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Ministry of Industries and Innovation

Act amending the Electricity Act No 65/2003

Article 1

The following amendments are made to Article 3 of the Act:

Sub-paragraph 6 shall read as follows: Transmission system: Electrical lines and connected facilities needed to transmit electricity from power stations to large-scale users and to distribution system operators at the points of delivery listed in an annex hereto. The system extends from the high-voltage side of auxiliary transformers connected to it, cf. Paragraph 3 of Article 5, to the high-voltage side of substation transformers of large-scale users and distribution system operators.

Sub-paragraphs 8 and 9 are deleted and the subsequent sub-paragraphs renumbered accordingly.

A new sub-paragraph, No. 15, is added, reading as follows: Large-scale user: A user who uses in one place a minimum of 14 MW of power with an annual utilisation time of 8,000 hours or more.

A new sub-paragraph, No. 17, is added, reading as follows: Income possibility curve: The maximum permitted annual income of the transmission system operator and distribution system operators to meet expenses.

Article 2

Clause 2 of Paragraph 1 of Article 4 shall be replaced by three new clauses, reading as follows: However, such a licence is not required for electric power plants with a rated capacity of under 1 MW, unless the energy produced is delivered into the distribution system of a distribution system operator or into the transmission system. The owners of power plants with a rated capacity of 30 – 1,000 kW shall submit technical details of the plant to the National Energy Authority (Orkustofnun). Also, Orkustofnun shall be informed annually of the total generation of power plants with a rated capacity of over 100 kW.

Article 3

Paragraph 3 of Article 5 shall read as follows:

Power stations which are subject to licence shall be connected to the transmission system, subject to the provisions of Paragraph 2 of Article 11. Power stations of 7 MW or higher shall be connected directly to the transmission systems, but smaller plants may be connected through a distribution system. A contract with the transmission system operator or distribution system operator in the distribution zone of the station shall be available when an application is submitted for a development licence.

Article 4

The following amendments are made to Article 8 of the Act:

Paragraph 1 shall read as follows:

A single company shall be responsible for the transmission of electricity and system management pursuant to the provisions of this Chapter. The company shall be a limited liability company. The Minister [for Industry] shall issue an operating licence to the transmission system operator providing for the rights and obligations of the operator. Provisions may be made for review of the licence after a specified period of time, provided that the criteria underlying the conditions of the licence have changed materially.

A new paragraph, becoming Paragraph 2, is added, reading as follows:

The customers of the transmission system operator shall be distribution system operators, large-scale users and power plants.

The words "Paragraph 2" in Paragraphs 3 and 5 of shall be replaced by the words: Paragraph 3

Article 5

The following amendments are made to Article 9 of the Act:

The word "determining" in Sub-paragraph 3 of Paragraph 4 Act shall be replaced by the word: co-ordinating.

Sub-paragraph 5 of Paragraph 4 is deleted.

A new paragraph, becoming Paragraph 5, is added, reading as follows:

The transmission system operator is under obligation to supply the authorities, customers and the public with the information necessary to assess whether the operator is performing its obligations in the operation and system management of the transmission system and ensuring non-discrimination in trade in electricity. In the event of any dispute as to whether the operator is under obligation to provide any requested information Orkustofnun shall settle the question. The decision of Orkustofnun may be appealed to the Appeals Committee on Electricity.

The phrase "Sub-paragraphs 1–5" in Paragraph 5 is replaced by: Sub-paragraphs 1-4.

Paragraph 9 shall read as follows:

The Minister shall, by means of a government regulation, establish further provisions on the role and activities of the transmission system operator, system management, processes of use and the connection of power plants to the transmission system.

Article 6

The following amendments are made to Article 10 of the Act:

Paragraph 1 shall be replaced by two new paragraphs, reading as follows:

The owners of transmission facilities falling within the scope of Sub-paragraph 6 of Paragraph 3 are under obligation to sell or lease them to the transmission system operator, or contribute them as share capital in the transmission system operator.

The owners of transmission facilities leased to the transmission system operator may at any time request that the transmission system operator buy its transmission facilities falling within the scope of Sub-paragraph 6 of Article 3 or accept them as contributed share capital in the transmission system operator.

