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Romanian Electricity Sector Evolutions of the Regulatory Framework Nicolae Opri ş President of ANRE

Romanian Electricity Sector Evolutions of the Regulatory Framework Nicolae Opri ş President of ANRE. Legal Framework. Primary legislation Electricity Act – Law 318/2003 (GEO 63/1998), to be revised in 2006 Restructuring decisions – Government Decision (GD) 365/1998,

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Romanian Electricity Sector Evolutions of the Regulatory Framework Nicolae Opri ş President of ANRE

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  1. Romanian Electricity Sector Evolutions of the Regulatory Framework Nicolae Opriş President of ANRE

  2. Legal Framework Primary legislation Electricity Act – Law 318/2003 (GEO 63/1998), to be revised in 2006 Restructuring decisions – Government Decision (GD) 365/1998, GD 627/2000 .... GD 1342/2001, GD 1524/2002 Market opening decisions – GD 122/2000, GD 1272/2001, GD 48/2002, GD 1563/2003, GD 1823/2004, GD 644/2005 Energy sector strategy – GD 890/2003 (Road Map to 2015)

  3. The Electricity Law 318/2003 Stipulates the: • tasks and competencies of the regulator; • regulated access to the electricity transmission and distribution networks; • authorisation procedures for market participants; • unbundling of the generation, transmission and distribution/supply activities; • principles for the development of the electricity market and its gradual opening; • main functions of the TSO, DSO’s and electricity market operator; • rights and obligations of the market participants; • tariff principles to be applied in the sector; • promotion of renewable energy sources; • sanctions and contravention.

  4. ANRE - public institution under the co-ordination of the Prime Minister Mission - to create and implement fair and independent regulations to ensure an efficient, transparent and stable functioning of the electricity and heat sector and markets while protecting the interests of consumers Appointment Power - President and Vice President of ANRE are appointed by the Prime Minister for 5 years, upon proposal of the Minister. The Commissioners are appointed for 5 years by the Minister. Financing - sources outside the state budget covered from license and authorization fees and contributions paid by sector companies.

  5. Secure and non - discriminatory regulatory framework The main sector regulations issued by ANRE • Wholesale Electricity Market Commercial Code (revised version) • Network Codes (Grid Code – revised version, Distribution Code) • Metering Codes • Technical and commercial regulations • Tariffs methodologies • Authorizations and licenses • Rules regarding the connection to the networks • Performance standards

  6. INSTALLED POWER GENERATION 18.3 GW RESERVE MARGIN 2004 = 48,9 % (Available capacity – Peak demand/Available capacity) GENERATORS PARTICIPATION TO ELECTRICITY GENERATION IN 2005 TYPE OF FUELS USED FOR ELECTRICITY GENERATION IN 2005 Total overhead transmission lines – 9000 km Substations – 78; Power transformers - 138 CONSUMERS - 8537422 Total distribution lines – 310127 km Substations – 1296

  7. Main steps of the reform 1. Restructuring • vertical unbundling of generation, transmission, distribution/supply activities • horizontal splitting of generation and retail supply 2. Competition • wholesale market and retail competition • new entry into generation and retail supply allowed 3. Regulation • establishment of an independent regulator • provision of the third party access to the grid • incentive regulation of transmission and distribution networks 4. Ownership • allowing new private market players • privatizing the existing publicly owned businesses

  8. Tu Ro Cr De ElB Te Ga Hidroelectrica Nuclearelectrica RENEL Transelectrica TSO OPCOM – Market operator Ba Do Mo Ol MuN TrS MuS TrN D_1 D_2 D_12 ENEL Spa April 28 2005 S1 S10 S11 S104 E.ON April 04, 2005 CEZ April 05, 2005 Present structure of the electricity sector 7 Major thermal producers Hydro producer Nuclear producer 14 municipal CoGen producers and other IPP and selfproducers Transmission and system operator Market operator 8 Distribution and supply companies 12 Industrial platform distributors 104 Suppliers

  9. Authorizations and licenses Rules for granting licenses and authorizations in the electricity sector approved by GD 540/2004, published in Romanian Official Gazette 399/2004

  10. Transmission system operator • UCTE and ETSO member • Fully unbundling - independent TSO company • Technical Grid Code in line with UCTE Operation Handbook - full responsibility for the Power System Security of Supply - no major incidents since unbundling (2000) 10.10.2004 – Resynchronization of the two UCTE zones 09.11.2004 – Romanian TSO member of ETSO

  11. Evolution of the electricity market opening degree

  12. The wholesale electricity market Bilateral Contracts Centralised Market

  13. Trading platforms on the wholesale electricity market (1) Bilateral Contracts Market regulated contracts - between producers and 8 DISCOs (suppliers of captive consumers) negotiated contracts – between market participants Bilateral Contracts Centralised Market - starting with December 2005

  14. Trading platforms on the wholesale electricity market (2) Centralised Markets: • DAM (voluntary) • Balancing (mandatory) • Ancillary System Services (mandatory) • Cross Border Capacities (explicit auctions) Priority productions • Renewable energy: supply quota & green certificates market • Cogeneration: capacity payments To support investments the development of a capacity market is envisaged

  15. Day-ahead electricity market reform Cogeneration will continue to be prioritized in the market, based on specific bid validation The Integration of the Romanian Electricity Market into the European Electricity Market

