CREG rejects higher return for Belgian grid manager Elia

Federal energy regulator CREG rejects a proposed increase in return on equity sought by Belgian high-voltage grid operator Elia. On the sidelines of its half-year results, the grid operator had insisted on this last week. Elia says a higher return on capital is needed to finance its future infrastructure investments.

According to the newspaper La Libre Belgique, Elia wants an increase in this return on equity capital from the anticipated 5,8% to 7,6%. That would entail an additional cost of 100 million euros, to be divided between the electricity bills of households and companies.

Fear of higher power bills

CREG, or Electricity and Gas Regulatory Commission, believes the proposal deviates from the tariff methodology the regulator approved in June 2022.

The energy regulator fears a further increase in power bills for households and businesses because Elia’s tariff proposal for the coming years does not consider this demand for a higher return. A family with an average electricity consumption would have to pay 80 euros more annually by 2027, double the amount paid today.

Moreover, CREG also rejects it because Elia asks that it be applied retroactively ‘for all past investments.”

Elia is pushing for a higher return because billions of investments are needed in making the high-voltage grid more robust, a move necessary for the energy transition, such as the switch to electric driving. An investment plan of 7,2 billion euros is planned for 2023-2027.

Better return for shareholders

The company is looking to shareholders, including the Belgian municipalities, for this. In that context, a better return for Elia shareholders is in order because the financial markets have changed significantly since June 2022, for example, due to the unexpected trend in interest rates.

Earlier, it became known that Elia, which has a monopoly position in Belgium, wants an 80% tariff increase for 2024-2027. In the tariff file, CREG intends to land in November.

Elia is not aware of rejection

In an announcement, Elia said it was unaware that CREG had rejected the proposal to increase the return on proper capital. However, the system operator also admitted that it is not exceptional for a proposal to be rejected during ongoing negotiations.

“It is part of a legally defined process by which Elia can submit a new proposal,” the grid operator stated. “However, Elia was not aware of the recent rejection.”

Elia also says that despite the size of the investment amount, the impact of the tariff increase on the total bill of end users is limited. “Indeed, these investments are necessary and will have a major positive impact on the evolution of electricity prices and welfare,” the system operator concluded.