Incentive Regulation in Germany –
A Strategic Challenge to Grid Operators
Dr. Kathrin Rübberdt
Incentive regulation has been set as the goal for the regulatory regime in Germany
Regulation
Return regulation
Incentive Regulation
Price Cap
Revenue Cap
Cap Regulation
Yardstick Competition
1. and 2. regulation period
3 ys + 3-5 ys
Following 2-y periods
as proposed by the
Bundesnetzagentur
1-2
The timeline has been changed several times, but seems to be clear now
Planned Milestones
Past development
01. July 2006 BNetzA (Regulator):
Report on incentive regulation published including
proposed model for Germany
13. July 2005 Update of EnWG (Legislation on
energy business) Regulation of the German
market (introduction of BNetzA as regulator /
Unbundling)
1998 / 2002 VV (Verbändevereinbarung =
association agreement between energy producers
and industrial consumers) I + II: non-discriminatory
access to nets
4. April 1998
Liberalization enforced by Legislation on energy
businesses (Energie-Wirtschafts-Gesetz EnWG)
Until 1998
electritiy markt is a monopoly
Zeit
Liberalizati
on/R
e
gul
a
ti
on
2007
2008
2009
End of
February:
Publication of
the proposal of
the responsible
BMWi-Staff
July: Passage of
incentive
regulation
before
parliament’s
summer recess
January 1st:
2nd Approval of
grid tariffs for
electricity grid
operators
January 1
st
.
Start of
incentive
regulation
April 1st: 2
nd
Approval for grid
tariffs for gas
grid operators
The original proposal by the Bundesnetzagentur relies on a regulation formula
Quality
Bonus/
-Malus
Company-specific cost
Adjusted industry
productivity
Extension
coefficient
Sales
revenue
Cost-reducing
revenue
Regulatory
account
Revenue cap
EOt = KAdnb,t + (KAvnb,0 + (1-EVind,t) * KAb,0 ) * (VPIt/VPI0 – PFt) * EFt + Qt
≥ Σ
Pi,t * Mi,t + Esonst,t
+
∆
RKt
1 (3 J.)
revenue cap
3
(2J. –Perioden)
Yardstick
Proposed revenue
Average
Best Practice
(cost-efficient)
Regulatory period
Approved revenue in t = 0
1)
All inefficiencies removed
Gradient:
company-specific efficiency
Gradient:
sectoral productivity
2 (3-5 J.)
revenue cap
Quelle: BNetzA
1) Auf Grundlage der Kostenprüfung + ROC durch BNetzA
Right now, several proposals have been introduced into the discussion
BNetzA
BMWi
VKU
VDEW
???
individual
companies
Official White Paper of the Federal Ministry of Economics
and Technology
Federal Act on Revenue Cap Regulation for the Grid Fees
on Electricity and Gas Transmission
Legislative
process
Current status of discussion
Common ground
incentive regulation
regulatory account
early start (January 2009)
Benchmarking as core component
no OPEX/CAPEX-differentiation
Differences
handling of investments
quality regulation
orientation point in benchmarking
applicability (company size)
Companies in Germany should start preparing now
Asset Operations
Asset Management
Asset Ownership
Asset Services
Operatives
Anlagen-management
Strategi-sches
Anlagen-management
Unternehmensführung
Strategi-sches
Service-management
Operatives
Service-management
Enabling Capabilities
Unterstützende Prozesse
Strategische Netz- und
Systemführung
Öko-Bilanzgruppen-management
Operative Netz- und
Systemführung
Operatives
Markt-management
Strategisches
Markt-management
Cost/revenue pressure
Company size
Structural
aspects
CAPEX/OPEX
growth
Tariffs and
pricing
In-/Outsourcing
Controlling
investment
quality
competition
Incentive Regulation calls for a new strategic set-up
[€]
Exemplary strategic challenges
Fixing of Revenue Cap
regulatory management
positioning in benchmarking
Decrease Costs
short-term cost-cutting
long-term cost leadership
Portfolio-Management
balance regulated and non-regulated
activities
Approved
revenue cap
Costs
Margin
0
t
Regulation period
An initial analysis helps to focus on the most relevant parameters and create high
impact
EO
t
Ineffiziency (EV
t
> 0)
Industry productivity (VPI
t
/VPI
0
– PF
t
)
Extension coefficient EF
t
f
Impact of quality
e
Individual Efficiency
Target
Regulation period
efficient (EV
t
= 0)
+
-+
-Quality Bonus/Malus
Q
t
+
-c
industry productivity
coefficent
d
Initial revenue
cap
Many parameters may be relevant to the individual company
Cost and cost structure
Demographics and
structural change
Quality and Service
...
