Guenter Bramboeck presents on distribution tariffs at the Vienna Forum on European Energy Law, 2014

1. Cost-reflectivity of
Distribution Tariffs
14.3.2014 guenter.bramboeck@evn.at

2. Distribution tariffs and cost-reflectivity
Cost components to be covered
Grid levels and cost shifting
Tariff structure and allocation of costs
Objectives to be pursued
Impact of liberalization – unbundling
Impact of reorientation of power generation
Smart metering and new opportunities?
Tariffs as interface between grid customers and
transmission system
Conclusions
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3. Cost components to be covered
Mainly capital costs (depreciation and
interest) and operational costs
Costs shifted from transmission based
on same elements
Other system costs (ancillary service,
etc.)
Energy costs for losses, as far as
acknowledged
Impairments as far as acknowledged
Other minor cost components
Incentives (quality of service, losses,
etc.)
Fixed costs count for appr. 90% of total
expenditures
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4. Grid levels and cost shifting
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Transmission
Substation
MV grid
Trafostation
LV grid
HV grid Connected customers
Connected customers
Connected customers
Connected customers
Connected customers
These grid levels have to be reflected in tariffs as minimum.
Currently just general 3 levels applied in EnC region.

5. Tariff structure and allocation of costs
Tariff structure should reflect the main
fields of possible cost-effective reaction of
customers.
The structure is main basis for cost-
reflectivity
Cost drivers: allocation of costs defines to
a great extent the system efficiency
Keep it simple but effective
Possible separation within distribution grid
− (Deep) connection fee according to maximum
demand
− Use of grid in capacity charge and TOU volumetric
− Metering, billing etc.
− Grid losses,
− reactive energy
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6. Objectives to be pursued
Consideration of demand habits in design
of connection fee (door keeper function)
Reflection of capacity costs by demand
charge and TOU
Consideration of customer potential to
react (load management)
Reflection of sharing of costs according
to ownership border
Consideration of special tariffs for
flexibility (interruptible consumption for
DSM)
Reflection of simultaneously occurring
peak demand of many small customers
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7. Impact of liberalization – unbundling
Separation of distribution tariff by simple
reduction of unified volumetric price leads
to distortions in remaining regulated tariff
Price and cost hikes for customers
pushed to the open market if no swift
adaption is practiced
Passed down subsidies get more obvious
and will be criticized by customers
Grid tariffs do no longer support well-
behavior of customers to limit costs
Higher forecast risk for separated losses
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8. ´Current structure of el. distribution grid tariffs in
EVN Group Austria fits on one page
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Based on:
http://www.e-control.at/portal/page/portal/medienbibliothek/recht/dokumente/pdfs/SNE-VO-2012-idF-Novelle-2014_konsolidiert.pdf

9. Impact from reorientation of power generation
Liberalized market changes location of
generation
Climate actions lead to distributed
generation (mainly PV) and change use
of grid and invoiced volumes
Additional investment in distribution grid
causes high investments to be allocated
in a cost-reflective way
Fluctuating RES (wind, PV) demand
flexibility on demand side – tariff structure
with price for interruptible supply as
precondition for demand side
management
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10. Smart metering and new opportunities?
SEE region widely applies sort of SM in
risk quarters for less losses and better
collection
Smart metering initially causes costs of
about 250 – 350 EUR/meter including
ICT
Smart technologies would make sense
only on the basis of smart tariffs
Smart tariffs or price products should
include offers to customers with clear and
sustainable benefit
Standardized load profiles get obsolete
Reasonable model for combination of SM
and tariff structure still not available
anywhere 10

11. Tariffs as interface between grid customers and
transmission system
Power system is extremely high complex
due to multiple interference with fairly
hard to communicate cost structure but
improvement opportunities by tariff
structures
Caused costs cannot be calculated on
the bases of an individual customer
RES generation cause additional costs in
the grids  setting the optimal incentives
is a big challenge
Local load may not coincide with system
load
Tariffs will always be a compromise
though with optimization potential
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12. Conclusions and remarks
Tariff structure essential for system
efficiency
Complexity has to be brought down to
cost drivers and customer applicability
Primitive grid price structure as seen
currently in EnC region might become
threat soon
Real costs have to be acknowledged by
regulators to avoid worsening of the
service but incentives are important and
effective
Unresolved social policy via electricity
prices is increasingly endangering
security of supply
Top-down development (big to small
customers) highly accepted in practice
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13. No snowflake in an avalanche ever feels
responsible.
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