MILESTONES TOWARDS THE ENERGY COMMUNITY TREATY

1. The Energy Community of South East Europe: Challenges and Prospects for a regional energy marketDr. Yannis Kelemenis

2. MILESTONES TOWARDS THE ENERGY COMMUNITY TREATY 1996: The first EU Electricity Directive 1998: The first EU Gas Directive 1998: The establishment of the Regulatory Fora 2002: The First Athens Memorandum of Understanding 2003: The Second Athens Memorandum of Understanding • 2004: Beginning of negotiations • 2005: Treaty establishing the Energy Community • 2006: Treaty Establishing the Energy Community enters into force

3. AIMS OF THE TREATY ESTABLISHING THE ENERGY COMMUNITY • create a stable regulatory and market framework capable of attracting investment in gas networks, power generation and transmission and distribution networks • create a single regulatory space for cross-border trade that is necessary to match the geographic extent of the energy markets • enhance the security of supply of the single regulatory space • improve the environmental situation in cross-border trade and related energy efficiency, foster the use of renewable energy, and set out the conditions for energy trade in the single regulatory space • develop competition on a broader geographic scale and exploit economies of scale

4. COMMITMENTS BY THE PARTIES UNDER THE TREATY Implement core parts of the EC acquis communautaire Create mechanisms for long-distance energy transportation and security of supply; urge the harmonization of market designs, mutual recognition of licenses and free establishment of companies, development in the areas of renewable energy sources and energy efficiency. provide for the free movement of network energy and allow for further measures to be taken towards creating a single energy market; establish an external energy trade policy and provide for a mechanism of mutual assistance between the Parties in the event of energy disruption.

5. T H E I N S T I T U T I O N A L B A C K G R O U N D • The Aquis on Electricity • The Aquis on Gas • The Aquis on Environment • The Aquis on Competition • The Aquis on Renewables

6. KEY ISSUES TOWARDS IMPLEMENTING THE ENERGY COMMUNITY TREATY • National wholesale and retail markets • Cross border issues • Access to national networks and the role of the TSOs • Security of supply • Unbundling • Market concentration • Institutional Organisation

7. Operability of market rules at national level Tariff issues Market opening Technical rules Licensing issues Public Service Obligations KEY ISSUES TOWARDS IMPLEMENTING THE ENERGY COMMUNITY TREATY (con’t)

8. S T E P S T O W A R D S D E V E L O P I N G T H E R E G I O N A L M A R K E T • Increase convergence of national market designs and market rules • Increase convergence of system access rules and transmission tariffs • Make stronger co-ordination of national institutions • Regulators to elaborate proper market rules and monitor national markets • TSOs to ensure optimal use of cross-border capacity and balancing power exchange • Regulators and TSOs to make available sufficient transmission capacity to players • Give strong political support to the whole process

9. S T E P S T O W A R D S D E V E L O P I N G T H E R E G I O N A L E L E C T R I C I T Y M A R K E T D E S I G N • Standardization of bilateral contracts with physical delivery; • Regional day-ahead market (implementation of flow-based market coupling); • Balancing arrangements (cross-border intraday and balancing trade); • Harmonisation and improvements of the long term explicit auctions of transmission capacity (improvement of auction rules and firmness of cross-border capacity allocation); • Common calculation of cross-border capacities (long and short term); • Maximisation of the amount and of the utilisation of cross-border capacities; • Congestion management; • Capacity adequacy mechanisms (regional capacity investment plan); • Regional SEE Market Operation Code; • Market mitigation, monitoring and transparency; • Harmonisation and improvement of data exchange; • Power exchanges and financial institutions.

10. THANK YOU