NVE uses inspections and thematic supervision to ensure compliance with a range of Acts and Regulations. Efficient regulation is dependent on high quality data, and compliance monitoring is a necessity in achieving that.
NVE’s Section for Economic Regulation carries out inspections to ensure compliance with the Income and Tariff Regulation and other relevant requirements, e.g. TEK.Based on the resources at hand, the number of inspections per year fluctuates between 5 and 15. Since 2007, NVE has carried out 106 inspections with a legal basis in the Income and Tariff Regulation. Each inspection takes roughly 200 man-hours to complete, but the process is usually ongoing from the beginning of the calendar year until August or September. Candidates for inspection are prioritized and chosen based on a risk assessment of probability and consequence. More specifically, NVE chooses companies based on the number and gravity of the non-compliances from the manual control of the economic and technical report, the company’s importance in revenue cap calculations, whether or not they have been inspected in recent years, or if there have been specific incidences that require a more thorough investigation. In addition, NVE will identify areas of particular interest that require further investigation. These might be areas that have proven to cause a significant number of non-compliances in the manual control of eRapp, or areas where NVE has clarified or amended the legislation. NVE chooses the final candidates based on an overall assessment of all the aforementioned criteria.
No later than 5 weeks prior to the inspection date, the companies receive a formal notification of inspection and they are ordered to report additional economic and technical data. NVE consolidates all available data and customizes a questionnaire for use on the inspection day.
NVE’s focus during its investigations is to identify routines and systems that ensure that companies report correct data. Areas of particular interest are rules and principles for allocating revenues, costs and assets between the different business areas – in particular, between monopoly and competitive businesses – routines and systems for updating the economic and technical registries of long-term assets and the coherence between these registries, eRapp and TEK, routines for registering grants and investment contribution from customers and updating the customer information system. Furthermore, companies must identify and explain transactions for the most relevant and significant accounts, e.g. other operating income, other operating expenses and cost of transmission services. They must also answer to any incoherence or significant annual fluctuations in the reported data, such as salaries and pensions, losses on receivables, maintenance and operational costs, depreciations and book values, grid losses, various technical data, etc. If satisfactory answers cannot be given on the day of the inspection, the company must report additional information post inspection.
When NVE has identified the number of non-compliances and evaluated comments, it is decided which actions to take and, if necessary, issue new decisions. Unwillingness to abide in accordance with the decisions will result in fines. The inspection process is finalized when all non-compliances have been corrected.
Topic monitoring includes all network operators, but for one topic at a time. NVE chooses the topic based on observations and input from the industry. A relevant topic is e.g. an area where there is a suspected general misconception or a need to pinpoint correct practice. Previously selected topics have been purchase and sale of transmission services, routines for updating the long-term asset registry for network installations/facilities that are no longer in use and handling of excess and deficit revenues. Topic monitoring can either be carried out as a survey and included in the manual control of eRapp, or by NVE ordering companies to report information regarding a specific topic.
Preparation of the revenue cap decision includes analysis of the data basis. The analysis looks at annual fluctuations and incoherence in the industry and individual companies. The network operators must explain or correct any deviations that NVE discovers. In addition, NVE publishes an annual report on development in the network industry. The report looks at fluctuations over the past 10 years in revenues, costs, investments and regulatory asset base, rate of return, grid losses, CENS, etc. It also looks at variations between groups according to size, geography, organizational structure, etc. Any abnormalities or incoherencies in the data basis for the revenue cap calculations discovered in the process must either be corrected or confirmed by the network operators.