Clause 1 in Paragraph 2, becoming Paragraph 3, shall read as follows: Owners of transmission facilities leased to the transmission system operator shall perform the necessary maintenance of their facilities to ensure the security and reliability of transmission through them.

Article 7

The following amendments are made to Article 11 of the Act:

Paragraph 1 is deleted.

The phrase "Paragraph 1 and 2" in Paragraph 3 is replaced by: Paragraph 2.

Article 8

Article 12 of the Act, together with its heading, shall read as follows:

Income Possibility Curve and Tariffs

Orkustofnun shall establish an income possibility curve for the transmission system operator relating to the expense of transmitting electricity to distribution system operators, on the one hand, and to large-scale users, on the other hand. In the establishment of an income possibility curve, account shall be taken of whether the connection of large-scale users will lead to, or has led to, increased efficiency in the development and use of the system.

The income possibility curve shall be determined based on the following criteria:

  1. Expenses relating to the company's operation, including expenses relating to maintenance, depreciation of assets necessary for the operation of the system, leasing costs relating to transmission facilities, cost of energy losses, general operating expenses and expenses incurred by system management.
  2. The profitability of the transmission system operator shall be as close as possible to the market yield of non-indexed 5-year treasury bonds or similar securities. Profitability is calculated as the ratio of earnings before financial income, financial expenses and taxes (EBIT) to the book value of fixed assets.
  3. Efficiency requirements based on reasonable costs, as assessed by Orkustofnun, taking account of the services provided by the company.

The income possibility curve shall be determined for three years at a time. However, the income possibility curve may be reviewed annually if criteria change materially, in the opinion of Orkustofnun.

The transmission system operator shall establish a tariff for his services in accordance with Paragraph 2. The tariff shall apply, on the one hand, to the consumption of distribution system operators from the transmission system and, on the other hand, to the consumption of large-scale users. The tariff for consumption by distribution system operators from the transmission system at points of delivery, pursuant to Sub-paragraph 6 of Article 3, shall be based on the delivery of electricity at 66 kW voltage. If energy from the transmission system is delivered at a higher voltage the tariff shall be reduced accordingly. In the same way, account shall be taken of other differences in delivery service in charging for consumption from individual points of delivery.

The same tariff shall apply to feeding into the transmission system from power plants. Where plants are connected to the transmission system through a distribution system the charge shall be divided between the transmission system operator and the distribution system operator pursuant to a division procedure decided by Orkustofnun following consultation with the parties.

Reserve power stations used in circumstances of disturbances in the electricity supply system shall be exempt from payments to the transmission system operator.

The tariff shall be sent to Orkustofnun two months before taking effect. If Orkustofnun is of the opinion that the submitted tariff is in violation of this Act or government regulations, Orkustofnun shall submit its comments to the transmission system operator within six weeks of the submission. The tariff shall not take effect until rectifications have been made to the satisfaction of Orkustofnun. The transmission system operator shall publish the tariff.

Payment shall be required if the connection of new power plants or large-scale users to the transmission system causes increased expense in the system. In the same way, account shall be taken if a connection results in a more efficient development or use of the transmission system.

In the event that the profitability of the transmission system operator for the preceding three years amounts to less than half of the market yield of non-indexed five-year treasury bonds, or comparable securities, or in excess of a third over the same profitability, this shall be taken into account in the determination of the income possibility curve and preparation of the tariff for the following year.

Further provisions on income possibility curves, business terms and tariffs, including processes of use, depreciation rules, profit objectives and efficiency requirements, shall be established by a government regulation. A government regulation shall also stipulate the procedures for taking account of the impact of general price level changes.

Article 9

Two new clauses shall be added to Sub-paragraph 6 of Paragraph 3 of Article 16, reading as follows: In the event of any dispute as to whether the operator is under obligation to provide any requested information, Orkustofnun shall settle the question. The decision of Orkustofnun may be appealed to the Appeals Committee on Electricity.

