Eurelectric’s Position on Distribution Network Tariffs in Response to the European Commission’s Recommendation on Sustainable Network Tariffs
In March 2026, Eurelectric published a position paper presenting the electricity industry’s response to the European Commission’s Recommendation on sustainable network charges (future-proof network charges). The document takes into account the challenging institutional context at the time the Commission’s recommendations were drafted. The Affordable Energy Action Plan prioritizes affordability as a top priority. At the same time, investment needs in distribution networks by 2040 are estimated at around 730 billion euros, and in transmission networks at 477 billion euros. Against this backdrop, the question of how to design network tariffs takes on exceptional importance, as they must simultaneously ensure a return on large-scale investments, send effective price signals, and be understandable to end consumers.
Eurelectric structures its argumentation around the seven principles derived from Article 18 of Regulation (EU) 2024/1747: transparency, cost-reflectiveness, non-discrimination, efficiency, technology neutrality, regulatory predictability, and full coverage of network costs with an appropriate rate of return. The document consistently argues that the tariff structure must follow the cost structure. Since over 90% of distribution network operators’ costs are fixed (i.e., independent of consumption volume), Eurelectric insists that tariffs shift from a purely volumetric (based on the amount of energy consumed/passing through the meter) design (EUR/kWh) to a combined model incorporating capacity (EUR/kW), volumetric/quantitative (EUR/kWh), and fixed (a lump-sum amount to cover a specific cost, such as facility construction or connection, EUR/year) components. This is also in line with ACER’s recommendations from last year, as well as with the current ACER’s report regarding the evolution of network tariff methodologies to promote the energy transition and the entry of numerous new market participants.
This principle is of direct relevance to Bulgaria, where network tariffs are still predominantly volumetric. The transition to capacity-based tariffs would require not only changes to the EWRC’s methodologies but also a significant communication campaign—as the document explicitly emphasizes, structural changes to tariffs must be announced in advance and preceded by information campaigns.
Time-of-use signals: static network tariffs, time-differentiated according to tariff/time zones within the 24-hour day
The document devotes significant attention to them. Eurelectric supports static time-of-use (ToU) tariffs with fixed time periods for peak and off-peak load and expresses reservations regarding dynamic network tariffs. The arguments are pragmatic: dynamic tariffs are too complex for grid users to implement, they depend on automated load management, and users who cannot respond (active demand response) risk paying more, which raises issues of fairness. Static ToU tariffs, on the other hand, are described as a tool with the potential to reduce grid losses, defer investments in grid reinforcement, encourage implicit consumption management, and facilitate electrification. Eurelectric allows for the supplementation of static ToU tariffs with critical peak pricing as an isolated measure for extreme situations. The guiding principle is that grid tariffs must remain predictable and stable, not changing within a single year, and if a change is necessary, it must be announced sufficiently in advance.
This distinction can be summarized by the argument that the energy component of the final price (i.e., the supply price) may be dynamic, but the network component must be static to ensure clarity for consumers and predictability for investors.
Location signals and connection fees
The document makes an important distinction between location signals in existing network tariffs and location signals in connection fees. Eurelectric expresses caution regarding overly detailed geographic differentiations in tariffs, which would introduce complexity, uncertainty for investors, and a sense of unfairness and discrimination regarding network access—especially at the level of distribution system operators. Instead, the organization proposes a pragmatic approach: uniform prices for peak and off-peak periods, but with different time intervals/tariff zones by region, determined by the local operator and local network parameters. This introduces an implicit location-based element without creating additional tariff complexity.
Regarding connection fees, Eurelectric discusses in detail the dichotomy between shallow and deep tariffs. With shallow tariffs, the consumer pays only for the infrastructure for the direct connection, while with deep tariffs, they also pay for the reinforcement of the network upstream caused by their connection. The document acknowledges that deep tariffs provide a stronger locational signal, but also highlights the risks: they can burden the new consumer with costs for managing congestion and existing network bottlenecks and hinder electrification, particularly in the industrial sector. The example of Spain is illustrative—shallow tariffs at the transmission level and deep tariffs at the distribution level lead to a distortion, whereby new large consumers prefer to connect to the transmission grid, even when connecting to the distribution grid is more efficient from both an economic and a system perspective.
The appendix, featuring examples from France and Denmark, further illustrates different approaches: proportional allocation of deep tariffs (France) and standardized tariffs with location-based signals for generation capacity (Denmark). The Danish model is particularly interesting with its proposal for differentiated tariffs based on the type of zone—dominantly generation, mixed, or predominantly consumption.
