Public consultation: 16 June - 20 July 2025

Introduction

Luxembourg's energy system is undergoing a deep transformation, driven by the energy transition, the electrification of end uses, and the need to integrate decentralized energy resources. These developments bring both opportunities and challenges for the design and operation of the electricity network.

Annual grid investment across Europe is expected to double¹ by 2050, putting upward pressure on tariffs, making it essential to send clear, cost-reflective price signals that help avoid unnecessary infrastructure expansion. A well-designed, future-proof tariff structure should strike a balance between cost recovery, system efficiency, user fairness, and the achievement of decarbonization goals.

In this context, Creos Luxembourg S.A, has commissioned an independent study from Consentec GmbH to assess the future design of network tariffs for the medium (MV), high (HV), and very high (VHV) voltage levels. This study is complemented by past reflections and regulatory analysis conducted by the Luxembourgish regulator lnstitut Luxembourgeois de Regulation (ILR), including the 2022² public consultation on tariff structure reform.

Context

The energy transition brings new requirements for grid operation: increased energy flows, bidirectional power exchange, and more diverse and dynamic usage patterns. This makes the traditional tariff structure, based heavily on peak load and energy volume, less fit for purpose.

A modern tariff structure should reflect actual grid usage and cost drivers, support flexible and efficient behaviors, and remain clear and fair across user types.

Why is a new tariff structure needed?

The current network usage tariffs at the MV, HV and VHV voltage levels include a power component and an energy component, which vary depending on the annual usage duration of the network users (the ratio between the annual volume drawn from the network (in kWh) and the maximum quarter-hourly power (in kW)). The power component is applied to the user's maximum quarter-hourly power demand at the delivery point during the year, while the energy component is applied to the total annual volume of electricity drawn from the network at the delivery point.
This tariff structure has three main drawbacks:

1. A user's bill is determined heavily by a single 15-minute peak, regardless of how often high usage occurs or whether it happens during off-peak periods. The current structure therefore penalizes rare peaks, even if they occur during off-peak hours for the network
2. The increasing integration of volatile RES (wind and sun) is creating congestions in the network, which could be mitigated by increased consumption. The current structure of network usage tariffs does not incentivize customers to increase their consumption during peak generation times.
3. The approximation of simultaneity coefficients and the requirement to match costs and expected revenues at each voltage level leads to a lack of stability and predictability in the tariff components, which can vary significantly from one to another.

To address these problems, a new tariff model needs to be introduced with the aim to better reflect actual grid usage, encourage flexibility, reduce the need for costly network upgrades, make capacity available to more users and integrate more RES into the existing grid.

Key Insights from Previous Consultations (2022)

The 2022 public consultation outlined several key building blocks for a future -proof network tariff model:

• Transition toward a subscription-based capacity model (ex-ante), especially for MV and HV users. The target model is based on ex-ante subscribed capacity, with user-defined power levels per time segment.
• Time-segmented pricing to better reflect peak and off-peak network stress, allowing better grid capacity allocation and dynamic pricing.
• Differentiation between firm (guaranteed) and non-firm (interruptible) capacities with respective pricing signals is a key design feature, with cost differentiation and availability depending on time and grid stress.
• Gradual reduction in the weight of volumetric charges in favor of capacity-based signals, the energy-based charges will mainly cover marginal costs, while capacity charges reflect infrastructure costs and user impact.
• Encouraging flexibility and efficient infrastructure use over new grid expansion, the entire model aims to defer or avoid costly grid reinforcements by promoting behavioural change and better use of existing capacity.
• Clear, transparent structures tailored by voltage level and user type - different implementations foreseen for LV vs MV/HV, but all within a coherent framework of predictability, transparency, and non-discrimination.

Reflection Elements from the Consentec Study & Reform Topics

The 2025 study by Consentec builds on and refines the 2022 foundations. Key proposals include:

• Cost cascading based on peak loads is only one of several valid approaches. Alternative cascading variables like gross annual consumption or transformer capacities (rather than peak loads) can be more stable and transparent.
• The simultaneity function assumes that usage hours correlate with a user's contribution to peak loads, which is questionable. The study recommends to abolish the simultaneity function in future designs. A gradual phasing out to avoid disruptive changes and allocation of network costs to tariff components through fixed ratios is more stable, transparent to users and easier to implement.
• Introducing a reference capacity model, where users pay for a self-selected capacity, plus a surcharge for energy consumed beyond that level, in order to better balance incentives and fairness while allowing flexible usage without sharp penalties.
• Evaluating generation-side tariffs and their impact on investment and self-consumption.
• Assessing new tariff signals that reward grid-friendly flexibility and time-shifted use.

Purpose of the consultation

This consultation seeks to gather feedback from all stakeholders-grid users, producers, consumers, suppliers, and industry associations-on the future tariff structure. It is an opportunity to comment on the study's proposals and contribute ideas that reflect your operational, economic, and technological realities.

The goal is to collectively shape a network tariff system that is robust, transparent, flexible, and supportive of Luxembourg's energy and climate objectives.

Participation in the consultation

Questions for stakeholders

A list of 11 questions has been drawn up for this consultation. Please read them and respond either by email to consultation.nste.mt.ht.tht@creos.net or using the MS Forms form.

Online workshop via MS Teams

A workshop via Microsoft Teams will be organised on 26 June 2025 from 9:00-11:00 a.m. to answer any questions about the consultation documents. To participate, you can log in using the following information:

Join the Microsoft Teams meeting now
Meeting ID: 322 787 816 318 5
Passcode: WF6e3jX2

Creos invites all interested parties to submit their responses to the questions and any additional comments by 20 July 2025 at the latest, either via the form or by email.

All feedback will be reviewed and taken into account in the development of the network's future pricing methodology. A summary of the contributions will be published to ensure transparency and stakeholder involvement.

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¹ 2025-ACER-Electricity-Network-Tariff-Practices
² https://www.ilr.lu/consultations/consultation-publique-du-16-septembre-au-30-octobre-2022/