Norwegian network companies have a duty to connect anyone that requests it and are responsible for building any infrastructure necessary to connect the would-be customer to the existing grid. New customers cover the costs of any grid infrastructure that benefits them exclusively. However, if the existing grid needs to be upgraded to enable the connection, the associated costs are socialised.
In a few cases, where the cost of connecting the customer to the grid is high compared to their expected power consumption, the Norwegian Regulatory Authority for Energy (RME) may exempt the network company from its obligations. However, such exemptions are rarely given and are limited, in practice, to the connection of holiday homes, often with low power consumption. Would-be customers that are not provided a network connection must find alternative solutions themselves.
It is expected that the cost of maintaining supply to areas with low consumption will increase in the future. However, access to alternative solutions is getting better and better. In light of this, we have, on behalf of RME, looked at possible adjustments to the exemptions regulation.
Compensation for exemptions
Today, network companies are not required to compensate customers for exemptions. We recommend introducing a compensation regime paid for by the network companies. Introducing compensation would give the network companies an incentive to account for the costs to the would-be customer when evaluating whether to apply for an exemption.
Maintaining stringent exemption criteria
Stringent criteria for allowing exemptions should remain. Being disconnected from the grid can have severe consequences for customers in the affected area and there is considerable uncertainty as to the developmental and socio-economic consequences for both new and existing customers. Network companies have strong economic incentives to apply for exemptions, which are currently held in check by the presence of stringent exemption criteria.
Exempting a connection obligation but a not a supply obligation
We have also looked at other possible adjustments to network obligations. One possibility would be to exempt the company from establishing a connection to the transmission network, while still requiring it to ensure that the customer has access to a satisfactory electricity supply.
In this case, the companies would themselves want to compare the costs of maintaining a grid connection with the cost of alternative supplies. Network companies are likely to have the competence needed to make this assessment. They may also benefit from economies of scale arising from an ability to connect several customers using the same solution.
A supply-linked obligation could also support the development of a market for alternative solutions. As long as the alternative solution is a satisfactory substitute for network connection, customers will not be made worse off by the lack of a network connection.
The proposals contained in the report are now out for consultation. The response deadline is June 15th, 2022.
