We, Willem-Alexander, by the grace of God, King of the Netherlands, Prince of Oranje-Nassau, etc., etc., etc.

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This English translation is provided as an extra service for information purposes only to those who do not read Dutch. No firm conclusion can be reached based on solely the English version. The ministries
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This English translation is provided as an extra service for information purposes only to those who do not read Dutch. No firm conclusion can be reached based on solely the English version. The ministries cannot be held bound in any way to the English version. Proposal for Act encompassing rules with regard to the production and distribution of electricity and drinking water in Bonaire, Sint Eustatius and Saba (BES Electricity and Drinking Water Act) We, Willem-Alexander, by the grace of God, King of the Netherlands, Prince of Oranje-Nassau, etc., etc., etc. To all who will see this or hear it read, greetings! Be it known: Whereas we have considered that it is desirable, considering the importance of the reliable, sustainable and appropriate functioning of the electricity and drinking water supply in Bonaire, Sint Eustatius and Saba, to establish rules with regard to the production and distribution of electricity and drinking water; Thus it is, that We, by the advice of the Council of State, and with the consent of the States General, have assented and understood as We hereby assent and understand: Chapter 1. General stipulations Article 1.1 In this Act and the stipulations based on it, the following is understood under: - Connection: a connection between an electricity or drinking water network and a consumer s installation; - Consumer: a natural person or legal entity using electricity or drinking water for own use; - Authority for Consumers and Markets (Autoriteit Consument en Markt): the Authority for Consumers and Markets, mentioned in Article 2, first section of the Act establishing the Authority for Consumers and Markets; - Distribution: the transport and supply of electricity or drinking water to consumers through networks or through means of transport as intended in Article 3.8; - Drinking water network: a structure of pipes and interconnected couplings, valves and other technical provisions for the transport and supply of drinking water; - Electricity network: one or more connections intended for the transport of electricity and the interconnected transformer stations, switching stations, distribution stations and substations, and associated equipment; - Renewable electricity: electricity, generated in a production installation, making exclusive use of wind, solar power, ambient air, surface water and geothermal heat, energy from the oceans, hydropower, biomass, landfill gas, sewage treatment plant gas or biogas; - Network: an electricity network or a drinking water network; - Our Minister: Our Minister of Economic Affairs, for as far it pertains to electricity, or Our Minister of Infrastructure and the Environment, for as far as it pertains to drinking water; - Vertically integrated company: company or group of companies in which production and distribution take place. Article 1.2 This Act is applicable to Bonaire, Sint Eustatius and Saba. Chapter 2. Production of electricity and drinking water 2.1 Permitting and establishment of producer Article It is illegal to produce electricity or drinking water for distribution to consumers without a permit. 2. Contrary to the first section, a permit is not required for the production of renewable electricity by an installation which generates power mainly for individual use, by a consumer, and in which case the electricity which is not used is fed into the network, taking into consideration Article 4.1 and 4.2. Article 2.1 stipulates that the production of electricity and drinking water which is intended for distribution through networks or through means of transport, such as tank lorry and boat, on the islands, is reserved for legal entity with a permit. If generated without a permit, the ACM (Authority for Consumers and Markets) can impose an administrative fine. The only exception in this regard, is the production of renewable electricity, mainly solar power, generated by consumers for individual consumption. If the production installation produces more than what is used by the consumer at that time, this extra electricity can be fed into the network. Articles 4.1 and 4.2 are specifically applicable in this regard. Rainwater which is collected in cisterns is not intended for distribution to third parties and collection is not subject to a permit. The distribution of water in bottles is not included in the scope of this Act and the production of such water is therefore not subject to a permit either. Article Our Minister grants a permit for a period of ten years to a legal entity which: a. has the necessary organisational, financial and technical qualities for proper execution of the task; b. can reasonably be deemed capable of observing the obligations and of executing the tasks, as included in this chapter. 2. An order is linked to the permit with regard to the minimum amounts of electricity or drinking water that must be produced. 3. Our Minister can also link an order to the permit, making it mandatory for the producer to provide financial security for the observance of the obligations imposed on them by virtue of this chapter, with regard to the production of electricity or water. 4. Our Minister can also link other orders and restrictions to the permit. 5. Our Minister may revoke the permit if the producer is unable to observe the obligations or is unable to execute the tasks indicated under or by virtue of this chapter. 