices are set for upward as well as downward regulation to safeguard the balance of the grid.
The grid should be in balance. That is, it should have a standard frequency range, at all times. To keep the grid balanced, programme responsible parties are appointed by TenneT. All parties, including small consumers connected to the grid, are in principle responsible to conduct programme responsibility tasks to safeguard the balance. It is crucial for TenneT and the regional grid operators to receive reliable metering data of the production, transmission and consumption to guarantee the standard frequency range. The Electricity Act and System Code set out the obligations for the recognised programme responsible parties, parties that are recognised to perform the programme responsibility. Recognised parties may be the Balance Responsible Parties (BRP) that are published on the website of TenneT. If a connected party does not appoint a BRP, such party may ask TenneT for its own recognition.
TenneT publishes the recognised parties on its website, in a register of recognised parties with balance responsibility and a register of recognised parties with metering responsibility. The BRP is obliged to submit an E-Programme to the TSO on the day prior to delivery. Such E-Programme includes all relevant information to determine how much electricity shall be fed into the grid or consumed from the grid, within 15-minute intervals on the day of delivery. If parties deviate from the E-Programme, electricity shall be purchased from the imbalance market.
Regulation of electricity utilities – power generation
Authorisation to construct and operate generation facilities
What authorisations are required to construct and operate generation facilities?
In principle, a permit procedure and a spatial planning procedure should be followed prior to the construction of a generation facility. Various permits and authorisations are required to construct new projects in the Netherlands. Some examples of required permits are an environmental permit, a water permit, a permit in accordance with the Nature Conservancy Act and an authorisation based on the Flora and Fauna Act. In some cases it might be necessary for the (local) authorities to issue a new destination plan or integration plan. Whether the municipality is entitled to determine a new destination plan, or the province or Minister of Economic Affairs and Climate is entitled to set a new integration plan, depends on the expected production of the generation facility to be built.
In order to enhance the development of renewable energy production facilities and achieve the renewable targets, the government adopted the National Coordination Regulation. The National Coordination Regulation combines and simplifies the application for permits and licences. The coordination regulation streamlines the various procedures for permit applications to foresee in a parallel application procedure for permits and consents, which shortens the application periods to an absolute minimum. For smaller generation facilities, either the provinces or the municipalities are the responsible authority to grant the required permits and licences.
In addition to the above, permission from landowners or infrastructure operators can be required if someone else is the owner of the intended location of the generation facility. To apply for a contribution under the Stimulation of Sustainable Energy Production (SDE+) subsidy scheme, it is necessary to obtain a formal declaration from the land owner - at the latest at the moment of filing of the application. Any arrangements in regard to the land, such as the establishment of a right of superficies or a land lease right to secure the ownership of the generation facility, can be finalised after the application for the SDE+ subsidy.
Grid connection policies
What are the policies with respect to connection of generation to the transmission grid?
Following the provisions of the Electricity Act, TSOs and DSOs are legally obliged to provide a grid connection to each producer that applies for one. The Electricity Act prescribes that a connection should be provided based upon objective, transparent and non-discriminatory criteria and tariffs taking into account the costs and benefits of different technics for renewable energy and decentral production. Depending on the actual size of the grid connection certain costs apply. Upon the receipt of an application for a grid connection, the relevant grid operator will provide the customer with a detailed and complete overview of the works to be carried out and the related costs to establish such a connection. The grid connection should be realised within a reasonable time, which for renewable energy and connection up to a maximum of 10MVA lapses 18 weeks after the application for a grid connection is submitted, unless this can reasonably not be expected from the grid operator.
If the refusal to connect a customer relates to the production of renewable energy, the grid operator should notify the producer and the regulator of the Electricity Act, the ACM, and provide to the ACM an overview of all relevant measures that the grid operator will undertake to prevent any further refusals to connect for the future.
Alternatively, a producer may also launch a tender to establish a grid connection if the connection is larger than 10MVA. In such case, the Electricity Act does set certain criteria for third parties to establish the grid connection.
