KANU 2.0

• Calculation tool for determining the transformation element
• FAQs on the webinar (link to event)
• Determination
• Opening, consultations and responses

The proceedings were prompted by the decarbonisation target set in the Federal Climate Change Act to be achieved by 2045 (and in some cases earlier under federal state requirements) in the gas sector as well. Parts of the natural gas network at transmission system level and in a few cases at distribution system level will be used in the future to transport hydrogen. A large part of the natural gas network will not be used beyond 2045, however, and will then likely be decommissioned.

In order to prevent substantial parts of the investments in gas networks not being able to be refinanced as a result, a regulatory framework is to be put in place to support the transformation of the networks since the existing framework was designed for the continued use of the networks and is therefore not sufficient. At the same time, measures are needed to ensure that at the end of the transformation process network users are not burdened with increases in tariffs that are excessive and could have been avoided.

The Bundesnetzagentur's KANU determination issued in 2022 already introduced straight-line depreciation up to 2045 for new assets. The KANU 2.0 determination now aims to add more flexibility to the useful lives and depreciation methods for existing and new assets in the form of national requirements. This will help to adjust depreciation in line with future decreases in sales and thus adequately reflect the economic utilisation of the gas infrastructure. This should, in turn, enable network operators to by and large recoup their investments and secure their economic performance particularly for the transformation process.

However, faster depreciation will generally mean a rise in tariffs, although the specific effects on tariffs will largely depend on the regional implementation of the heating transition. The models put forward by the Bundesnetzagentur are expected to lead to a moderate rise in tariffs.

The legal basis is the latest revision of the Energy Industry Act (EnWG) ensuring the independence of the regulatory authorities. However, the proceedings only apply to the transitional period of the ongoing fourth gas regulatory period (2023 to 2027). All the relevant provisions applicable as from 2028 will be based on the then complete implementation of the judgment of the Court of Justice of the European Union (CJEU) of 2 September 2021 (C-718/18) and the Bundesnetzagentur's resulting powers to issue determinations. The definition of the provisions will be able to take into account findings from the implementation of the KANU 2.0 determination and the progress in plans for the heating transition.

Calculation tool for determining the transformation element

The Bundesnetzagentur is providing a calculation tool for determining the transformation element as part of the KANU 2.0 determination process. The tool can be used to determine an individual transformation element using the revenue caps for the fourth regulatory period and the new depreciable amounts when applying the KANU 2.0 determination.

FAQs on the webinar (link to event)

Determination

Since the determination is addressed to all operators of gas distribution systems and gas transmission systems in Germany, the Grand Ruling Chamber for Energy gave public notification of the determination in place of service pursuant to section 73(1) sentence 1 EnWG in accordance with section 73(1a) sentence 1 EnWG. Public notification is brought about by publication in the Bundesnetzagentur's Official Gazette of the operative part of the determination, of the notification of appellate remedies and of a brief statement that the decision in full has been published on the Bundesnetzagentur's website (section 73(1a) sentence 2 EnWG). In accordance with section 73(1a) sentence 3 EnWG the determination is considered to have been served on the day on which two weeks have elapsed since the date of public notification in the Bundesnetzagentur's Official Gazette.

Opening, consultations and responses

Opening of the proceedings

The Grand Ruling Chamber opened the proceedings on 6 March 2024 (GBK-24-02-2#1).

Consultation on the draft determination

The Bundesnetzagentur, having evaluated the responses to the key elements paper, published a draft determination for consultation.

The aim of the KANU 2.0 determination is to add a large degree of flexibility to the depreciation arrangements for gas network operators nationwide for the assets concerned. The determination allows network operators considerably shorter useful lives than before (in exceptions up to 2035 and as a rule up to 2045 or 2040, depending on, for example, national or federal state climate protection rules). In addition, declining balance depreciation at a rate of up to 12% is allowed. It includes exemptions, however, for certain asset groups such as administrative buildings.

It is envisaged that the new depreciation arrangements can be applied in the revenue caps and network tariffs for as early as 2025 to 2027. The accelerated depreciation arrangements can then be implemented through the current capex markup procedure or a new transformation element, depending on the year of acquisition of the relevant asset. In order to minimise bureaucracy, there will be a notification procedure instead of an application procedure for the transformation element.

However, network operators will not be required to apply the rules at a specific time. Network operators could, for example, opt to wait for the adoption of local heat planning before changing the depreciation arrangements.

As from 2028 the provisions are to be integrated into the Grand Ruling Chamber for Energy's planned determinations with rules to succeed the Gas Network Tariffs Ordinance (GasNEV) and the Incentive Regulation Ordinance (ARegV).

Comments on the draft determination had to be submitted by 7 August 2024 (date of receipt).

The Bundesnetzagentur published the comments on its website after removing any trade and business secrets or personal data.

Further information on transparency can be found here.

Responses to the draft determination

Information about the procedural provisions

The procedural provisions in the KANU 2.0 determination apply to network operators that fall under the responsibility of the Bundesnetzagentur in accordance with section 54(1) and (2) EnWG (see point 13 of the operative part of the determination). These procedural provisions do not, however, affect the administrative proceedings of the federal state regulatory authorities (section 54(3) sentence 7 EnWG). The Bundesnetzagentur will set out the procedural rules for the federal states that have delegated their responsibility to the Bundesnetzagentur (Berlin, Brandenburg, Bremen and Schleswig-Holstein) in a separate determination.

Details of the consultation on the draft determination can be found here (German web page).

Consultation on the key elements paper

The Bundesnetzagentur published a key elements paper on the imputed useful lives and depreciation arrangements. The key elements paper paved the way for the KANU 2.0 determination proceedings conducted by the Grand Ruling Chamber for Energy.

Comments on the key elements paper had to be submitted by 28 March 2024 (date of receipt).

The Bundesnetzagentur published the comments on its website after removing any trade and business secrets or personal data.

Further information on transparency can be found here.

Responses to the key elements paper