Today, ACER published its report on methodologies for electricity network tariffs, in which it analyzes how network tariffs are set in the EU and how network costs are allocated among different network users (e.g., generators, consumers, battery energy storage facilities, or other operators) .

The report aims to make the setting of electricity network tariffs more transparent and comparable by sharing national practices and to propose solutions to the various tariff challenges faced by energy regulators.

What is the significance of the report in the context of the European Commission’s Action Plan for Affordable Energy?

Network charges finance the operation and modernization of the electricity transmission network. ACER has repeatedly stated that limiting network costs is essential for the EU’s competitiveness, as they are one of the main factors determining electricity costs.

Action 1 of the European Commission’s Action Plan for Affordable Energy (February 2025) is to make electricity prices more affordable. In this context, ACER’s report on tariff practices, which emphasizes fair and cost-reflective electricity network tariffs, is very timely, given that the European Commission will propose in the second quarter of 2025 a draft on network tariff methodologies designed to incentivize the use of flexibility and investments in electrification.

What are ACER’s key messages?

• Setting the right price signals is crucial. As the energy transition progresses, grid costs are expected to rise (potentially doubling by 2050) and account for an increasingly larger share of electricity bills (see ACER’s report on electricity infrastructure, December 2024). This requires regulators to regularly review the “appropriateness” of network tariff methodologies. Ensuring that network tariffs send the right price signals optimizes network use and keeps network costs low.
• Limiting the growth of grid costs is important for the EU’s competitiveness and affordable electricity. Sustainability measures should ensure that all grid users receive signals regarding system flexibility and efficiency, rather than unjustified cost shifting between them.
• Grid tariffs should reflect costs to encourage consumers to adapt their behavior. Together with market prices, they provide a combined price signal that influences consumers’ electricity generation and consumption patterns.
• Two-thirds of EU countries have recently made (or plan to make) significant changes to their network tariff methodologies. Many of these changes are in line with previous ACER recommendations (including increasing the use of capacity-based tariffs in accordance with the principle of cost causation, introducing time-of-use signals, and eliminating unjustified discounts on charges).
• The context of the national energy system matters. A one-size-fits-all solution is not easily found: this ACER report presents selected national practices from which regulatory authorities can draw inspiration to improve system efficiency and keep electricity network costs low, while adapting them to local needs.

ACER proposes 10 principles that national regulatory authorities (NRAs) should take into account when establishing or approving their next methodologies for electricity transmission or distribution tariffs. These aim to:

• increase the transparency and comparability of network tariff methodologies;
• ensure non-discrimination among network users;
• promote cost reflection and effective price signals; and
• encourage stakeholder participation prior to major revisions of the methodologies.

In summary

1. Context and Motivation

1. Growing Need for Investment
   • According to ACER, annual investments in European electricity networks (transmission and distribution) will double by 2050 and could reach up to €100 billion per year. This is driven by growing demand (electric vehicles, heat pumps, etc.) and the expansion of renewable energy sources (RES).
   • These investments are necessary but will lead to rising grid costs if no measures are taken.
2. Role of Network Tariffs
   • To avoid a significant increase in network tariffs (transmission and distribution), tariff methodologies should be urgently reviewed to ensure a more accurate reflection of system costs and to achieve efficient use of the networks.
   • ACER notes that unbalanced policies—such as exempting certain consumer groups from part of the network costs—can undermine efficiency incentives and lead to an even greater increase in overall network costs.
3. EU Regulatory Framework
   • Regulation (EU) 2019/943 and Directive (EU) 2019/944 require network tariffs to be cost-based, transparent, and non-discriminatory, to incentivize efficiency and flexibility, and not to create barriers to storage technologies, self-consumption, or consumer participation in balancing through flexible consumption and aggregation.
4. Objectives of the Report
   • To collect and assess the methodologies applied for setting transmission and distribution tariffs in all EU Member States (plus Iceland and Norway).
   • To identify national best practices that can serve as examples.
   • To formulate recommendations for improving tariff methodologies so that they are better suited to the challenges of the energy transition and provide more accurate cost signals.

2. Key Challenges and Current Developments

1. Expected increase in network service costs
   • Growing investments in networks will have a significant impact on transmission/distribution tariffs. Some European countries are already approving substantial increases (e.g., double-digit percentages) in network charges.
   • To mitigate this price increase, ACER emphasizes the need to encourage flexible behavior and efficient use of infrastructure—to avoid “overinvestment” and to use smarter solutions whenever possible.
2. Improving Signals Through Tariffs
   • Tariffs, which are predominantly volumetric (based on energy consumed—kWh), often do not reflect the real drivers of costs—peak load and location-based differences.
   • ACER observes a trend toward more countries introducing components based on power (kW) as well as time-of-use (hourly/seasonal) differentials to encourage shifting demand away from peak hours.
   • There is also a trend toward so-called “flexible connection agreements,” under which certain consumers receive a discount if they agree to limit or manage their demand on the grid during periods of congestion.
3. Politically Sensitive Exemptions and Discounts
   • In some countries, practices continue to be maintained or new ones introduced to exempt certain groups (e.g., large industrial) of consumers from grid fees or to provide subsidies through net metering, for example, for solar producers for self-consumption (prosumers). Bulgaria is among the examples of exemptions, such as for storage facilities when injecting energy into the grid and for exemptions from grid fees for energy withdrawal by prosumers. ACER warns that this typically leads to a shift of the burden onto other consumers and may impair system efficiency.
4. Local and dynamic signals
   • The report presents examples (e.g., from Denmark, Norway, Spain, and Slovenia) where the tariff structure includes a location-based or even dynamic element—such as different rates by region (due to congestion and losses) or hourly variation updated at more frequent intervals (almost in real time).
   • Although more complex to implement, these approaches provide more precise signals where the grid is actually congested.