Alternative energy sources
Does government policy or legislation encourage power generation based on alternative energy sources such as renewable energies or combined heat and power?
The transition to renewable energy in the Netherlands started with the Energy Agreement for Sustainable Growth, which was concluded in 2013 between representatives of (local) governments, nature conservation and environmental organisations, financial institutions and civil-society organisations. The Energy Agreement expresses the aim of the Dutch government to achieve a fully sustainable energy supply system in 2050. To achieve this long-term goal, the parties who have signed the Energy Agreement have committed to achieve some short-term goals, such as an increase in the proportion of energy generated from renewable energy sources to 14 per cent in 2020 and 16 per cent in 2023. For each of the sectors of the renewable energy sources, such as wind and solar, certain targets have been described in the Energy Agreement.
Last year, the Rutte III government presented its energy policy for the next four years in the Coalition Agreement. The main goal of the Dutch government is to achieve a reduction of 49 per cent in carbon dioxide emissions, compared to 1990. In addition to the previous Energy Agreement, the government wishes to conclude a Climate Act and Climate Agreement to achieve the long-term goal of a decrease of 95 per cent in carbon dioxide emissions by 2050, again compared to 1990.
The production of renewable energy is mainly supported via the SDE+ subsidy scheme. The SDE+ subsidy is a feed-in-tariff for producers of renewable energy to compensate them for the non-profitable portion of the costs of renewable energy. Each year there are two rounds of application for SDE+ subsidy divided into three phases, each subject to a maximum phase amount. The project developers who are granted a SDE+ subsidy receive the subsidy for 15 years (except for developers of biomass, biogas and sewage gas projects, who are granted a subsidy for 12 years). As soon as the SDE+ subsidy has been granted, the project developer shall be obliged to ensure that the project is operational within three years after the receipt of the grant from the Dutch Enterprise Agency.
Climate change
What impact will government policy on climate change have on the types of resources that are used to meet electricity demand and on the cost and amount of power that is consumed?
Traditionally, the Netherlands relied for many years on its natural gas production. On a European level, specific targets have been set for 2020 and 2030 to reduce the carbon dioxide emissions, and to halt global warming. The Dutch government however is lagging behind achieving its renewable targets. A lot of renewable energy generation facilities are still to be built. The government supports the development of renewable energy projects through subsidy schemes and simplifying the process of requesting the required licences and authorisations for the construction of renewable energy projects. In addition, the Dutch government aims to introduce support mechanisms for project that reduce carbon dioxide emissions which currently fall outside the SDE+ subsidy scheme, such as carbon capture and storage projects. The government also proposed to close the five remaining coal plants in the Netherlands by 2030.
Storage
Does the regulatory framework support electricity storage including research and development of storage solutions?
The current Dutch regulatory framework does not contain any specific provisions relating to energy storage and therefore does not specifically support the investment in storage solutions. Under Dutch regulations, Dutch consumers have the possibility to use the net metering scheme. The consumers can offset an energy surplus of their power production, which will be fed into the grid, with the electricity that it consumes from the electricity supplier. The net metering scheme will be replaced in 2023 by a new support mechanism, the feed-in subsidy, which can be defined as compensation for the electricity which has been fed back into the grid. The consumers are exempted from the payment of the sustainable energy surcharge and energy taxes. Owing to the current format of the net metering scheme, consumers are not encouraged to invest in energy storage as the whole surplus can be set off.
Government policy
Does government policy encourage or discourage development of new nuclear power plants? How?
Only 3.5 per cent of the total energy supply in the Netherlands is being produced by nuclear power. The reactor in Borssele is the only active nuclear power plant at the moment.
