Elenia’s appeal to the Market Court: The changes in regulation methods in the middle of the regulatory period are inconsistent with the legal principles of administration and the objectives of the development of distribution networks

The changes in the regulation methods of electricity distribution established by the Energy Authority in the middle of the 5th regulatory period for 2022–2023 contradict the legal principles of administration and the objectives for the development of distribution network operations. Like dozens of other DSOs, Elenia is seeking repeal from the Market Court against the decisions of the Energy Authority placing customers of electricity distribution in an unequal position.

The majority of DSOs are appealing to the Market Court against the changes in regulation methods, which were confirmed by the Energy Authority just before Christmas. The companies consider the changes in the middle of the regulatory period to be inconsistent with, among other things, the rule of law principle. The DSOs have not been treated equally, as the impact to the companies and their customers in not uniform.

“The changes in regulation methods in the middle of the four-year regulatory period are highly unusual and erode the confidence of DSOs and their stakeholders, including the financial sector, in the credibility and the continuity of regulation. As a result of these changes, Elenia will cut its network investments this year by more than EUR 40 million. Improving electricity distribution and reducing power outages, especially in rural areas, are slowing down considerably at a time when remote working has become the norm,” says Tapani Liuhala, CEO of Elenia.

“The consequences of the changes in the regulation methods are unreasonable,” says Liuhala.

The Energy Authority normally monitors the reasonable return of DSOs in periods of four years and establishes regulation methods in advance for a period of eight years. Regulation is based on the applicable laws, predictable practices and the Energy Authority’s methods of monitoring reasonable return and pricing.

“Elenia has been a pioneer in the reform of electricity network services and has improved its operations the most in the industry. There is no justification for the fact that the implications of the regulation changes are most severe for the development of the security of electricity supply for our customers,” Liuhala says.

“Our investments in renewing the ageing electricity network exceed one billion euros. The share of the weatherproof network has increased from less than 20 per cent to around 60 per cent in our 75,500 kilometres of electricity network in just over a decade. This has resulted in more than 10,000 person-years of work in the 100 municipalities of our network area, but the work to renew the ageing electricity network is ongoing,” Liuhala continues.

“At the same time, our pricing has been moderate and stable. It has been more than two years since the last price increase of around 6%,” he says.

“The changes in unit prices of network components and the decrease in the WACC rate, which is the basis for the return, could have been implemented as planned for the next regulatory periods without causing this disruption, which creates unequal security of supply for customers, interrupts the improvement of cost-effectiveness of operations and slows down the green transition. Connecting renewable energy into the energy system requires investments in smart grid solutions,” says Liuhala.

“Changes in the middle of the regulatory period are contrary to good governance, the principle of legal certainty and the protection of property. This interrupts the long-term electricity network renewal process and disregards the fact that the starting point for the network planning is up to 50–60 years of investment life cycle. The residents of rural areas are being punished the most as we are forced to withhold the planned investments to renew the obsolescent electricity network,” Liuhala says.