6. Under or by virtue of governmental decree, further rules may be imposed with regard to the procedure for permitting, the criteria, intended in the first section and the contents of the permit, the orders and restrictions, intended in the second, third and fourth section. Article 2.2 provides the basis for producer permitting. The Minister of Economic Affairs or of Infrastructure and the Environment grants at least one producer in each public body a permit for the production of electricity or drinking water, on condition that the intended producer complies with the obligations. This producer may produce both electricity and drinking water, and this producer may also form part of a vertically integrated company in which the distribution of electricity and drinking water is also encompassed, but all of this is not a prerequisite. Several producers can also be granted a permit, but these producers will then also have to comply with the requirements and obligations imposed on them based on this Act. The Minister can link orders and restrictions to the permit. One of these orders will entail that it be stipulated for which production quantity the producer is responsible, in the ambit of the tasks imposed on the producer pursuant to Article 2.3. This order is of particular importance if several producers have a permit on one island. Pursuant to the third section, the Minister may also link an order to the permit, imposing an obligation on the producer to provide financial security. The goal is to guarantee that the producer observes its tasks pursuant to the Act, and does not simply cease production, for example. This may involve the following forms of financial security: a security deposit or a bank guarantee and a mortgage or right of pledge. The amount for which the financial security is maintained will not exceed that which is reasonably needed to cover the expenses for observance of the obligations imposed by virtue of the Act. 2.2 Tasks and obligations of the producer Article A producer is charged with the task of, taking into consideration the permit: a. ensuring reliable and high-quality production; b. guaranteeing that over a long period the demand for electricity or drinking water can be met. If several producers are appointed, said producers will meet this demand together and each producer will produce at least the amount defined in the relevant permit; c. management, maintenance and development of the installations and materials that are used for production, in a manner that guarantees the safety, efficiency and reliability of production, taking into consideration the environment and public health. 2. Under or by virtue of Governmental decree, further rules are imposed with regard to the tasks, mentioned in the first section, in which case, with regard to drinking water, rules are at least imposed concerning: a. the quality, including minimum requirements for drinking water with respect to micro-organisms, parasites or other substances, in quantities or concentrations that could endanger public health; b. quality control and reporting by the producer. The tasks of the producer are included in Article 2.3. The most important task of the producer is to provide a reliable supply and of good quality (first section, under a), and to produce in sufficient volumes to meet the overall demand on the island (first section, under b). If several producers have a permit, said producers must meet the overall demand on the island together, and each producer must supply at least the amount of electricity or drinking water defined in the relevant permit. The task, mentioned in the first section under c, entails that the production installation must be safe and production must be established in such a manner that the burden on the environment is restricted. By virtue of the second section, further requirements will be imposed on the interpretation of these tasks, whereby, in any event, further rules will be imposed on the quality of the product to be supplied. For drinking water, these requirements could involve the quality of the drinking water and the manner in which the quality system must be established. Article It is mandatory for a producer to keep separate accounting for its statutory tasks. 2. The separate accounting contains: a. a balance sheet account and a profit and loss account; b. a specification of the allocation of the assets and liabilities and expenditure and revenue related to the tasks, intended in Article 2.3, whereby, if applicable, differentiation is made in the allocation of electricity or drinking water; c. explanatory notes on the rules used for depreciation. Article 2.4 stipulates that the producer must keep orderly accounting records with regard to the production of electricity and drinking water. A producer may be part of a larger organisational unit in which other activities are also conducted, above and beyond the production in question. Furthermore, the producer can also produce electricity and drinking water. The cost entries that pertain to several activities must be allocated to the production of electricity and drinking water, based on distribution codes. This allocation must be performed in a causal, transparent and consistent manner. 2.3 Regulation of the producer tariff Article The Authority for Consumers and Markets establishes, each year, based on the producer s proposal, the maximum production price which will be charged by this producer, to the distributor, for the electricity produced or for the drinking water produced. 2. The production price for electricity and drinking water: a. is based on the actual costs of production, taking into consideration a reasonable return; b. is structured from a component which is dependent on consumption, expressed in an amount in USD per kwh, or an amount per cubic metre of drinking water and a component which is independent of consumption, expressed in an amount in USD. 3. The component which is dependent on consumption comprises the operational and maintenance burdens and the energy costs related to production. 4. The component which is independent of consumption comprises the capital expenses. 5. The Authority for Consumers and Markets may decide to implement a discount on the component dependent on consumption, to promote efficient business management. 6. If a producer and the distributor form part of a vertically integrated company, internal settlement will take place, based on the price intended in the first section. 7. Further rules may be imposed by ministerial regulation, with regard to the procedure and the elements, and the manner in which tariffs are calculated, intended in this article. The regulation of the producer tariff is included in Article 2.5. The ACM establishes, pursuant to this article, at the producer s proposal, the maximum price which the producer may charge to its only buyer, the distributor. This price will be the base of the tariff for consumers, pursuant to paragraph 3.3. The production price is based on the actual costs incurred by a producer and takes into consideration a reasonable return (cost plus regulation). An individual price will be established for drinking water and electricity, and cross-subsidies will not be allowed. All costs related to the production will be discounted in the price. The production price is structured from three elements: the operational and maintenance burdens (the x-component), the fuel or energy costs (the y-component) and the capital expenses (the z- component). The first two elements are included in the component of the production price which is dependent on consumption, and this component will be charged to consumers by way of the variable consumption tariff, intended in Article 3.14, second section, under c. The capital expenses are included in the component of