The rules regarding the use of nuclear materials in the Netherlands are set out in the Nuclear Energy Act 1963. There have not been any major amendments to the act since the implementation in 1963. In 2006, the government had an initiative to update the provisions of the Nuclear Energy Act. The revision would grant more control over the nuclear business to the Ministry of Economic Affairs and Climate. The licences for nuclear plants would be limited to 40 years and reprocessing agreement would be made subject to a licensing system. To date, the initiative and forthcoming proposal to amend the act, has not resulted in a definitive amendment of the act. In the meantime, the Authority for Nuclear Safety and Radiation Protection has been established, which focusses on the development of regulations, licensing systems and supervision to ensure that the highest standards of nuclear safety and radiation protection are being met.
Regulation of electricity utilities – transmission
Authorisations to construct and operate transmission networks
What authorisations are required to construct and operate transmission networks?
In the Netherlands, one single transmission network operator, TenneT, has been appointed to operate the transmission grid. Based on the provisions of the Electricity Act, it is the responsibility of the TSO to construct, maintain and expand the high-voltage grid of more than 110kV and the cross-border grid. Furthermore, the TSO is obliged to build new grids, secure the transport of electricity in a safe, reliable and efficient manner, expedite the safety of the use of generation facilities and is responsible for the execution of programme responsibility.
The appointment of a grid operator for the transmission system is subject to the consent of the Minister for Economic Affairs and Climate. If the grid operator does not perform its tasks as grid operator to the full satisfaction of the Minister, the Minister is entitled to replace the current grid operator by a different legal entity that shall be able to operate the grid. Under the Electricity Act, several regulatory duties have been granted to the Minister, such as the duty to adopt secondary legislation, such as the Codes, by decree and consent. The Authority for Consumers and Markets shall supervise the appointment of the grid operator and has been designated to define the Tariff Code and subsequent Codes with a technical nature.
Eligibility to obtain transmission services
Who is eligible to obtain transmission services and what requirements must be met to obtain access?
Third-party access to the transmission grid is arranged by the provisions of the Electricity Act. One of the statutory duties of the grid operator under the Electricity Act is to provide a connection to the grid to each producer which applies for one. The Electricity Act prescribes that a connection should be provided based upon objective, transparent and non-discriminatory criteria and tariffs taking into account the costs and benefits of different technics for renewable energy and decentral production. The connection shall be realised in accordance with the secondary legislation and the tariffs and conditions set herein by the ACM. In all cases, applications from producers of renewable energy shall have priority compared to other applications (see also question 4).
Government transmission policy
Are there any government measures to encourage or otherwise require the expansion of the transmission grid?
In the past, an application for a connection may be rejected or delayed by the grid operator if the requested connection endangered the technical capacity of the grid. The grid operator was allowed to delay the connection until the necessary amendments to the grid were implemented or the capacity has been created in any other way. The Minister of Economic Affairs described this approach of the TSO as discriminatory towards new producers who would like to enter the grid. As a consequence hereof, the Minister amended the Electricity Act to oblige the grid operator to provide a connection to the grid, if the capacity is not sufficient. When the technical capacity of the grid is endangered, the grid operator shall be obliged to perform congestion management, a method to maintain the stability of the transmission grid in a period during which the power supply exceeds the point that the grid is balanced.
Rates and terms for transmission services
Who determines the rates and terms for the provision of transmission services and what legal standard does that entity apply?
The rates and terms for the provision of transmission services are set by the ACM. The rates have to be non-discriminatory. Each year, the ACM announces the maximum tariffs for next year. Parties have to pay a connection fee to the TSO to get connected to the grid. Such connection fee is built out of two components, being an initial connection tariff and a periodic connection tariff. On top of the connection fee, parties have to pay a transmission fee that covers the costs of the transmission service. The rates are announced by the ACM in a method decision, in which the formula to calculate the maximum tariffs is explained in further detail. The formula includes an x-factor. The x-factor is determined by the ACM in a separate method decision for a regulatory period of three to five years and reflects the discount owing to efficiency.
Entities responsible for grid reliability
Which entities are responsible for the reliability of the transmission grid and what are their powers and responsibilities?
