NEST decisions bring momentum to grid fee regulation for electricity and gas

On 10 December 2025, the German Federal Network Agency (Bundesnetzagentur) announced the first framework and methodological decisions for the new grid fee regulation for electricity and gas grids. The decisions are part of the so-called NEST process (“Networks. Efficient. Secure. Transformed.”) and have a fundamental impact on the revenues of grid operators in the electricity and gas sectors. This also raises the question which legal remedies exist against such framework decisions by the Federal Network Agency.

Key objective of the NEST process

The NEST decisions replace the grid fee regulation previously governed by statutory ordinances issued by the Federal Government. In a ruling dated 2 September 2021, the European Court of Justice declared the German Federal Government’s regulatory authority to be contrary to EU law because the Directives for internal electricity and gas markets confer the power to fix transmission and distribution tariffs exclusively on the independent regulatory authorities. With new regulations, in particular in sections 21 and 21a of the Energy Industry Act (EnWG), the German legislature consequently established the competence of the Federal Network Agency, where the newly created Grand Ruling Chamber for Energy (“Große Beschlusskammer”) is internally responsible. Accordingly, the Incentive Regulation Ordinance (ARegV) and the Electricity and Gas Grid Fee Ordinance (StromNEV and GasNEV) will expire at the end of the fourth regulatory period and will be replaced by the NEST decisions.

Review of the decision procedure

The decisions were preceded by a multi-stage consultation process. In June 2025, the Federal Network Agency published drafts of the decisions (preliminary NEST drafts) and submitted them for consultation. At the end of October, the State Committee (“Länderausschuss”) of state regulatory authorities was formally consulted on the drafts. However, it was not possible to reach consensus: The State Committee particularly criticised shortening the regulatory period (“Regulierungsperiode”) from five to three years.

The final decisions consist of two framework decisions for electricity and gas grid fees (“RAMEN Strom” and “RAMEN Gas”) and several methodological decisions for determining the initial level (“Ausgangsniveau”), return on capital (“Kapitalverzinsung”), efficiency comparison (“Effizienzvergleich”) and the general sectoral productivity factor (“genereller sektoraler Produktivitätsfaktor”).

Significant changes compared to preliminary NEST drafts

The final decisions contain further changes compared to the preliminary NEST drafts. Regarding the efficiency value (“Effizienzwert”) relevant for determining the revenue cap (“Erlösobergrenze”), the Incentive Regulation Ordinance previously stipulated a minimum efficiency value of 60% for particularly cost inefficient grid operators (cf. section 12(4) ARegV). This minimum efficiency value meant that even inefficient grid operators were allowed to generate as much revenue as if they had achieved an efficiency value corresponding to the minimum efficiency value. In order to reduce the number of hardship cases and thus the bureaucratic effort involved, the methodology for efficiency comparison provides for raising the minimum efficiency value to 70%. Furthermore, the revenue caps in the efficiency comparison are to be stabilised by the fact that – in connection with the pending decision on the threshold value for the simplified procedure (“vereinfachtes Verfahren”) – 90% of grid operators will be subject to the standard procedure in future.

When determining the financing costs, which are included in the grid fees as a capital cost surcharge (“Kapitalkostenaufschlag”) on the revenue cap to cover interest costs on borrowed capital, the Federal Network Agency initially wanted to apply an equally weighted average value for the past seven years, according to the preliminary NEST drafts from June, so that years with interest rates of zero would also have been included. The method for determining the return on capital now provides for a differentiation between existing assets and new investments. For new investments, the interest rate on borrowed capital is determined based on the interest rate of the respective year of acquisition, which means that investments in years with higher interest rates are dynamically taken into account. As a result of this differentiation, the calculation of interest costs for borrowed capital is less generalised and these costs may therefore be added to the respective revenue cap to a greater extent. However, the determination is neither completely precise for each year – it remains an average – nor specific to each grid operator; instead, the Federal Network Agency intends to use the investment data already available for all grid operators when determining the specific borrowing rate in the future.