Article 10

Article 17 of the Act, together with its heading, shall read as follows:

Income Possibility Curve and Tariffs

Orkustofnun shall establish an income possibility curve for distribution system operators relating to the cost of distributing electricity. If permission is granted for a separate tariff for rural areas, as provided in Paragraph 5, separate income possibility curves shall be established for the distribution of electricity in urban areas, on the one hand, and in rural areas, on the other hand.

The income possibility curves shall be determined based on the following criteria:

  1. Expenses relating to the business activities of the distribution system operator, including expenses relating to maintenance, depreciation of assets necessary for the operation of the system, expenses relating to transmission through the transmission system, cost of energy losses, general operating expenses and expenses incurred by system management in the distribution system.
  2. The profitability of the distribution system operator shall be as close as possible to the market yield of non-indexed 5-year treasury bonds or similar securities. Profitability is calculated as the ratio of earnings before financial income, financial expenses and taxes (EBIT) to the book value of fixed assets.
  3. Efficiency requirements based on reasonable costs, as assessed by Orkustofnun, taking into account the services provided by the distribution system operator.

The income possibility curve shall be determined for three years at a time. However, the income possibility curve may be reviewed annually if criteria change materially, in the opinion of Orkustofnun.

The distribution system operator shall establish a tariff for his services in accordance with the income possibility curve pursuant to Paragraph 2. The same tariff shall apply in the distribution zone of each distribution system operator for the consumption of low voltage electricity, i.e. 230–400 V. If energy from the distribution system is delivered at a different voltage the tariff may be adjusted accordingly. In the same way, account may be taken of other differences in service in the tariff.

Distribution system operators are permitted to apply to Orkustofnun for permission to maintain a separate tariff for rural areas where the cost of distribution is demonstrably higher than in urban areas. The condition for permission to maintain a separate rural tariff is that the use in the rural area in question must amount to a minimum of 5% of the total use in the distribution zone of the distribution system operator. An application for separate tariffs shall be accompanied by information on the geographical delimitation of areas, land use and number of inhabitants in the area in question, in addition to evidence showing that the cost of distribution to users in the area is higher than the cost of distribution to other consumers.

The tariff shall be sent to Orkustofnun two months before taking effect. If Orkustofnun is of the opinion that the submitted tariff is in violation of this Act or government regulations, Orkustofnun shall submit its comments to the distribution system operator in question within six weeks of the submission. A tariff shall not take effect until rectifications have been made to the satisfaction of Orkustofnun. The distribution system operator shall publish the tariff.

In the event that the profitability of the distribution system operator for the preceding three years is less than half of the market yield of non-indexed five-year treasury bonds, or comparable securities, or in excess of a third over the same profitability, this shall be taken into account in the determination of the income possibility curve and preparation of the tariff for the following year.

In the event that the distribution system operator's anticipated income in respect of a new customer does not cover normal initial or operating cost, the customer may be required to pay additional cost. The same applies if business criteria have changed materially.

Further provisions shall be established in a government regulation concerning income possibility curves, business terms and tariffs, including depreciation rules, profit objectives and efficiency requirements, in addition to processes of use and more detailed definitions of rural areas, cf. Paragraph 5. A government regulation shall also stipulate the procedures for taking account of the impact of general price level changes.

Article 11

A new clause is added to Paragraph 1 of Article 28, as follows: Orkustofnun is responsible for the implementation of this provision, see also Article 24.

Article 12

The words "every four years" in Article 39 of the Act shall be replaced with the words: every two years.

Article 13

Following Article 42, a new article shall be inserted reading as follows, including heading:

Enforcement etc.

Payments for electricity, transmission and distribution collected pursuant to tariffs which have been subjected to due process in accordance with this act of law are enforceable without adjudication or settlement pursuant to Sub-section 10 of Paragraph 1 of Article 1 of the Enforcement Act No. 90/1989. The delivery of electricity may be cut off to customers in default of such payments.

