A new network use tariff
A fair tariff structure that anticipates future needs
Read the information pamphlet published on the occasion of the coming into force of the new tariff structure.
Introduction and summary
The electrification of our society has been accompanied by an increase in energy flows on our networks. That’s why network operators closely monitor the state of the networks and their expansion, so that they can meet current and future electricity needs. The increase in flows is perfectly manageable at the moment, due to the excellent quality of the country’s networks. In the future, however, it is likely that there will need to be an increase in network capacity. This is due, in particular, to the increase in simultaneous use.
As well as expanding the networks, operators wanted to find an immediate, fair and complementary solution to this change in network use. In practical terms, they are now focusing on cost reflectivity, applicable to the portion of the final electricity price 1 that relates to network use. And so, on 1 January 2025, the Luxembourg Regulatory Institute (Institut luxembourgeois de Régulation – ILR) and network operators will introduce a new tariff structure to the low-voltage electricity market (households, shops, etc.). For the time being, this change will have little impact on the vast majority of consumers, especially as the main variable is always the price of electricity itself, not the network use tariff.
In the medium term, however, this change will call for more efficient network use, better use of existing networks as a whole and, lastly, the maintenance of tariff stability.
The change in greater detail
On 1 January 2025, the Luxembourg Regulatory Institute (Institut luxembourgeois de Régulation – ILR) and network operators will introduce a new tariff structure onto the electricity market. The objective? To respond to changes in network use within the context of the energy transition. How? By offering a fairer tariff structure that will ultimately encourage consumers to be more flexible in their network use and to make better use of existing networks.
The context: the electrification of our society and the increase in flows
It is clear that the electrification of our society is resulting in increased energy flows. While this is still quite manageable due, in particular, to the excellent quality of the country’s networks, it could rise even higher in the future. In order to stem this rise, and before having to possibly increase network capacity, we need to find a complementary solution to limit the peak loads that can be caused by simultaneous use.
Infrastructure: the importance of the networks and their operators
At the core of the electricity market, network operators are responsible for transporting electricity, while at the same time ensuring that there is a balance between production and consumption. On this basis, it is important to differentiate between the price of electricity itself and the electricity network use tariff which, together with taxes, make up the final price paid by the consumer.
The issue: the future risks posed by simultaneous use
In the future, simultaneous use could become more common, for example, when an electric car is charging or when a sauna is switched on while the washing machine, oven and hob are running in the same household. This simultaneous use could lead to peak loads or even congestion if anticipatory measures are not taken. In addition to expanding the networks, the structure of future network use tariffs must, therefore, be adapted today to meet the current and future constraints of networks whose capacity is a shared resource.
The solution: act today to avoid paying more tomorrow
As a result, the new network use tariff will place greater emphasis on the concept of power. Please note, power is expressed in watts (W) or, more commonly, in kilowatts (kW). It is an instantaneous value representing the intensity of the action, comparable to the speed of a vehicle or the flow of a river. Users will be offered a limited number of reference power levels, calibrated for the most common uses and profiles. The power assigned will not be used as a maximum value, but rather as a reference value for its level of use. In other words, regularly exceeding the assigned subscription level is not an issue. The additional volume of energy will then simply be billed at a higher rate, as it will be up to the network to absorb this difference.
The outcome: paying the right price for network use
Ahead of application on 1 January 2025, consumers will be allocated power levels based on their consumption history. This process will identify an optimal category for each customer from a financial perspective. At the moment, consumers who generate peak loads, through their consumption behaviour and network use, are at an advantage. In future, all consumers will pay the right price, due to a fairer tariff structure that takes account of consumption patterns.
Please note, however, that the price of electricity is the main variable in the final price, with an impact that may be much greater than the change brought about by the new tariff structure. As a result, the vast majority of consumers who are already adopting energy transition behaviours will not feel the impact.
Graphic representation of the new tariff structure
Summary of the electricity low voltage network tariff components (excluding metering costs)
Allocation of the reference power level
The network operator allocates to each consumer the optimal reference power level (which minimizes the cost for the customer) based on their consumption over the last 12 months.
The network operator continuously reassesses the reference power level through a monthly recalculation of the reference power based on consumption data for the last 12 months. This approach guarantees that a change in consumer behavior will automatically be taken into account over time, without the need for the consumer to become active.
1 It is important to distinguish between the price of electricity and the electricity network use tariff which, together with taxes, make up the final price paid by the consumer. The price of electricity is not affected by this change.