Structural parameters and
exogenous cost drivers
Output
The regulatory manager holds a central strategic role
The regulatory manager
is a strategic staff function
is responsible for regulator management
principal coordinator and facilitator between technical and commercial functions
involved in all strategy-relevant decision-making processes
Board of Executives
Regulatory Manager
Financial & Commercial
Technical
Asset Management
Asset Services
Further functions
Corporate Development
Strategic Controlling
CONCEPTUAL
A superior management of technical functions is crucial under incentive
regulation
Provide accurate information on
asset history
state of assets
costs
Manage costs
Develop and follow investment and
maintenance strategies
Ensure quality
Use innovative technologies like smart
metering
Supporting processes
Management processes
Core processes
Asset
Ownership
Asset
Managemt.
Asset
Operations
Asset
Services
Commercial functions play an important role as well
Efficiency
• Lowest total finance costs, particularly
for transaction processing
• Focus on cash & capital
allocation/investment
• One enterprise-wide core financial
transaction processing application
Effectiveness
• Future-focused reporting and credible
forecasts
• Multi-dimensional profitability,
performance measures and analytics
• In-depth specialized finance skills
To Strategic Decision
Support focused
From Function focused
Vision
&
Strategies
Planning
Forecasting
Budgeting
Cost and Profitability
Management
Core Transaction
Processing
Reporting
Measure
Performance
Vision
&
Strategies
Planning
Forecasting
Budgeting
Cost and Profitability
Management
Core Transaction
Processing
Reporting
Measure
Performance
The availability of data is essential to enable regulatory management
• Dachs-eRisk • SAP-IS/U • PSI-PSIgamess • Somentec-XAP • IFS-IFS Rechnungsservice • IFS-IFS Produktion • Dachs-eRisk • PSI-PSIgas • SAP-EDM • Somentec-XAP • PSI-PSIservicecontrol • Schleupen-CS.AM_Auftragsmanagement • Somentec-XAP • IFS-IFS Instandhaltung • Oracle-JD Edwards EnterpriseOne • SAP-PS • Crombach&Partner-SysBau/3 • IFS-IFS Engineering Auftrags- und Vergabemanagement Analyse und Simulation Projektmanagement Konzeption CAD GIS und Betriebsmittel-Information Kalkulations-, Visualisierungs-, Reportingwerkzeuge Netzberechnung Lastmanagement und Hydraulik Asset Management Fahrplan- und Bilanzkreis-management Kalkulations-, Visualisierungs-, Reportingwerkzeuge Anschluss- und Auftrags-management Netzberechnung Lastmanagement und Hydraulik Kunden-management Abrechnung und Metering Asset Ownership Prozessleitsystem Worflow und Scheduling GIS Anschluss-Management Reporting Kunden-Management Fahrplan-Management Asset Operations Auftrags- und Vergabemanagement Analyse- und Simulation Projektmanagement Kunden-management GIS und Betriebsmittel-Information Workflow und Scheduling Abrechnung und Metering Asset Services System-Integration Mobile Basisarchitektur Betriebssystem Daten und Informationen Kommunikation Enterprise Integration Prozess-integration • Shaw Power Technoloies-PTI bzw. PSS/E • BCP Inc.