the production price which is independent of consumption, and will be included in the fixed consumption tariff. In this way, the fixed costs for production are always paid in the fixed consumption tariff. The fifth section stipulates that the ACM may implement a discount on the production price in order to provide an efficiency incentive to the producer. The producer, in turn, must apply a cost reduction, in order to attain the desired return. Further requirements may be imposed by ministerial regulation, with regard to, amongst others, the procedure and elements, and the manner in which tariffs are calculated. This may involve, for example, the latest date at which the producer must make a tariff proposal. For the time being, it a further specification is not yet a necessity, and the ministerial regulation is optional. Chapter 3. Distribution of electricity and drinking water 3.1 Appointment and establishment of distributor Article 3.1 It is illegal to distribute electricity or drinking water without an appointment as intended in Article 3.2. Article 3.1 stipulates that the distribution of electricity and drinking water may only be performed by an appointed distributor, or for drinking water on Saba, by the appointed company, intended in Article 3.2, fourth section. The ACM can impose an administrative fine for distribution without appointment by Our Minister. The supply of electricity generated individually is therefore also prohibited from being distributed through individual networks to third parties. Article Our Minister appoints one limited liability company as distributor for each public body. The distributor: a. has the necessary organisational, financial and technical qualities for proper execution of his task; b. can reasonably be deemed capable of observing the obligations and of executing the tasks, as included in this chapter. 2. Our Minister can link orders and restrictions to the appointment. 3. Our Minister may revoke the appointment if the distributor is unable to observe the obligations or is unable to execute the tasks indicated under or by virtue of this chapter. 4. If a drinking water network is not present in the public body, Our Minister will appoint, contrary to the first section, a company as distributor, and this company will be charged with distribution of drinking water by way of tank lorries, tankers or other means of transport, intended in Article 3.8, at a tariff which is established in accordance with Article 3.13 and The other articles of this chapter are not applicable. Article 3.2 governs the Minister s authority to appoint. The Minister appoints one limited liability company as distributor for electricity or water, per public body. The distributor for electricity and drinking water may be the same legal entity, but this is not necessary. Orders and conditions may be linked to the appointment. The appointment applies for an indefinite period, but may be revoked if the distributor is unable to observe its obligations or is unable to execute its tasks. An electricity network is in place for all of the islands and a distributor for electricity will therefore be appointed for all islands. This is not the case with drinking water. Plans have not been made for a drinking water network in Saba in the near future. One or more companies will be appointed, however, to distribute drinking water by way of tank lorries, tankers or other means of transport, at regulated tariffs, as intended in Article 3.8. These companies do not have to comply with the other requirements included in this chapter. The drinking water supplied by these companies will, however, have to comply with the requirements imposed by virtue of Article 2.3, second section, with regard to the production of drinking water, and these companies are also obliged to perform the task for a regulated tariff. Article A distributor has ownership of the network that it operates. 2. A distributor s shares are directly or indirectly encompassed within the state, provinces, municipalities or the public bodies Bonaire, Sint Eustatius or Saba. This article stipulates, in the first section, that the distributor must have ownership of the network that it operates. The second section stipulates that the distributor must be publicly owned. If the distributor s shares are owned by the public body, the Island Council, intended in Article 6 of the Law on the public bodies Bonaire, Sint Eustatius and Saba, will form the distributor s general assembly of shareholders. By directly encompassed, as intended in the second section, is understood that the ownership of the network, or the distributor s shares, is / are encompassed with one or more legal entities of which all shares are held by the state, provinces, municipalities or other public bodies, or by a legal entity that is a full subsidiary of one or more legal entities of which all shares are held by the state, provinces, municipalities or public bodies. Article The distributor s Supervisory Board consists of no more than three members. 2. A member of the company s Supervisory Board is only appointed after Our Minister has agreed with the appointment. In order to keep the costs for electricity and drinking water as low as possible, it is stipulated in Article 3.4 that the internal supervisory body, the Supervisory Board, may not consist of more than three individuals. The Supervisory Board s members are appointed by the shareholders, but Our Minister has to agree with the appointment first. Article The distributor maintains proper financial management and has sufficient capital and reserves to allow for necessary investments in the networks 2. The total debt divided by the sum of the total debt and capital and reserves, including minority interests and preferred shares, may not exceed 0.8. In this article, requirements are imposed on a distributor's financial management, in order to ensure that a distributor is not running major financial risks and as a result will always be able to perform its statutory tasks. In this case it specifically involves the investments that a distributor must make in its networks, to keep these functioning, maintained, renewed and expanded. The criteria included in the second section, governs the ratio between borrowed capital and total assets. In other words, the proportion between the total debt and the total value of the company. It is stipulated that a distributor must have at least 20% capital and reserves. A sufficient buffer must be in place to cushion incidental losses. Under total debt is understood the debt to providers for borrowed capital, as is evident from the distributor s balance sheet. This, contrary to capital and reserves, originating from the providers of equity. The differentia
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