Network charges to enhance the energy transition and contribute to affordability

On 17 July 2026, the European Commission published a proposal for amending Regulation (EU) 2019/943 on the internal market for electricity (hereafter “the proposal”). This blogpost focuses on the regulatory provisions and particularly the review of the electricity network tariffs, which are mainly anchored in its article 18 and intend to improve the design of network charges to ensure cost-efficiency of transmission and distribution networks to lower system costs, including through better use of the existing infrastructure. This Blog intends to complement the July Blog on the proposal that provided an overview of article 18a, which proposes measures to accelerate the digitalisation of electricity grids.

NRAs’ competence to fix and approve tariffs

The proposal is drafted with the intention to make efficient use of existing grid infrastructure and to design effective network charges to contain system costs. According to the proposal, network charges should incentivise efficient grid operation and the use of flexibility and, at the same time, maintain appropriate investment signals and a level playing field for market participants.

In order to better achieve this goal, the proposal would empower the European Commission to adopt delegated act(s) under article 61(5a) that would set out guidelines to define a “common structure and harmonised methodology on tariffs”. This article must be read against the independence principles and tasks and duties of national regulatory authorities (NRAs). Article 59 of Directive (EU) 2019/944 sets out the duties and powers of NRAs in the electricity sector and clearly attributes an exclusive competence to NRAs for fixing methodologies and tariffs.

Therefore, it is key that NRAs retain full competence and flexibility to design methodologies suited to national circumstances, networks and users. The ACER best practice report on transmission and distribution tariff methodologies provides a valuable contribution towards advancing this objective as future-proof network tariffs require the right balance between European principles and national flexibility.

Targeted tariff elements and special regimes

The proposal introduces stronger incentives for system operators to improve cost efficiency, enable timely grid access, encourage flexible grid use by consumers and producers, and enhance transparency. To this end, network charges should provide locational investment signals (art. 18(2)(f)) and contain time-of-use elements to reflect the use of the network (art. 18(2)(h)) that could be of a static or dynamic nature to incentivise system users to make more efficient use of the network. According to the proposal, costs created by system users who either inject or withdraw electricity to and from the grid should also be considered in the overall network charges methodology.

These elements should reflect network needs; a one-size-fits-all approach risks distorted signals and could contribute to inefficient cost allocation. Furthermore, fair tariffs require transparency when exceptions apply.

Article 18(3) of the proposal introduces the possibility to apply special tariff regimes for specific categories of system users, such as energy-intensive industries or data centres and energy communities, provided that NRAs can demonstrate that these users have a lower or higher impact on the overall costs of electricity networks and the principle of cost-reflectivity is applied. It combines this option with safeguards to avoid adverse effects on affordability for households and SMEs. Special regimes must clearly define who bears the costs, avoid cross-subsidisation and preserve neutrality and non-discrimination. Any impacts on users — especially on vulnerable consumers — should be assessed thoroughly.

Capacity element in the network charges

According to article 18(2)(g) of the proposal tariff methodologies should “provide appropriate incentives to system users for the reduction of peak load consumption, including through adding a capacity element to the tariff structure”. A capacity element can contribute to a more predictable and cost-reflective allocation of network costs, particularly where network costs are strongly driven by peak demand. It can also provide incentives to reduce system peaks and thereby help defer or avoid otherwise necessary network reinforcement. However, where a significant share of network charges is recovered through a fixed or non-time-responsive capacity component, the marginal incentive to shift consumption or provide demand-side flexibility may be reduced, as part of the network charge remains unaffected by changes in consumption patterns. This may weaken the effectiveness of demand-response incentives, particularly for users with significant flexibility potential, such as electric vehicles, heat pumps, batteries and other controllable loads.

The Commission’s recent study on European electricity TSO tariff structures, incentives for flexibility and efficient investments reinforces the importance of reducing peak demand and improving the efficient use of existing network capacity, while also recognising the need for tariff design to reflect national circumstances. In this context, capacity elements should be considered as one possible instrument for achieving these objectives rather than as a uniform regulatory requirement. The Commission’s analysis also highlights the complementary role of time-of-use and, where appropriate, dynamic tariff elements in encouraging consumption and generation at times when network capacity is available or renewable electricity is abundant. More granular time and locational signals can further improve the cost-reflectivity of tariffs and support the efficient integration of distributed generation, storage and demand response.

Use of available data

According to article 18(5) of the proposal, the collection and publication of a comprehensive list of data points on network costs and tariffs is made mandatory to increase the transparency in tariff setting. The existing regulatory framework, together with ACER’s best-practice reports and other regulatory publications, already provides a strong foundation for comparison and informed decision-making. Any further data requirements as foreseen in article 18 should be carefully considered, based on clear and harmonised definitions.

Mandatory DSO benchmarking

The proposal foresees a requirement for NRAs to conduct cost-efficiency benchmarking of their national electricity Distribution System Operators (DSOs) every four years, provided that there is more than one DSO operating at national level (art. 18(7)). Strengthening benchmarking at DSO level is intended to support more efficient network operation and investment decisions. ACER would assist NRAs when carrying out an efficiency comparison among DSOs.

Benchmarking exercises are valuable tools where they provide meaningful and relevant information for the purposes of revenue-setting and tariff regulation. A mandatory DSO benchmarking exercise at a fixed four-year interval should be coherent with the ones already in place in some Member States and be aligned when it comes to timing and scope with national regulatory periods and frameworks to ensure their effectiveness and relevance. In order to ensure flexibility and efficiency NRAs should retain the possibility to grant derogations where the structure, scale, or heterogeneity of the DSO sector prevents the establishment of meaningful and comparable benchmarks.

Conclusion

The proposal will enter the ordinary legislative procedure where the European Parliament and the Council of the European Union will define their positions. Let us recall that sound decisions require sound evidence. Given the great impact of the proposed changes, a thorough impact assessment and public consultation would have been essential to ensure proportionality, subsidiarity and necessity. Let us also recall that it is important that new reporting obligations do not create disproportionate administrative burdens that would weaken the objectives of the European Commission’s 2025 Simpler and Faster Europe Communication, which introduces measures to modernise how EU laws are designed to be fit for purpose and particularly addresses reporting obligations.

Whatever results from the legislative process, as stated in the proposal’s recital (13), “regulatory authorities should (…) consider whether a gradual approach is necessary so as to give system users time to adjust their behaviour and consumption patterns.” This would help to mitigate short-term impacts as many network charge regimes are currently under review.