-NePlan • Fischer Urig-Stanet • DiGSILENT-Power Factory • PSI-PSIcontrol • GE Energy-Smallworld • ESRI-ArcGIS • AED-SICAD-SICADopen • Intergraph-G/Tec • SHH-Paris • HHK-GEOgraf • Poppenhäger-GRIPS • GE Energy-Smallworld • ESRI-ArcGIS • AED-SICAD-SICADopen • Intergraph-G/Tec • SHH-Paris • HHK-GEOgraf • Poppenhäger-GRIPS • Autocad-Autodesk • Bentley-Microstation • SAP-BW • Accenture-NOA • Cognos-Business Intelligence • GE Energy-Smallworld • ESRI-ArcGIS • AED-SICAD-SICADopen • Intergraph-G/Tec • SHH-Paris • HHK-GEOgraf • Poppenhäger-GRIPS • SAP-BW • Accenture-NOA • Cognos-Business Intelligence • Somentec-XAP • IFS-Vertrieb&Service • SAS-SAS/QC • SAG EL-xRCM • SAG EL-MABI • Meridium-RCMO • PSI-PSIcontrolNessi • SAP-PM • MRO-Maximo • SAP-BW• S&G and Partners/Signion-LCC • PSI-PSIganesi
• Oracle-JD Edwards EnterpriseOne • IFS-IFS Instandhaltung • SAG EL-xRCM • SAG EL-MABI • Meridium-RCMO • PSI-PSIcontrolNessi • SAP-PM • MRO-Maximo • SAP-BW
• S&G and Partners/Signion-LCC • PSI-PSIganesi
• Oracle-JD Edwards EnterpriseOne • IFS-IFS Instandhaltung • GE Energy-Power On • Accenture-NOA • PSI-PSIcommand • Greengate-GF • HST-Kanio • Robotron-SEA • ClickSW-Click Schedule • IFS-IFS Produktion
• Oracle-JD Edwards EnterpriseOne
• PSI-PSIcontrol • PSI-PSIgamos • GE Energy-ENMAC System • SAG EL-MASIS • ABB-Calor Emag • Cursor-EVI • SIV-kVASy • Microsoft-CRM • Sage-SalesLogix • SAP-CRM • peopleSoft-CRM • Siebel-CRM • Somentec-XAP
• Oracle-JD Edwards EnterpriseOne • Schleupen-CS.AV_Arbeitsvorbereitung • PSI-PSIservicecontrol
• Schleupen-CS.AM_Auftragsmanagement • Somentec-XAP
• IFS-IFS Instandhaltung • Oracle-JD Edwards EnterpriseOne
• Shaw Power Technoloies-PTI bzw. PSS/E • BCP Inc.-NePlan • Fischer Urig-Stanet • DiGSILENT-Power Factory • PSI-PSIcontrol • PSI-PSIservicecontrol • Schleupen-CS.AM_Auftragsmanagement • Somentec-XAP • IFS-IFS Instandhaltung • Oracle-JD Edwards EnterpriseOne • Cursor-EVI • SIV-kVASy • Microsoft-CRM • Sage-SalesLogix • SAP-CRM • peopleSoft-CRM • Siebel-CRM • Somentec-XAP
• Oracle-JD Edwards EnterpriseOne • SAP-BW • Microsoft-Visio • Microsoft-Excel • Accenture-NOA • Cognos-Business Intelligence • Somentec-XAP • IFS-IFS Vetrieb&Service • SAS-SAS/QC • Cursor-EVI • SIV-kVASy • Microsoft-CRM • Sage-SalesLogix • SAP-CRM • peopleSoft-CRM • Siebel-CRM • Somentec-XAP
• Oracle-JD Edwards EnterpriseOne
• Schleupen-CS.AV_Arbeitsvorbereitung • GE Energy-Power On • Accenture-NOA • PSI-PSIcommand • Greengate-GF • HST-Kanio • Robotron-SEA • ClickSW-Chlock Schedule • IFS-IFS Produktion
• Oracle-JD Edwards Enterprise One • Dachs-eRisk • PSI-PSIgas • SAP-EDM • Somentec-XAP • SAP-PS • Crombach&Partner-SysBau/3 • IFS-IFS-Engineering • Dachs-eRisk • PSI-PSIgamess • SAP-EDM • Somentec-XAP • IFS-IFS Rechnungsservice
Regulatory requirements
Data request from the BNetzA
In-house requirements
monitoring and controlling
operative planning
strategic planning
Timely, accurate and consistent
data
from an integrated and
harmonized IT landscape
Large number of partly integrated,
partly independent IT components
“Before anything else, preparation is the key to success” (A.G. Bell, 1847-1922)
Success ?
Success today
Success in the future
•
long-term continuous additional
•
active business designer
•
long-term perspective for company, employees,
shareholders and customers
Continuous
Preparation
Contact and further information
Dr. Kathrin Rübberdt
Accenture
Campus Kronberg 1
D-61476 Kronberg
Tel.: ++
49-6173-57-67521
Mobil: ++
49-175-57-67521
e-mail:
www.accenture.com