3. Key Highlights and Best Practices

In the report, ACER identifies five main areas where regulators should consider reforms:

1. Tariff structure
   • From volume-based to capacity-based tariffs: Many countries are already introducing an additional component based on the capacity provided (kW), reflecting the fact that grid costs are primarily determined by peak load.
   • Time-of-use tariff elements: In Belgium, Germany, the Netherlands, Spain, and Slovenia, there are examples of day/night, seasonal, or multi-tiered structures. This encourages shifting demand to less congested time slots.
   • Dynamic tariffs: Although less common, some areas are testing hourly rates announced a day in advance, providing greater flexibility.
2. Location-based signals
   • To reduce congestion in certain areas, several countries (Denmark, Ireland, Norway) apply lower or higher charges for producers or consumers in different regions.
   • Norway, for example, uses a “marginal loss” method, where the tariff depends on the node where energy is injected or consumed.
3. Flexible connection agreements
   • Some system operators offer discounts if a consumer or producer accepts certain restrictions (e.g., during peak periods) . An example is the Netherlands, where there are contracts for “non-firm” connections—the consumer pays less but may be restricted during peak times.
4. Discounts, Exemptions, and Net Metering
   • The report examines the pros and cons of differentiated regimes for:
     • Large generators/industrial consumers (exempt from network charges).
     • Prosumers with photovoltaics (net metering/netting).
     • Electric vehicles and charging stations (special low tariffs).
     • Energy communities (more favorable conditions for shared grid infrastructure).
   • ACER notes that any unjustified exemption or discount violates the “polluter pays” principle and shifts part of the costs onto others.
5. Transparency and approval process
   • National regulators must conduct open public consultations and publish detailed methodologies and data to improve trust and acceptance among stakeholders.
   • It is essential to have a clear and predictable framework, especially when transitioning to new tariff structures (to avoid abrupt changes).

4. Recommendations from ACER

In conclusion, ACER formulated 10 key recommendations, including:

• Publication of clear data and use of common terminology – to facilitate the comparability of tariffs across countries.
• Differentiation of network tariff components and corresponding cost categories in accordance with the terminology proposed by ACER.
• Publishing information on the structure and value of network tariffs in each country, along with the relevant studies on which key network tariff decisions are based, and gradually making all this information available in a centralized EU data repository, which could be managed by ACER and the NRAs.
• Ensuring non-discriminatory treatment of different grid users:
  -Assessment of injection costs (fees for producers) – these should not be excluded by default; instead, consideration should be given to whether the producer should also bear a share of network costs, particularly when they increase the need for network reinforcement.
  –Avoiding unjustified exemptions and net metering – to prevent distortion of price signals and avoid burdening other consumers.
  –Accounting for both energy injected into and withdrawn from the grid for bidirectional consumers (e.g., storage facilities) and applying cost offsets where separate billing would result in unjustified double charging.

• Cost-reflective pricing and provision of effective price signals:
  – All grid users should contribute fairly to covering the costs of the voltage levels they use through appropriate cascading cost allocation (“the polluter pays”).
  – Two- or multi-component tariffs (energy + capacity), rather than just a consumption-based component – since peak load is often a key driver of new investments.
  – Local signals – where necessary, consider more local or dynamic elements to avoid overloads and optimize grid costs.
• Multi-year transition period – allow affected consumers time to adapt their behavior or business models when significant changes are introduced.
• Enhanced public communication – consultations with stakeholders to keep them informed and ensure a higher level of acceptance of tariff reforms.

5. Analysis and Summary

1. Greater focus on peak load
   • In the context of electrification (EVs, heat pumps), peak load is becoming an increasingly significant problem because investments in new grid assets are expensive. Therefore, more and more countries are introducing capacity-based or multi-component tariffs to encourage consumers (and producers/storage) to optimize their load profiles.
2. Balance between simplicity and effectiveness
   • Simple flat volumetric tariffs are easier for customers to understand, but they do not reflect the actual impact on the grid. On the other hand, grid tariffs that are highly differentiated by time and location (dynamic, local) are the most effective, but also the most complex to implement and adopt.
3. Negative effects of unjustified exemptions from network cost payments
   • ACER has repeatedly emphasized that “preferential” network tariffs for certain groups can hinder the achievement of the lowest overall system costs. Such exemptions may be politically motivated (support for industry, promotion of RES, assistance for vulnerable households, etc.), but they often result in cross-subsidization and increase bills for other consumers.
4. Need for an active information campaign
   • Given public attention to electricity prices, changes in tariff methodologies may face strong resistance. Predictable processes, public discussions, and an adequate transition period are recommended.
5. Overall system efficiency
   • The efficient use of existing infrastructure (flexible agreements, dynamic pricing) and optimal planning of future investments reduce overall costs. Precise targeting of network charges is key to avoiding overcapacity or poor returns.

In conclusion, ACER’s 2025 report reflects the growing need to refine transmission and distribution tariff models in Europe. With the upcoming significant increase in network investments (due to electrification and growing RES), network tariffs will increasingly influence final electricity prices and consumer behavior. In response to this, the report:

• Proposes a broader application of capacity (power) and time-of-use tariffs, which provide better incentives for reducing peak loads.
• Emphasizes the importance of fair (non-discriminatory) allocation of grid costs to avoid distorting signals and prevent excessive burden on certain customer groups.
• It recommends transparency, coordinated action by EU regulators (especially regarding charges affecting producers and large industry), and improved communication during tariff reforms.

In summary, the report is a key reference for current trends in network tariffing in Europe. Its guidelines aim to help NRAs implement adequate, forward-looking network tariff structures to ensure flexibility, efficient network use, and affordable costs for end-users.

The full report is available at this link.