Kerstin Andreae, Chairwoman of the Executive Board of Deutschen Vereins des Gas- und Wasserfaches (BDEW), issued a statement on 24 September in response to several media reports about allegedly high returns:
„It is incomprehensible that terms are often confused in the discussion about the return on capital for network investments. The regulatory interest rate differs fundamentally from the commercial return. While the HGB return is company-specific, based on different criteria and can also be distorted by one-off accounting effects, the regulatory rate of return is a figure set by the authorities. It is not freely generated on the market, but determines the extent to which interest may be paid on the equity capital employed.
For investors in energy networks, the value of the network operator according to regulatory standards is therefore particularly important. This is essentially derived from the imputed fixed assets and the regulatory rate of return on equity – and is thus the decisive basis for investment decisions. We must not cut corners now. After all, we cannot afford a Deutsche Bahn effect because too little has been invested in infrastructure.
The high quality of supply in Germany ensures the attractiveness of the business location and our quality of life. The basis for this is a modern network infrastructure that will have to deliver far more in the future than it has done to date: more lines, more connections, more digitalisation, more flexibility, more speed and more security. This will require investments of more than 200 billion Euro by 2035. This means that the annual investments made by network operators will have to triple in some cases. In order to mobilise the necessary capital, international investors who are willing to invest in German networks are also needed. At the same time, network operators are regulated by the Federal Network Agency and must therefore comply with detailed requirements regarding the use of funds and the returns they are allowed to generate. This entire field of so-called incentive regulation is complex and is currently being revised by the Federal Network Agency.
Fair, internationally competitive incentive regulation is needed to mobilise capital. This also includes raising the return on equity (ROE), as we are currently at the bottom of the table in Europe in terms of regulatory ROE. This has also been confirmed by the European Court of Auditors. While the international average is 6.65 %, network operators in Germany are not allowed to charge more than 4.28 %. As a result, locations other than Germany are more attractive to investors. The Federal Network Agency urgently needs to make adjustments here, otherwise the urgently needed network expansion will be slowed down.“