TenneT has been appointed as the Dutch TSO, and is therefore responsible for managing the high-voltage grid. As designated TSO, TenneT does have some additional obligations based on the Electricity Act, such as the transportation and distribution of electricity in an efficient and safeguard manner. Furthermore, the TSO should ensure that connection points are created and maintained with other (international) grids or consumers and should provide system services; that is, to maintain the balance between the supply and demand of electricity.
Regulation of electricity utilities – distribution
Authorisation to construct and operate distribution networks
What authorisations are required to construct and operate distribution networks?
DSOs are appointed by the Minister of Economic Affairs and Climate. Access of third parties to DSOs is regulated by and under supervision of the ACM.
The requirement of unbundling under the Electricity Act does not only apply to the TSO but is also applicable for DSOs. The provisions of the Electricity Act form an outlier in the European Union, where in general only a TSO is obliged to unbundle its grid management activities from its entities engaged in the production, trade or supply of electricity. In accordance with the provisions of the Electricity Act, Nuon and Essent have separated their grid management activities from its production, trade and supply of electricity. However, Eneco and Delta filed a case to argue that the unbundling requirements are, among other grounds, in violation with European law, as the unbundling provisions would be contrary to the principle of free movement of capital. After several stages in court, and after the Supreme Court filed a request for a preliminary ruling at the European Court of Justice, the Supreme Court decided that the provisions regarding unbundling are not contrary to the provisions of European law. Following this court ruling, the unbundling provisions could be enforced by the ACM, which resulted in the unbundling of Eneco and Delta prior to the deadlines as set by ACM of 1 February 2017 and 1 July 2017, respectively.
Access to the distribution grid
Who is eligible to obtain access to the distribution network and what requirements must be met to obtain access?
Equally to the access of third parties to the transmission grid, third-party access to the distribution grid is arranged by the provisions of the Electricity Act. One of the statutory duties of the grid operator under the Electricity Act is to provide a connection to the grid to each producer that applies for one. The Electricity Act prescribes that a connection should be provided based upon objective, transparent and non-discriminatory criteria and tariffs taking into account the cost and benefit of different technics for renewable energy and decentral production. The connection shall be realised in accordance with the secondary legislation and the tariffs and conditions set herein by the ACM. In all cases, applications from producers of renewable energy shall have priority compared to other applications.
Government distribution network policy
Are there any governmental measures to encourage or otherwise require the expansion of the distribution network?
The TSO, TenneT, is owned by the Dutch government and shall therefore be encouraged to expand the grid in such way that it will be sufficient to transport all of the electricity generated in the Netherlands. The increase of renewable energy, and therefore the uncertainty about the actual generation at a certain point in time, increases the risk of an imbalance on the grid or a shortage on the capacity of the grid. To ensure that the capacity of the grid suffices, TenneT started to expand the grid, as well onshore and offshore. The TSO started with the construction of an offshore high-voltage grid along the Dutch coast, which is able to transport 3.500MW. The high voltage grid along the coast facilitates the connection between the offshore wind farms and the onshore grid. This expansion is expected to be finished by 2023.
Rates and terms for distribution services
Who determines the rates or terms for the provision of distribution services and what legal standard does that entity apply?
ACM regulates the rates as the grid operators do not have any competitors in their region. As there is a lack of competition to ensure that the prices are kept at a reasonable level, the ACM publishes maximum tariffs to stimulate the regional grid operators to ensure that electricity is distributed in an efficient manner and at a reasonable price. Before the start of each regulatory period, which may vary between three and five years (to be decided by the ACM), the ACM publishes a method decision that describes the calculation method that will be used to calculate the maximum tariffs that a grid operator is allowed to charge to their customers. During a regulatory period, the ACM will publish an annual tariff decision, which is based on the formula as set out in the method decision. In the tariff decision, the maximum tariff of each individual grid operator is determined, based on the method decision and the Dutch Tariff Code. The method and tariff decisions are published on the website of the ACM. The last method decision covers a period of five years, from 2017 to 2021.
Regulation of electricity utilities – sales of power
Approval to sell power
What authorisations are required for the sale of power to customers and which authorities grant such approvals?
