German regulator proposes lower earnings for power, gas grids - Reuters

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The moon rises as electricians work atop a power pole near the lignite power plant of Neurath of German energy supplier and utility RWE, near Rommerskirchen north-west of Cologne, Germany, February 5, 2020. REUTERS/Wolfgang Rattay/File Photo

• Equity interest to fall to 4.59% from 6.91% from 2023/24
• Authority will consult industry, decide in autumn

FRANKFURT, July 14 (Reuters) - Germany's federal network agency on Wednesday published a draft proposal for equity interest rates for gas and power networks showing operators stand to see their income curbed in the five-year periods starting 2023 and 2024 respectively.

The authority proposed a permitted return for new infrastructure of 4.59% before corporate tax, down from 6.91% now, in the regulated sectors, where costs are recouped through fees levied on end-customer prices.

Old infrastructure would earn 3.03% compared with 5.12% currently, it said in a statement.

Decisions on the matter will be taken in the autumn.

The outcome of the process will have an impact on the speed of renewables expansion and the repurposing of natural gas pipelines for low-carbon uses such as transporting yet-to-be produced hydrogen produced form renewable sources.

Bundesnetzagentur President Jochen Homann said his agency was mindful of the need to protect operators' revenues but also obliged to lessen the impact on consumer prices.

"We want to keep investments in grids permanently attractive," he said.

The lower proposed rates mirrored assessments of noticeably lower interest rates in the capital markets at present and in the future, while allocating suitable risk premiums.

"When determining the final rates, we will be taking into account the proposals out of the consultation process," Homann said.

Operator lobbies said they needed to spend more money on upgrading their networks for new roles in decarbonised energy systems.

"Should the equity interest rate be reduced to the envisaged extent, this could become a boomerang for necessary investments in the energy infrastructure," said Ingbert Liebing, managing director of the association of local utilities, VKU, referring to revised official forecasts for power demand in 2030. read more

Energy industry association BDEW spoke of "insufficient conditions for investments" at a time that billions of euros needed to go into infrastructure, warning this could throttle the energy transition.

Reporting by Vera Eckert, editing by Kirsti Knolle, Douglas Busvine and Steve Orlofsky

Our Standards: The Thomson Reuters Trust Principles.

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