ENTSOG First Report on Implementation Monitoring and Baseline for Effect Monitoring of the Tariff Network Code

4.3.1 TAR.1: LEVEL AND VARIABILITY OF THE UNDER-/OVER-RECOVERY

Goal of TAR.1 (Under-/Over-recovery)

The objective of this indicator is to provide an assessment of the evolution of the regulatory account balance compared to the allowed revenue during the years following the implementation of the TARNC. This topic on regulatory account is part of Chapter IV ‘Reconciliation of revenue’ of the TAR NC, which applies as from 31 May 2019, even though transparency requirements on revenue reconciliation is part of Chapter VIII ‘Publication requirements’ of the TARNC, which applies as from 1 October 2017 with certain compliance in December 2017. The main assumption to check is whether the TAR NC influences the level and dispersion  10) of the regulatory account balance compared to the average allowed revenue for TSOs over time, i. e. during the years when the TARNC is implemented and later. The pattern followed by the regulatory account balance may be a result of changes introduced by the TAR NC. If TAR.1 shows increased/reduced relative imbalance over time, it may also support/discard the assumption that the TARNC implementation may develop tariff instability. The implementation of the TARNC may not be the only influence on the evolution of TAR.1.

Assumptions for TAR.1 (Under-/Over-recovery)

TAR.1 only applies in non-price cap regimes

TAR.1 focuses on the evolution of the under-/over-recovery for TSOs operating under a non-price cap regime. TSOs under a price cap regime do not require a regulatory account to register the difference between the allowed revenue and the actual revenue, since no allowed revenue is defined for them. Only a cap on tariff is set for TSOs with a price cap regime. Therefore, TAR.1 is not applicable for TSOs under a price cap regime. Most TSOs are operated under a non-price cap regime, except for the Slovak and Swedish TSOs which are operated under a price cap regime, and TSOs in the Czech Republic and Italy, which are operated under a combination of price cap and non-price cap regimes  11) .

TAR.1 only considers the end-of-the-regulatory-year regulatory account balance

Only the regulatory year is relevant, i. e. the period equal to one-year for which the allowed revenue is defined within a regulatory period. The regulatory year may be different from the calendar year. It is only based on data for the under-/over-recovery between the allowed and the actual revenues at the end of a given regulatory year, not on the variations in the regulatory account balance during a given regulatory year.

 10) Statistical dispersion is the extent to which a statistical distribution is stretched or squeezed, which means the extent to which the different values of the data are close or far from each other. In the present case, dispersion of the regulatory account balance means whether the values of the balance are close to the average of balances during the period. E.g., if the average balance is 0 over the period covering Year 1 to Year 3, the dispersion will be higher in case the balance values are −10, 0 and +10 than if the values are −1, 0, +1. Intuitively, this is because the range of values is higher in the first case (20 units between −10 and +10) than in the second case (2 units between −1 and +1).  11) For further developments, cf. ENTSOG (2017) .

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