Compliance monitoring
RME uses inspections and thematic supervision to ensure compliance with a range of Acts and Regulations. Efficient regulation depends on high-quality data, and compliance monitoring is essential to achieving this.
RME’s Section for Economic Regulation carries out inspections to ensure compliance with the Regulation on Supply Licensees, the Regulation on Grid Income and other relevant requirements. The number of inspections fluctuates each year and is somewhat based on the resources at hand. 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. RME selects companies based on the severity and frequency of non-compliances, their significance in revenue cap calculations, recent inspections, and specific incidents needing further investigation. In addition, RME 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 RME has clarified or amended the legislation. RME selects the final candidates by evaluating all the criteria mentioned above.
No later than 5 weeks prior to the inspection date, the companies receive a formal notification of inspection and are ordered to report additional economic and technical data. RME consolidates all available data and customizes a questionnaire for use on the inspection day.
RME’s focus during investigations is to identify routines and systems that ensure 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 contributions 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 address 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 RME 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 comply with the decisions will result in fines. The inspection process is finalized when all non-compliances have been corrected.
Thematic Supervision
Topic monitoring includes all network operators, but for one topic at a time. RME chooses the topic based on observations and input from the industry. A relevant topic is, for example, an area where there is a suspected general misconception or a need to pinpoint correct practice. Previously selected topics have included the 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 RME ordering companies to report information regarding a specific topic.
Data Analysis
Preparation of the revenue cap decision includes analysis of the reported data. The analysis looks at annual fluctuations and incoherence in the industry and individual companies. The network operators must explain or correct any deviations that RME discovers. In addition, RME publishes an annual report on developments 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 examines variations between groups according to size, geography, organizational structure, etc. Any abnormalities or incoherencies in the data for the revenue cap calculations discovered in the process, must either be corrected or confirmed by the network operators.