The supply and sale of electricity to small-consumers, with a total maximum transmission value of less than or equal to 3x80A, is subject to a licence and certain terms and conditions as set out in the Electricity Act. The licence to supply to small-consumers is granted by the Minister of Economic Affairs and Climate. The Minister may attach certain conditions to the licence, and is allowed to revoke the licence if the supplier is not able to provide the electricity in a reliable manner to the small-consumer and on reasonable tariffs and terms and conditions. To protect the small-consumers, the conditions of the connection and transport agreement should be transparent, fair and known prior to the conclusion of the agreement. The suppliers are obliged to offer a model contract to the small-consumers. The sale of power to other types of consumers is not subject to a licence.
Power sales tariffs
Is there any tariff or other regulation regarding power sales?
There are no boundaries to the tariffs for the supply of electricity. The prices of the supply are set by the market parties, based on the resultant of the electricity supply and electricity consumption. The market for electricity suppliers is fully liberalised, and the consumers are free to choose their own supplier. Owing to the competition that is created by liberalisation, energy suppliers have to keep their prices attractive, compared to the other suppliers. Based on the provisions of the Electricity Act, a supplier of electricity to small-consumers is obliged to set reasonable tariffs. The licence holder shall inform the ACM at least once per year regarding any changes to the tariffs.
Rates for wholesale of power
Who determines the rates for sales of wholesale power and what standard does that entity apply?
The rates for sales of wholesale power, either on the day-ahead or intraday markets, are subject to market mechanisms. Owing to the fact that the number of producers and suppliers increased significantly over the past few years, the competition in the market has grown. This is a consequence of, among others, the investments in the development of generation facilities based on renewable energy sources. The increase in suppliers had a price lowering effect on the wholesale market.
The other side of the coin is that owing to an increase in the production of electricity, the costs relating to the management of the grid have risen, as grid enlargements are required to ensure reliable and safe transport of electricity. These additional costs are converted into the rates for the sale of wholesale power. Even price fluctuations on foreign markets, owing to the close link between the German and Dutch grid, may have influence on the rates.
Public service obligations
To what extent are electricity utilities that sell power subject to public service obligations?
Suppliers of electricity to small-consumers, with a total maximum transmission value of less than or equal to 3x80A, is subject to a licence and certain terms and conditions as set out in the Electricity Act. Based on the provisions of the Electricity Act, the suppliers are obliged to offer a model contract to small-consumers (see question 18).
Regulatory authorities
Policy setting
Which authorities determine regulatory policy with respect to the electricity sector?
The Authority for Consumers and Markets is responsible for the regulation of the electricity sector in the Netherlands, together with the Minister of Economic Affairs and Climate. The ACM is appointed as regulator under the Electricity Act, the Gas Act and the Heat Act. In its role as regulator, the ACM is also assigned to determine the Tariff Code and Technical Codes, which include the maximum tariffs that can be charged by the grid operator for the connection to the grid and transport of electricity.
Scope of authority
What is the scope of each regulator’s authority?
The Minister of Economic Affairs and Climate defines the energy policy in the Netherlands and is, together with the ACM, responsible for the correct implementation of the Electricity Act, as well as the publication of draft proposal to amend the current provisions of the Electricity Act. Under the Electricity Act, the Minister of Economic Affairs and Climate is obliged to present every four years an energy report that contains at least an analysis of the developments on the national and international electricity market, an analysis of the changes in the use of energy sources, an overview of the goals to be achieved to ensure trustworthy, sustainable, effective transport of energy.
The ACM is appointed as regulator under the Electricity Act. As regulator, the ACM is responsible to supervise whether the TSO, DSO, supplier and other relevant parties within the electricity sector, do comply with the provisions of the Electricity Act. In addition to its role as regulator, the ACM publishes the method decisions and tariff decisions as described in the Tariff Code and is responsible for keeping the Tariff Code and Technical Codes up to date to comply with the most recent developments in the electricity sector. If a party infringes any of the provisions of the Electricity Act, the ACM will have the power to sanction such party by imposing orders and fines.