  16. Average prices December 2005 on European Marketplaces OPCOM Day-Ahead Market July 2005-December 2006 Registred participants: 65 Average number of active participants: 30 Maximum number of active participants: 38 Average price [RON/MWh]: 125,51 Average price [EURO/MWh]: 34,94 Electricity traded volume [MWh]: 1.717.891,411 Average electricity traded volume: 388,927 MWh/h DAM trading cota: 6,72% Source: OPCOM

  17. NORDPOOL APX-Group EEX PPX PowerNext OTE EXAA OPCOM Borzen OMEL GME Regional Power Exchange Source: OPCOM

  18. Support schemes for priority production • Renewable sources • Generators received green certificates • Mandatory supply quota for suppliers • Green certificates trading: -bilateral or • - centralized market organized by the market operator (operational from November 2005) • Max and min limitation for green certificates values set up by ANRE: • -minimum value 24 Euro / MWh, - maximum value 42 Euro / MWh November – December 2005 7241 green certificates traded on centralized market

  19. Support schemes for priority production • Cogeneration units • Capacity payments for efficient qualified units • Contracts between TSO and generators with efficient qualified units • Contract prices: ancillary services tariffs

  20. Regulated access to the transmission and distribution networks • Technical requirements – • Grid Code – ANRE Order 20/2004 – Official Gazette 828/2004 • Distribution Code – ANRE Decision 101/2000 – Official Gazette 276/2000 • Rules for connecting to the networks - GD 867/2003 – Official Gazette 559/2003 • Tariffs for connection to the networks – • ANRE order 29 /2003 – Methodology for establishing the connection tariffs to the medium and low voltage networks • ANRE order 28 /2003 - Methodology for establishing refunds among consumers connected at different stages to the distribution networks • ANRE order 15/2004 and 32/2005 - regarding the approval of the connection tariffs for the medium and low voltage networks

  21. Network tariffs Transmission and Distribution – regulated activities Applied regulation - incentive regulation • Transmission: • revenue cap; • zonal Gs& Ls based on marginal costs • Distribution: • price cap (price basket)

  22. Transmission tariffs • revenue cap, CPI minus X formula; • Xefficiency=1% from controllable OPEX (without depreciation); • regulatory period 5 years, except for the first period which lasts for 3 years; • Correction Factors: quantity,new investments, losses, congestion and quality.

  23. Distribution tariffs • price cap (price basket) • regulatory period 5 years, except for the first period which lasts for 3 years • efficiency increase of 1% applied only to OPEX • correction factor on complying with the required minimum level of quality

  24. Conditions of distribution license • The License Holder shall make sure of the fact that there is full independence at the management and operational level between: • the distribution and supply to captive customers activities • any other activity carried out (in the electricity sector or in other field) by the License Holder and by the affiliated and associated enterprises. • Starting from the 01.01.2006, the License Holder shall also make sure that there is administrative unbundling between: • the distribution activity and • the activity of supply to captive customers

  25. Captive end-user tariffs • Full pass through • Regulated margin of 2.5% of the acquisition costs • Semestrial ex-post adjustments • NUT ensured by ANRE End-users average electricity price (without taxes) 74 Euro/MWh

  26. Average end-users electricity prices 1997-2006 - without taxes -

  27. Supply activity Electricity Labeling Obligation according to Directive2003/54 Regulation for electricity labeling issued by ANRE - 2005 First labels issued in April 2005, corresponding toyear 2004 acquisitions.

  28. Privatization of Distribution Companies

  29. Undergoing privatisations (1) • "Muntenia Sud" - S.A. - 2006; • Remaining three distribution/supply companies – 2006 - 2007; • Complexul Energetic Turceni - S.A. – integrated electricity&mining; • Complexul Energetic Rovinari - S.A. – integrated electricity&mining; • Complexul Energetic Craiova - S.A. – integrated electricity&mining • "green field" cogeneration capacities in Iernut, Palas, Bucuresti Sud power plants, as new IPP’s • Borzesti; • TERMOSERV branches individually or together with the power plant; • selling of "Termoelectrica“ shares to "Termoserv Galati" - S.A. and "Electrocentrale Galati" - S.A.; • Selling of the MEC’s shares to "Termoelectrica Midia" - S.A.

  30. Undergoing privatisations (2) SC "Hidroelectrica" - S.A. Bucuresti • Private capital increase for finalising some hydro objectives under construction (public privat partnership). • For microhydro power plants • new companies with mix capital (private and public); • other forms of partnership; • Sell of assets. "Transelectrica" - S.A. Bucuresti • Sell of shares for branches/services; • Sell of assets; • New joint-venture companies.

  31. Investments projects • Pump-storage Power Plant Tarnita-Lapustesti • Units 2 and 3 of Cernavoda Nuclear Power Plant • 400 kV Interconnection Lines with Hungary and Serbia & Montenegro • Black Sea DC link cable Reasons to enforce regional cooperation and trade: • Increase communication, exchange of information, rules harmonization • Promote opportunities for investment developments • Generation cost savings • Macroeconomic benefits

  32. Thank you for your attention ! Romanian Electricity and Heat Regulatory Authority Phone: (+ 40 21) 311 22 44 Fax : (+ 40 21) 312 43 65 www.anre.ro

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