Our preliminary assessment is that Arva AS’ application for exemption from the delivery obligation at Dørvær in Træna municipality is granted. The exemption is granted on the basis of the Energy Act1 § 3-3 second paragraph and regulations on network regulation and the energy market § 3-1 first paragraph. General information Network owners who have an area concession are responsible for supplying the geographical area to which the concession applies with electrical energy. According to the Energy Act, they have a delivery obligation to all customers in the area. The preparations for the Energy Act2 elaborate on what the obligation to supply includes: “The obligation to supply entails an obligation for the distribution company to allow subscribers to connect to the distribution network and to supply energy to consumers within The right to exempt from the obligation to supply is expressed in regulations on network regulation and the energy market § 3-1 first subsection: “The regulatory authority for energy can grant a dispensation from these obligations when special reasons so require.” It follows from the preparatory work that “the exemption provision can only be applied when the connection cannot reasonably be established under normal conditions. This may be applicable in connection with leisure facilities, seating facilities or tourist cabins.” “Special reasons” and “reasonableness” are terms that in most cases will be linked to costs of maintaining the delivery obligation, and what effects a delivery exemption will have on private and public interests. In the exercise of discretion, emphasis is placed on the fact that the cost of maintaining the delivery obligation must be substantial before an exemption from the delivery obligation becomes relevant. The question of exemption from the obligation to deliver is often raised in connection with reinvestments in the network in an outlying area. The need for investment can be triggered as a result of a serious fault situation, for example in the event of a cable break, or when the network has become in such poor condition due to age that it has to be completely rebuilt. RME’s preliminary assessment In line with the requirements for advance notification under Section 16 of the Public Administration Act, RME notifies with this decision that Arva’s application for exemption from the delivery obligation at Dørvær in Træna municipality has been granted. Is there a basis for granting the exemption application? In assessing whether there is a basis for granting an exemption from the delivery obligation, RME emphasizes the following factors: • Type of connection • Number of customers and the customers’ consumption • How much costs are passed on to the network company’s other customers In the application, Arva has indicated that they have offered a one-off compensation to customers. The regulations do not require the network companies to offer such compensation. RME will therefore not make an assessment of the size of the compensation. Type of connection The preparatory work for the provision on exemption from the delivery obligation states that the exception provision can only be applied when the connection cannot reasonably be established under normal conditions. An exemption from the delivery obligation has previously been granted for grid systems that supply holiday homes and seating facilities. The preparatory work for the Energy Act opens up the possibility of granting exemptions to leisure facilities, seat operation and tourist cabins. In this case, the one holiday home is used for rental by the company that owns the holiday home. However, it is clear that industry is not the company’s main purpose. It is obvious to compare the cabin with a tourist cabin, for which an exemption can be granted. RME can therefore not see that the rental business of the cabin closes in order for an exemption from the delivery obligation to be granted. The other properties in this case are leisure properties. Exemption from the delivery obligation can therefore be considered. Træna municipality mentions that the area is one of the focus areas for developing a more versatile business life in the municipality. As there are no concrete plans for industry, RME cannot see that this has any significance for the assessment of Arva’s application. Number of customers and the customers’ consumption In this case, an exemption from the delivery obligation has been sought for four cabins. In the last two years, the cabins have had an average annual consumption of 861 kWh, 6 kWh, 797 kWh and 718 kWh. How large are the costs passed on to the network company’s other customers? It appears from the network company’s application for exemption from the delivery obligation that the costs of renovating the cable are estimated at NOK 7,000,000. Arva has estimated annual capital and operating expenses to be NOK 475,000 per year. Based on Arva’s network rent from 2022, the total network rent for the four customers can be estimated to be approximately NOK 10,000 per year.4 If one takes the total estimated network rent as a basis, other customers in Arva’s concession area must cover an annual cost of approximately NOK 465,000 per year. We see that Arva has used a depreciation period of 30 years in the calculation of annual capital and operating expenses. This is significantly lower than the usual depreciation period for high-voltage submarine cables in the distribution network. In this case, this is not decisive. We nevertheless ask Arva to explain why they have chosen a depreciation period of 30 years in the comments to the notice. The reinvestment costs in the previous cases where an exemption has been granted have varied from NOK 370,000 to NOK 4.3 million. The costs in this case are thus higher than cases where we have granted exemptions in the past. Conclusion Our preliminary assessment is that there are grounds for granting Arva’s application for exemption from the delivery obligation. This is because it is not reasonable for Arva’s other online customers to cover such large costs in order to maintain the supply to the four customers at Dørvær. This is also seen in the light of the consumption of the cabins and the type of connection. If Arva is exempted from the delivery obligation, the cabin customers can still obtain a network connection by paying a construction contribution. If new or existing customers are willing to cover the network investment costs necessary to supply the island through a construction contribution, Arva is obliged to provide connection even if an exemption from the delivery obligation has been granted. Source: Extract from letter sent from RME 24/11/2022.
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