London (Platts)--1Mar2011/646 am EST/1146 GMT

Belgium's energy regulator Tuesday rebuffed Electrabel's criticism of its method for calculating profits from nuclear power plants, detailing why it projects profits at three times the level Electrabel does.

Electrabel, a GDF Suez company, is Belgium's dominant nuclear power generator, and the Belgian government signed a deal in October 2009 charging nuclear operators around Eur215-245 million ($298-339 million) a year to run the plants. In return, plant lifespans were extended.

The tax was set using figures from the National Bank of Belgium. At the instructions of energy minister Paul Magnette, the CREG has since used its access to information in the power sector to work out nuclear generators' profits.

Using 2007 data, the CREG puts these profits at around Eur2 billion a year, while Electrabel, which controls almost all production, has said nuclear margins were more like Eur652 million.

Sophie Dutordoir, CEO of Electrabel, told parliament last month she "categorically contested" the assumptions CREG used to work out nuclear profits. The regulator gave a detailed response Tuesday.

CREG estimated the costs of nuclear production between Eur17/MWh and Eur21/MWh, using 2007 levels. Electrabel added a further Eur2.7/MWh to this for "general costs," but CREG's workings already included all costs associated with nuclear production, the regulator said.

Also, Electrabel added a further Eur5/MWh to costs, corresponding to the capacity of other types of generation required when the nuclear plants weren't running.

CREG criticized this in its statement, saying its calculations were based upon the volume of power produced by nuclear plants alone -- some 46 TWh.

On the revenue side, Electrabel assumed that all the nuclear power was sold to industrial customers (on average, at prices lower than the wholesale level of Eur60/MWh) but the nature of the power grid and wholesale market means this is not a fair assumption, the regulator said.

"The laws of physics are such that one cannot say that the electricity produced by a certain power plant and injected into the grid will be consumed by a certain client," CREG said.

Wholesale market prices act as a reference point for negotiations with large clients, the regulator added.

CREG also disputed the price Electrabel gave for power sold to large users, at around Eur44.8/MWh, saying it was more like Eur48.4/MWh.

The company also underestimated the price for power sold to smaller customers, the regulator said. The higher prices for residential and small business customers put the average price sold to Belgian customers at Eur67/MWh, the regulator said.

Using wholesale market prices of Eur60/MWh, nuclear profits were between Eur1.75 billion and Eur1.95 billion, it said. Using CREG's calculated customer price, profits came to between Eur2 billion and Eur3 billion.

Electrabel's calculations determine a much lower profit of Eur750 million, including the profits generated by Belgium's other nuclear operator, SPE-EDF.

While the government was keen to get the regulator's opinion on nuclear profits, it has not, as yet, asked the CREG to give its opinion on what level the nuclear tax should be.

In the last installment of the levy, parliament passed a bill in late 2010 charging nuclear operators Eur250 million for 2010.

--Robin Sayles, newsdesk@platts.com

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