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SiRM research into tariff regulation of heat networks sent to House of Representatives

The pricing of heat networks is going to change. On behalf of the Ministry of Economic Affairs and Climate SiRM researched how that could be done.

News 8 February 2019

Once a heat network is installed, it has the characteristics of a natural monopoly and therefore misuse of market power by a heat company is conceivable. That is why rates for consumers are regulated, which is done at the moment by the ‘gas reference’. The policy of using less natural gas and levying a higher tax on natural gas will make this less relevant in the long term. The Ministry of Economic Affairs and Climate has therefore asked SiRM to research alternatives.

Due to the heterogeneity of the sector, regulating tariffs for small consumers of heat networks is very complex. Municipalities play an important role in the creation of a heat network. In some situations it is difficult to find sufficient heat production. Heat companies do experience some degree of competition in some phases of the construction and exploitation of the heat network, or that may arise in the future. Competition "on" the network, such as with electricity and gas networks, is almost never possible with heat distribution networks for small-scale consumers. The impact of possible "third party access" for small consumers is limited.

In this report we compare three ways of regulating on the basis of an assessment framework. We conclude that not one method of regulation scores the best on the assessment framework. Customization for regulation is required. The ways of regulation each have their advantages and disadvantages and hybrid forms may be desirable.

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+31 6 41 36 23 59 jp.heida@sirm.nl

Pam van der Meer (officemanager)
+31 6 21 32 55 55 pam.vandermeer@sirm.nl

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