Tariffs for feeding energy into the grid and flexible connection agreements
Tariffs for producers feeding electricity into the grid are presented as a particularly contentious tool. Eurelectric acknowledges that power generators are grid users but highlights several risks: loss of competitiveness for local generation in systems with advanced interconnection (deeply integrated market); increased overall dispatching costs without a guaranteed reduction in redispatching costs; undermining investment predictability. The organization’s recommendation is that locational signals for generators and storage be applied only at the time of connection, rather than as ongoing tariffs, thereby ensuring ex ante certainty for investors.
Flexible Connection Agreements (FCAs) are presented as one of the four main tools for managing flexibility in distribution networks, alongside time-of-use (ToU) tariffs, rule-based approaches, and market-based flexibility procurement. FCAs allow new customers to connect more quickly or at lower fees in areas with limited capacity by accepting temporary restrictions on grid access. The document emphasizes that these agreements in themselves constitute a strong locational signal—the connecting party is aware that the area has limited capacity as early as the investment stage.
Special Tariff Regimes and Storage
Eurelectric maintains a firm position that all consumers connected to the grid—including active consumers (prosumers), energy communities, operators of electric vehicle charging points and storage facilities—must pay network tariffs that reflect the costs they generate. Traditional volumetric tariffs do not adequately capture the impact of the bidirectional energy flows characteristic of these new categories of consumers, making capacity tariffs particularly relevant.
Regarding storage, the document notes that it occupies a specific place in the regulatory framework: it acts simultaneously as a consumer and a generator, provides flexibility, and, when located in congested areas, reduces system costs and the need for new investments. Eurelectric calls for the avoidance of double charging for storage (in accordance with Article 15 of Directive 2019/944) and for transparent remuneration for flexibility providers, without this distorting the prerogative for cost-reflective network tariffs.
Public funding and regulatory incentives
Eurelectric’s position on public funding is nuanced. The organization does not support the systematic injection of state budget funds into grid tariffs, as this creates structural dependencies on the national/EU budget and unsustainable political representations. Instead, it supports time-limited funds aimed at smoothing out short-term peaks in capital expenditures—for example, during accelerated electrification or energy crises. This position is rooted in the understanding that institutionalizing subsidies for grid costs threatens the sustainability of the tariff system.
Eurelectric calls for clear regulatory incentives for the uptake of grants, including recognition of the additional operating costs generated by grant-funded projects and the depreciation of funded assets in tariff methodologies. Assets financed from external sources must remain under the ownership and responsibility of the distribution system operator. The document also highlights the need to simplify access to EU programs (CEF Energy, Innovation Fund) and reduce the administrative burden, especially for smaller operators.
Regulatory incentives are also linked to the balance between operating expenses (OPEX) and capital expenditures (CAPEX). Eurelectric emphasizes that regulation must treat OPEX and CAPEX decisions equally, allocating efficiency gains between operators and consumers through models based on cost-benefit analysis. Excessive shifting of efficiency benefits toward consumers undermines operators’ incentives to make necessary investments. The document pays special attention to new technologies—SCADA, DERMS, DLR, AI, digital twins—which improve efficiency but require faster amortization and higher maintenance costs.
Cost Cascading
The cost cascading principle, whereby grid consumers contribute to costs not only at the voltage level to which they are connected but also at the higher levels used to deliver electricity to their premises, is being reevaluated. With the growth of distributed generation, energy is increasingly consumed locally at low and medium voltage, and in some cases causes reverse flows. Eurelectric supports a more sophisticated approach in which locally generated and self-consumed energy can be incentivized through special tariffs, under which the consumer does not pay for higher voltage levels if energy flows do not reach them.
At the same time, the organization explicitly opposes net billing schemes outside the 15-minute interval, in which consumers effectively use the grid as a battery without contributing adequately to grid costs. This position is directly relevant to Bulgaria, where the debate on active consumers and net metering remains ongoing. As a technical prerequisite, the document calls for promoting grid monitoring at all voltage levels through smart devices, including smart meters.
The Eurelectric document presents a comprehensive and well-argued framework for understanding network tariffs in the context of the energy transition and sets guidelines for upcoming discussions in member states on network tariff methodologies — from the shift to capacity-based elements in tariffs to the introduction of static time-of-use (ToU) tariffs and a rethinking of connection fees.
Second, the document builds a case for the need for regulatory incentives for digitalization and flexibility, equal treatment of OPEX and CAPEX, simplified access to EU funds for smaller operators, and the avoidance of double charging for storage. The practical examples provide ready-made comparative arguments that can be used in developing national positions.
There are also open questions. The transition from volume-based to capacity-based tariffs poses risks for consumers with low consumption but higher connected capacity, without the social dimensions of this change having been assessed. The position regarding tariffs for feeding energy into the grid is cautious to the point of ambiguity—Eurelectric simultaneously acknowledges their role and recommends limiting them to the point of connection. However, these nuances require further in-depth analysis in the context of specific national circumstances.