Article 14

Paragraph 2 of Interim Provision IV of the Act shall read as follows:

The tariffs of the distributions system operators effective on 7 April 2003 shall, notwithstanding the provisions of Article 17 hereof, remain in effect until 1 January 2005. Distribution system operators may, however, with the approval of Orkustofnun, decide on a tariff reduction. Moreover, distribution system operators may, with the approval of Orkustofnun, raise their tariffs in accordance with changes in the building cost index or verifiable and unavoidable increases in costs which are directly and materially connected with the operation. During this period the same tariff shall apply in the area of operation of each distribution system operator. Permission for the establishment of rural tariffs may not be granted during this period.

Article 15

The following amendments shall be made to Interim Provision VI of the Act:

Before the word "promote" is inserted the phrase: monitor and.

The word "seven" in Sub-paragraph 3 shall be replaced by the word: ten.

A new clause is inserted following the third clause, as follows: Three shall be elected by the Althing.

Article 16

The following amendments shall be made to Interim Provision VIII of the Act:

Paragraphs 1 and 2 shall be phrased as follows:

The entry into force of the provisions of Chapter III is postponed. They shall take effect on 1 January 2005, except as otherwise provided by this provision. The same applies to Sub-Paragraph 6 of Article 3, and Paragraph 3 of Article 5 hereof. Until such time, this provision shall apply to the transmission of electricity.

During the time that this provision is effective, the transmission system shall consist of the electrical lines, and facilities connected therewith, which transmit electricity at 66, 132 and 220 kV and which belonged to Landsvirkjun on 7 April 2003, including any additions after such date at 132 kV or higher for the purpose of increasing transmission through this system, but excluding radial lines from the system. The same applies to the lines of other parties at this voltage whose addition to the transmission system has been negotiated with Landsvirkjun. Landsvirkjun shall require authorisation from the Minister of Industry to construct new transmission lines.

The words "energy losses" in Sub-paragraph 2 of Article 6 shall be replaced by the words: energy loss.

Clause 3 of Paragraph 7 shall read as follows: Notwithstanding the above, a large-scale user can negotiate reimbursement from the transmission system operator for transmission.

Article 17

Five new interim provisions are appended to the Act, reading as follows, including headings:

a. (IX.)

Profitability of the Transmission System Operator and Distribution System Operators

In the establishment of an income framework for the transmission system operator in respect of the transmission of electricity to distribution system operators, Orkustofnun shall initially assume a profitability corresponding to half of the market yield of six-year non-indexed treasury bonds or comparable securities. The same applies to the income possibility curve of distribution system operators. The profitability criterion shall be increased over five years to the yield provided for in Sub-paragraph 2 of Paragraph 2 of Article 12 and Sub-paragraph 2 of Paragraph 2 of Article 17. However, the increase in the profitability criterion shall not cause a greater increase in the income possibility curve than may be achieved through an efficiency requirement.

b. (X.)

Establishment of a Transmission System Operator

On the entry into force of this Act, a state-owned limited liability company shall be established for the transmission of electricity and system management. The Minister [for Industry] shall appoint a board of three directors to represent the company in the assessment of transmission facilities pursuant to Interim Provision XI. The board of directors shall function until a final conclusion has been reached on the value of transmission facilities and a shareholders' agreement has been concluded between shareholders in the company.

c. (XI.)

Assessment of the Value of Transmission Facilities

The owners of the transmission facilities forming the transmission system according to Sub-Paragraph 6 of Article 3 hereof shall come to an agreement on the assessment of their value. The objective shall be established of arriving at an assessment value which is as close as possible to the replacement value of the transmission facilities, net of projected depreciations entered into the accounts in respect of the assets in question, in addition to any other items which may be of relevance, such as special contributions out of public funds for investment in the development of the transmission system. For this purpose, the Minister [for Industry] shall appoint a negotiation committee composed of three members appointed without nomination, of which one shall serve as chairman; two members shall be nominated by the City of Reykjavík, one by the Township of Akureyri, and one by the owners of the Sudurnes Heating Utility hf. Orkustofnun shall advise and assist the committee. The negotiation committee shall conclude its work no later than 1 August 2004. The outlays resulting from the work of the committee shall be paid out of the State Treasury, but the owners shall pay the cost of the work of their respective representatives.