Establishment of regulators
How is each regulator established and to what extent is it considered to be independent of the regulated business and of governmental officials?
The ACM is an independent public regulatory entity that is responsible for monitoring competition and customer protection. Moreover, the ACM carries out sector-specific supervision, for example the electricity sector. The Minister of Economic Affairs and Climate may provide general guidelines to the ACM, but is not entitled to instruct the ACM on specific cases.
Challenge and appeal of decisions
To what extent can decisions of the regulator be challenged or appealed, and to whom? What are the grounds and procedures for appeal?
Any and all decisions taken by the ACM or the Minister of Economic Affairs and Climate, based on its responsibilities under the Electricity Act, are subject to the provisions of administrative law. Within six weeks after the decisions of the ACM, a party may object to the decision. If the objection is not accepted, the party may file an appeal against the decision. Such appeal can be filed to the court of Rotterdam. The ultimum remedium of the affected party shall be an appeal to a higher court, which should be filed with the Dutch Trade and Industry Appeals Tribunal.
Acquisition and merger control – competition
Responsible bodies
Which bodies have the authority to approve or block mergers or other changes in control over businesses in the sector or acquisition of utility assets?
In all cases, parties who aim to merge or otherwise change its control, have to take into account the unbundling requirements as set out in the Electricity Act and the provisions of the Competition Act (see question 27). Based on the provisions of the Electricity Act, a grid operator shall not be able to merge with an entity that is engaged in the production, trade or supply of electricity.
In the event of a merger, demerger, dissolution or bankruptcy of the legal entity that is designated as the grid operator by the Minister of Economic Affairs and Climate, such appointment shall automatically lapse. After such event, the Minister shall appoint a new grid operator in accordance with the provisions of the Electricity Act. It is possible to appoint the same legal entity as grid operator, if such legal entity still exists following the occurrence of such event.
Review of transfers of control
What criteria and procedures apply with respect to the review of mergers, acquisitions and other transfers of control? How long does it typically take to obtain a decision approving or blocking the transaction?
The criteria and procedure with respect to the review of a merger is set out in the Dutch Competition Act. To safeguard a certain level of competition in the electricity market, the ACM should be notified in regard to a merger, acquisition or any other transfer of control in the event that certain conditions are met. Merger control of the ACM applies to mergers and acquisitions whereby the combined worldwide turnover of the entities involved is at least €150 million and whereby at least two of the merging entities do separately have an annual turnover of at least €30 million in the Netherlands. The notification is not required if the involved entities only comply with one of the two aforementioned terms.
To file a request, the parties have to, on the website of the ACM, complete a form that focuses on certain aspects of the merger to determine whether a merger could result in the creation or strengthening of a dominant position. The ACM shall review both the notification phase and the application for a licence. The ACM shall decide within four weeks whether an application for a licence can be filed. The entities are allowed to implement the merger only after the ACM decided to grant the licence. Such decision should be made within 13 weeks after the application for a licence has been filed. If the ACM rejects to grant a licence, the involved entities can file a request to the Minister of Economic Affairs and Climate to overrule the ACM and to grant a licence.
In some cases, the European Commission (EC) shall have competence based on the provisions of the EC Merger Regulation. This shall be the case if the entities involved in the merger have realised a combined worldwide turnover exceeding €5 billion and at least two of the merging entities do separately realise an annual turnover within the European Union of at least €250 million.
The administrative fines for infringement with the provisions of the Dutch Competition Act shall be a maximum of €900,000 or a maximum of 10 per cent of the worldwide turnover of the entity, whichever is higher.
Prevention and prosecution of anti-competitive practices
Which authorities have the power to prevent or prosecute anti-competitive or manipulative practices in the electricity sector?
Articles 101 and 102 of the Treaty on the Functioning of the European Union are considered to be the cornerstones of competition law in the Netherlands. Individuals may invoke articles 101 and 102 of the Treaty on the Functioning of the European Union at a national or a European court.
