Statement by FNB Gas on the determination of imputed useful lives of natural gas pipeline structures (“KANU”)

FNB Gas expressly welcomes the fact that the Federal Network Agency intends to create the possibility of reducing the useful lives of gas network investments or making them more flexible by means of the “KANU” definition put out for consultation.

The FNB Gas comments on behalf of its member companies as follows:

Current framework conditions
The German government’s climate policy objectives of limiting the use of fossil fuels, including natural gas, by 2045 are not currently reflected in the regulatory requirements for refinancing affected gas infrastructures. The normal useful lives of up to 65 years specified in Annex 1 of the GasNEV no longer fit the current political framework. In addition, substantial new investments are to be made by transmission system operators in order to develop LNG sources and to transport these new feed-in volumes in line with demand, in order to reduce dependence on Russian sources and increase security of supply.

Flexibilization of imputed useful lives the right consequence
FNBGas expressly welcomes the fact that the Federal Network Agency intends to create the possibility of reducing or flexibilizing the useful lives of gas network investments with the “KANU” specification put out for consultation. The regulations put out for consultation for investments capitalized from 2023 onwards, as well as for the two new asset groups “LNG facilities” and “LNG connection facilities”, take into account the climate policy and security of supply objectives and thus give network operators the necessary flexibility to respond appropriately to the changed framework conditions.

The envisaged flexibilization correctly does not restrict longer useful lives. This means that the further use and amortization of assets remains possible in the future, e.g. in the hydrogen sector, but also for the transport of bio- and synthetic methane.

For the time-critical investment decisions that are now pending – new investments, LNG connection facilities and LNG plants – “KANU” creates an appropriate basis. For existing plants (gas network investments made up to 2022), however, there is also a need for action, which must be addressed in a next step.

Supplementary
On page 14 of the draft determination, the BNetzA states that increased imputed depreciation due to a shortened depreciation period also leads to an increase in the expense parameters, which could have adverse effects in the efficiency comparison. The process of evaluating incentive regulation should analyze and assess whether it is appropriate to link the objective intended by the KANU provision, i.e., to be able to take full account of newly constructed facilities in the calendar-year revenue ceiling in terms of costing, with the risk of higher efficiency targets.