Translated with DeepL.com
On 13 February 2024, the Cabinet of Ministers approved amendments to the Electricity Market Law, which aim to reduce the cost burden for establishing new high-capacity distribution system connections and to promote business development and innovation. The draft law will be submitted to the Saeima for urgent consideration.
The amendments provide for the introduction by law of the principle of cost sharing for connection construction works, where half of the costs are borne by the user and the other half by the system operator, AS "Sadales tīkls" for system connections of large capacity electricity users, including in the medium voltage (6-20 kilovolt (kV) ) network and for 0.4 kV network connections with a capacity (input protection apparatus size) above 100 amperes (A).
Until now, this principle of apportioning the cost of works has only been applied to small power connections (up to 100 A). However, for higher capacity connections, the user paid 100% of the connection installation costs upfront, and during the lifetime of the connection, the user was subject to a load efficiency solution (reduced service charge), allowing the user to recover the investment made in the connection over a five-year period. In case the user is also a self-generator of electricity (e.g. by installing solar panels), this arrangement made it more difficult for him to reach the required level of consumption at which the service charge was reduced.
Minister of the Economy Viktors Valainis says: "By reducing the cost burden for entrepreneurs to establish a new connection and start their business, we are taking a significant step towards improving the availability of electricity system connections, as well as the development of connections for large-scale production companies and improving the investment environment in general."
The proposed cost sharing solution for the construction works will contribute to shifting away from the use of other, less efficient and more environmentally friendly energy sources. In addition, it will lead to an increase in the consumption capacity connected by the electricity distribution system operator and the electricity distributed, resulting in a more efficient use of the existing electricity supply system and the system capacities already installed.
AS "Sadales tīkls" emphasises that this approach will ensure the principle of equity and will be a step towards promoting the electrification of the economy. "A similar approach is already working successfully in Lithuania. This innovation will not only ensure the principle of equality for all customers, but will also create a more favourable investment environment and promote electricity consumption, which in Latvia is currently lagging behind the level of other European countries," emphasises Sandis Jansons, Chairman of the Board of "Sadales tīkls".
The revised approach foresees a gradual phasing-out of the efficient use of authorised loads, which is now an essentially obsolete mechanism and a very administratively complex one. This option is not expected to apply to new connections after 1 May 2024.
The user is required to start using the installed connection immediately after the connection is installed and to use the connection with the installed capacity agreed by the parties in the connection contract for at least five years without reducing the allowed load (connection capacity) of the connection. These conditions require the end-user to choose more carefully the capacity of the connection to be installed. Similar restrictions exist in neighbouring countries, e.g. in Lithuania the permitted load of the connection must be used for 10 years.