As set out in question 27, the ACM is the regulatory authority that is authorised to enforce the provisions of the Dutch Competition Act. Besides the authority to review mergers or acquisitions, the ACM focuses on abuse of a dominant position by an entity and the cartel prohibition as set out in article 6 of the Dutch Competition Act. The cartel prohibition prohibits that agreements are being made between entities that aim or effect to prevent, restrict or distort the competition on the Dutch (electricity) market.
Determination of anti-competitive conduct
What substantive standards are applied to determine whether conduct is anti-competitive or manipulative?
The cartel prohibition of article 6 of the Dutch Competition Act contains a general prohibition to conclude restrictive agreement or conduct restrictive practices, either of a vertical or a horizontal nature. Article 6 includes certain thresholds. If the involved entities stay under these thresholds (the minimus-exception), the agreements are considered as of minor importance. If the agreements do not involve more than eight companies, and its combined annual turnover is not higher than €5.5 million (supply agreements) or €1.1 million (for other agreements), the cartel prohibition does not apply. If an agreement is concerned to be restrictive for the competition in the market, the agreement will partly or wholly be null and void.
Contrary to the articles 101 and 102 of the Treaty on the Functioning of the European Union, article 24 of the Dutch Competition Act does not specify any categories which are considered to be an abuse of a dominant position.
Preclusion and remedy of anti-competitive practices
What authority does the regulator (or regulators) have to preclude or remedy anti-competitive or manipulative practices?
The ACM can sanction each entity that infringes any of the provisions of the Competition Act with a maximum fine of €900,000 or 10 per cent of the worldwide turnover of the entity, whichever is higher. For infringements of the cartel prohibition, the maximum fine will be multiplied by the duration of the cartel, which is subject to a maximum of four years. In case of recidivism within five years, the maximum fine can be doubled.
International
Acquisitions by foreign companies
Are there any special requirements or limitations on acquisitions of interests in the electricity sector by foreign companies?
There are no limitations or restrictions in the Electricity Act for the acquisition of interests in the electricity sector by foreign companies (other than the group prohibition clause).
Authorisation to construct and operate interconnectors
What authorisations are required to construct and operate interconnectors?
The interconnector operator is appointed by the Minister of Economic Affairs and Climate, under the same terms and conditions as the appointment of a TSO or DSO. It is not required that the interconnector operator is a public company or private company with limited liability. The aim of the European policy is to increase the interconnection capacity to create one single integrated electricity market across Europe. A new interconnection with Denmark is currently under construction, and the existing interconnections with Belgium, Germany, Norway and the United Kingdom are being expanded and optimised.
Interconnector access and cross-border electricity supply
What rules apply to access to interconnectors and to cross-border electricity supply, especially interconnection issues?
In addition to its role as TSO, TenneT is also responsible for the operation and realisation of cross-border interconnections. TenneT is responsible for the publication of transmission data on imports and exports. The terms and conditions for such publication are set out in the Dutch Grid Code. The capacity of import and export depends on the amount of electricity that can be transmitted safely. The cooperation between the TSOs on a European level improves the security of the supply and enhances the stability of the grid. Management of the interconnections includes the responsibility to transfer the capacity in a non-discriminatory and transparent manner to interested market parties, as prescribed by EC Electricity Regulations, the Electricity Act and the Grid Code. The capacity of the interconnections is being made available to market parties through an auction, the TSO auction. The Joint Allocation Office (JAO) is a joint service company that consists of 22 TSOs in 19 countries, and facilitates the yearly, monthly and daily auctions of transmission rights.
The funds received by TenneT in its role as TSO are allocated by a foundation called the Foundation for the Management of Allocated Funds from the National High-Voltage Grid. The funds are received as a result of imbalance settlements and market-based allocation of cross-border electricity transfers. The revenues resulting from the allocation of interconnections shall be used to ensure that the actual availability of the allocated capacity can be guaranteed and to maintain or increase the capacity of old and new interconnections. Any surplus revenues shall be used to reduce the current tariffs as set out in the Tariff Code for the connection to the grid and the transport of electricity.