The OPEX surcharge, i.e. the surcharge for costs such as personnel, maintenance or grid digitalisation, was previously set by the Federal Network Agency at the beginning of a regulatory period. As a result, grid operators were only allowed to cover their operating expenses during a regulatory period with grid fees to the extent that was determined in advance by the Federal Network Agency. As costs regularly rise within a regulatory period, the preliminary NEST drafts still provided that electricity grid operators would in future be allowed to take rising operating costs into account when determining the revenue cap in the standard procedure. While this would initially have benefited only larger grid operators whose fees are determined in the standard procedure, the RAMEN decisions now stipulates that the annual adjustment of the OPEX surcharge applies to all distribution grid operators – and thus also to smaller grid operators in the simplified procedure, as they too have to maintain and digitalise their grids. This change, which will initially only apply to the fifth regulatory period, means an increase in expected revenues for grid operators on the one hand and an additional financial burden for grid customers on the other.

As previously planned, the duration of the regulatory period is to be shortened from five years to three years starting from the sixth regulatory period. The Federal Network Agency has responded to the criticism from the State Committee only by stating that, before the transition to the three-year periods, it will evaluate whether the various simplification and acceleration instruments are sufficient to implement the shorter review cycle in practice. However, the Federal Network Agency is ultimately sticking to the reduction itself and the need for grid operators to eliminate inefficiencies more quickly.

Further decisions still pending

The Federal Network Agency’s decisions do not yet cover all the planned decisions for the future grid tariff system, meaning that further decisions are still pending. For example, the methodology for determining the return on capital does not yet contain a specific weighting of borrowing rates for new investments for the fifth regulatory period, as not all the necessary data is available yet. The economic threshold up to which grid operators can choose the simplified procedure will also be determined at a later date and communicated to the state regulatory authorities by 30 November of the base year.

Other regulatory procedures are also underway: Before Christmas, the Federal Network Agency published a draft decision on quality regulation and opened the consultation process until 6 February 2026. Furthermore, the Federal Network Agency is separately defining the regulatory framework for transmission system operators, for which it also submitted a draft regulation for consultation on 10 December 2025.

While the NEST decisions relate to the revenue side of grid operators and regulate how much grid operators are allowed to earn from grid fees, the Federal Network Agency is finally determining in the parallel AgNes procedure (General Grid Fee System for Electricity, in German: “Allgemeine Netzentgeltsystematik Strom”) which grid users have to pay grid fees in which amount. Following the publication of a discussion paper in September 2025, various expert workshops are currently taking place in the AgNes procedure. The final decisions are expected to follow at the end of 2026.

New regulation of legal remedies

The NEST decisions adopted by the Federal Network Agency fall short of the demands made by grid operators during the consultation process and raise the question of whether the new regulatory framework sufficiently takes into account the increasing investment and supply needs in the electricity sector and the politically desired transformation of the gas grids.

In view of this high importance, the question also arises what legal remedies are available to grid operators to have the Federal Network Agency’s framework and methodological decisions reviewed by the courts. This is particularly relevant because the deadline for appealing the decisions themselves is only one month from their announcement.

However, an amendment to the Energy Industry Act (see our previous insight), which came into force on 23 December 2025, means to extend or at least clarify the legal remedies. The newly created section 75(3a) EnWG stipulates that in appeal proceedings against (case-by-case) decisions of the regulatory authority, the legality of a previous (framework) decision by the Grand Ruling Chamber of the Federal Network Agency can be reviewed incidentally even after the appeal period of the determination has expired. Some risk remains in this respect, nevertheless, as the new regulation does not clarify the scope of such incidental review.

Options for action

Grid operators should review their investment plans based on the adopted NEST decisions, plan measures to increase efficiency and, in the case of smaller grid operators, consider switching to the standard procedure. In general, it is important to examine the impact of the decisions on future grid fees and thus on the revenue structure.

Our Energy & Infrastructure team is happy to support and advise grid operators and grid customers on developing and implementing options for action.