If a consensus is not achieved in the negotiating committee established pursuant to Paragraph 1 concerning an assessment of individual facilities, the Minister [for Industry] shall, at the request of the owner of the facility in question, appoint a separate assessment committee to assess the value of the facility.

The assessment committee shall be composed of one lawyer, who shall act as chairman, one auditor and one engineer. The qualifications of the assessors, as regards involvement in the process of individual issues, shall be subject to the Act on Civil Proceedings .

In the assessment of transmission facilities the assessment committee shall seek to establish their replacement value, taking account of depreciation. Act No. 11/197, on expropriation procedures, apply to the work of the committee, as applicable, apart from Paragraph 2 of Article 2, Article 7, Article 11 and Article 15.

The assessment committee may seek the opinion of Orkustofnun as needed.

The cost of the work of the assessment committee shall be paid by the transmission system operator.

The decision of the assessment committee shall be made available no later than 15. October 2004.

Any disputes concerning the value of transmission facilities to be sold to the transmission system operator or contributed to the transmission system operator as share capital cannot be referred to the courts until the assessment committee has returned its decision.

In the event that the conclusion of the assessment committee is referred to the courts, the transmission system operator shall pay the owner of the transmission facilities rent for the facilities in an amount decided provisionally by Orkustofnun, taking account of the conclusion of the assessment committee.

When a final conclusion has been reached on the value of transmission facilities their owner shall notify the transmission system operator and Orkustofnun whether the facilities will be contributed as share capital, sold, or leased to the transmission system operator. If the owner of transmission facilities elects to lease them to the transmission system operator, Orkustofnun shall decide the amount of the rent based on the final conclusion regarding their value.

d. (XII.)

Restrictions on the Transfer of Shares in the Transmission System Operator

Shareholders in the transmission system operator may only transfer their shares to other shareholders in the company and not to parties outside the company.

e. (XIII.)

Review

The Minister [for Industry] shall appoint a committee composed of representatives of stakeholders and parliamentary parties for the purpose of reviewing this Act. The review shall be concluded prior to 31 December 2010.

Article 18

The following Annex is attached to the Act:

Annex

Points of delivery to distribution system operators pursuant to Sub-paragraph 6 of Article 3:

  1. Svartsengi,
  2. Fitjar,
  3. Hamranes,
  4. Hnoðraholt,
  5. Rauðavatn,
  6. Korpa,
  7. Brennimelur,
  8. Akranes,
  9. Vatnshamrar,
  10. Vegamót,
  11. Ólafsvík,
  12. Grundarfjörður,
  13. Vogaskeið,
  14. Glerárskógar,
  15. Geiradalur,
  16. Tálknafjörður,
  17. Mjólká,
  18. Breiðidalur,
  19. Bolungarvík,
  20. Ísafjörður,
  21. Hrútatunga,
  22. Laxárvatn,
  23. Blanda,
  24. Sauðárkrókur,
  25. Varmahlíð,
  26. Dalvík,
  27. Rangárvellir við Akureyri,
  28. Húsavík,
  29. Laxá,
  30. Krafla,
  31. Lindarbrekka,
  32. Silfurstjarna,
  33. Kópasker,
  34. Vopnafjörður,
  35. Lagarfoss,
  36. Eyvindará,
  37. Seyðisfjörður,
  38. Neskaupstaður,
  39. Eskifjörður,
  40. Hryggstekkur,
  41. Stuðlar,
  42. Fáskrúðsfjörður,
  43. Teigarhorn,
  44.  

     

  45. Hólar,
  46. Prestbakki,
  47. Búrfell,
  48. Hvolsvöllur,
  49. Rimakot,
  50. Vestmannaeyjar,
  51. Flúðir,
  52. Hella,
  53. Selfoss,
  54. Ljósifoss,
  55. Hveragerði,
  56. Þorlákshöfn.

Article 19

This Act shall enter into force immediately.

 

Passed by the Althingi on 28. May 2004.

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Disclaimer: This section of the site details available translations on legislation relating to the Government Offices in Iceland. In case of any discrepancies between the translations and the original text in Icelandic, the original text as published in the Icelandic Legal Gazette prevails.

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