Transactions between affiliates
Restrictions
What restrictions exist on transactions between electricity utilities and their affiliates?
The current group prohibition-clause in the Electricity Act requires that the grid operator of the high-voltage grid should separate its grid management entities from its production, trade and supply entities. This legal requirement has been implemented by the Unbundling Act (Wet onafhankelijk netbeheer), which entered into force in 2008.
The implementation of the Unbundling Act removes the incentive and possibility to discriminate the access of third parties to the grid. Grid operators that also have an interest in the supply of electricity may have the incentive (and the ability) to offer preferential treatment to a related supplier, which results in discrimination of other suppliers. To avoid such discrimination, the group prohibition-clause has been implemented in the Electricity Act.
The group prohibition-clause does not only apply to TSOs, but also to DSOs, which makes this group prohibition-clause more restrictive than the unbundling requirements as set out in the European directives.
Enforcement and sanctions
Who enforces the restrictions on utilities dealing with affiliates and what are the sanctions for non-compliance?
The provisions of the Unbundling Act are enforced by the ACM. As set out in question 14, following a ruling of the Supreme Court, the ACM ordered Eneco and Delta to unbundle its grid management activities from its non-DSO activities prior to 1 February 2017 and 1 July 2017, respectively.
Update and trends
Update and trends
Are there any emerging trends or hot topics in electricity regulation in your jurisdiction?
The Netherlands relied for many years on its natural gas production. Owing to (the increasing danger of) earthquakes in the northern provinces of the Netherlands, the Minister of Economic Affairs and Climate decided that the gas generation facilities have to be decommissioned before 2030. Following this decision and to achieve the European targets to generate 14 per cent of its energy from renewable energy, the energy mix in the Netherlands has to change significantly. Climate change and the stimulation of the development of renewable energy generation facilities are important subjects in the Coalition Agreement of the newly formed Dutch government. In addition to the targets set out in the Energy Agreement of 2013, the government aims to conclude a Climate Act and Climate Agreement to achieve the long-term goal of a decrease of 95 per cent in carbon dioxide emissions by 2050. The first proposals for the introduction of a Climate Act and Climate Agreement were presented mid-2018. The proposals are still to be finalised, but the targets and first drafts of the measurement to be taken are very promising.
The expectation is that there will be a huge rise in the development of solar photovoltaics (PV), as many solar PV projects have been granted with a SDE+ subsidy in the 2017 spring round. These projects have to be constructed and connected to the grid within three years after the SDE+ subsidy has been granted to the project companies. Not only had more project companies than expected applied for SDE+ subsidies, but the capacity of the projects that applied for the subsidy also increased. More large ground-based and rooftop solar projects are therefore expected to be realised within the upcoming years.
The first subsidy-free offshore wind farm bids were awarded in 2017. A consortium of Vattenfall, Statoil, Innogy and WitWind was awarded in a tender to develop wind farm Holland Kust Zuid without any public subsidy. The wind farm is to be built by 2022, and will be the first zero subsidy offshore wind farm in the world. (As of mid-2017, no subsidy tenders had been awarded in Germany, but the commissioning of wind farms is planned for 2024 or 2025, so after the scheduled commissioning date of Hollandse Kust Zuid.)
The energy transition is not only a hot topic on a governmental level, but there is also an increasing interest from corporates to provide an alternative way for project developers to attract cheaper finance and meet its bankability requirements. During the development phase of the renewable energy project, the project company will not gain any revenues. As project finance has to be concluded before the start of construction, projects can be made more bankable-ready by concluding power purchase agreements (PPAs) with corporates or utilities. The power purchase agreement secures steady revenues for a project to repay its debts and may be the difference between a bankable and a non-bankable project. Not only onshore wind projects, but also solar and other renewable energy projects can take advantage of such PPA structures.
