Depreciation
European Union Electricity Market Glossary


 

 

Straight line depreciation is applied by most national regulatory authorities (NRAs) in gas and electricity regulation.


Once a depreciation method (straight line or accelerated depreciation) has been chosen at national level, it is then applied for both gas and electricity network operators. 

 

In the electricity sector, most NRAs apply the same depreciation rate value for typical TSO and DSO network assets alike.

NRAs do use different depreciation values, with the majority using historical values in different variations; the same applies for the gas sector.


The linear method is predominantly applied for the depreciation of the regulated assets.

 

The lifetime of a typical network asset ranges from 20 to 55 years and NRAs typically apply an individual depreciation ratio for each type of asset. However, in some regulatory regimes an average ratio for all companies and all assets is applied.

 

Just as in the case of RAB valuation, the depreciation of assets might be based on historic values, re-evaluated values or on a mixture of these two methods. The vast majority of regulators allowed depreciation of tangible and intangible assets valued on the same basis as the Regulatory Asset Base (RAB) in their regulation, hence clear correlation between these values can be observed.

 

Source: CEER Memo on Regulatory aspects of energy investment conditions in European countries C13-IRB-17-03 07-Mar-2014

 

 

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Last Updated on Sunday, 14 February 2016 14:07
 

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