Sweden Revisits How Grid Operators Recover Their Costs

Sweden’s electricity network companies face a choice wherever demand grows faster than their lines can accommodate. They can build more capacity or make better use of the lines and substations they already have. On November 5, Energimarknadsinspektionen, the energy regulator, responded to concern that its proposed method for setting network revenue caps would deter the first option. The method covers the 2028–2031 regulatory period and changes the financial treatment of both options.

What the Cap Pays For

Electricity users usually have a single local network company. The regulator sets a four-year ceiling on what each company can collect in network charges to limit the advantage that comes with that position. The ceiling is intended to cover the costs of running the grid efficiently and allow investment where it is needed. It leaves the company with decisions about the work it will carry out and what it will charge within the permitted revenue.

The method changes the basis for valuing assets added from the first half of 2028 at the earliest. For new assets covered by the change, the capital base would reflect what the company actually paid to acquire them. Existing assets would retain their current market valuation at the point of transition. Those treatments can produce different values for otherwise similar equipment. A company planning an investment therefore needs to know which valuation applies when it estimates how the spending will affect its future revenue.

Who Finances the Asset Matters

When a new customer pays a connection charge, that charge can finance part of the work needed to connect the site. Under the proposed method, the customer-funded portion would cease to contribute to the network company’s regulated return. The treatment ties the return calculation more closely to the capital that the network company itself has had to put at risk. The regulator would also use an eight-year history for the market inputs in its allowed-return calculation. That reduces reliance on forecasts and makes the estimate more dependent on the market conditions observed over that period.

Running costs would be assessed using the actual costs incurred during the regulatory period, replacing the use of a historical reference period. That timing matters for a growing network. A company that starts procuring flexibility to manage a new bottleneck may incur the cost before a system based on older accounts would recognize it. The proposed change brings the expense and the regulatory assessment closer together.

The Test Across Capital and Operations

The regulator would compare companies on total cost efficiency and use the result to adjust their caps up or down. That places a line upgrade and a measure that shifts demand away from congested hours under the same efficiency incentive. The two responses still have different service characteristics. A shift in demand may free capacity at certain times, while reinforcement can increase physical headroom over a longer period. Comparing the costs makes sense only alongside the capacity and reliability each option can provide.

Ei estimates that aggregate caps for 2028–2031 would be about nine percent lower than if the current method were continued into those same years. In constant 2025 prices, the preliminary aggregate is about level with the caps originally decided for 2024–2027. These figures use different baselines. Neither estimate fixes the charge on an individual bill, and companies may carry unused revenue room into the next period.

Ei has asked for comments by November 23. The company-level caps are due to be decided by October 31, 2027. Those decisions will show how the method treats companies with different investment schedules, financing sources and operating costs.