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REGULATION OF THE HUNGARIAN WIRE/PIPELINE ENERGY MARKET AND THE HUNGARIAN REGULATORY EXPERIENCES

REGULATION OF THE HUNGARIAN WIRE/PIPELINE ENERGY MARKET AND THE HUNGARIAN REGULATORY EXPERIENCES. Ferenc J. Horváth, President Hungarian Energy Office 2 nd German-Hungarian Energy Conference Berlin, 30 November 2004. NATIONAL ENERGY USE.

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REGULATION OF THE HUNGARIAN WIRE/PIPELINE ENERGY MARKET AND THE HUNGARIAN REGULATORY EXPERIENCES

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  1. REGULATION OF THE HUNGARIAN WIRE/PIPELINE ENERGY MARKET AND THE HUNGARIAN REGULATORY EXPERIENCES Ferenc J. Horváth, President Hungarian Energy Office 2nd German-Hungarian Energy Conference Berlin, 30 November 2004

  2. NATIONAL ENERGY USE

  3. STRUCTURE OF ELECTRICITY AND NATURAL GAS SOURCES IN 2003

  4. MILESTONES IN HUNGARIAN ENERGY INDUSTRY Corporate and ownership structure, and regulation • 1992: destroy of vertical trusts (OKGT, MVMT) • 1994: legal regulation; Electricity andGas Acts, HEO • 1995: privatisation • 1997: adjustment of price level • 1998: District Heat Act • 1999: new tariff system, business model • 2001: new Electricity Act • 1 January 2003: opening of electricity market • 2003: new act on natural gas supply • 1 January 2004: opening of natural gas market • 1 June 2004: all non-household customers are eligible

  5. SHARE OF ELECTRICITY LICENSEES IN THE PROPORTION OF REGISTERED CAPITAL ON 31 DECEMBER 2003

  6. MARKET SHARES BASED ON THE QUANTITY OF ELECTRICITY SOLD BY ELECTRICITY SUPPLIERS

  7. BREAKDOWN OF REGISTERED CAPITAL ACCORDING TO PROPRIETARY CATEGORIES IN NATURAL GAS INDUSTRYON 31 DEC 2003

  8. MARKET SHARE OF E.ON (CONSIDERING ITS SHARES) ACCORDING TO THE QUANTITY OF SOLD GAS

  9. MODEL OF ELECTRICITY INDUSTRY

  10. MAIN RESPONSIBILITIES OF THE OFFICE (1) • Regulation of wire/pipeline energy undertakings • Inspection of wire/pipeline energy undertakings • Consumer protection • Information

  11. MAIN RESPONSIBILITIES OF THE OFFICE(2) Licensing, modification of licenses, approval • Operational license • Establishment license • Operational licenses of competitive market players • Approval of Codes

  12. MAIN RESPONSIBILITIES OF THE OFFICE(3) Price regulation, price preparation • Price regulation of charges for system use - price regulatory issues of developments - incentives of efficient operation • Managing price regulatory issues of dual market • Continuous development of captive (public utility) tariff systems • Assessment of claims on price inspection

  13. MAIN RESPONSIBILITIES OF THE OFFICE(4) Customer protection • Inherent in all our activities • Handling customers complaints • Setting standards and monitoring of quality of supply • Energy Interest Representing Board (EIRB)

  14. MAIN RESPONSIBILITIES OF THE OFFICE(5) Information, publicity, cooperation • 1500 resolution in 10 years • 1300 complaints per year • Annual report to Parliament • Annual information publication with data • Presentations, articles, interviews, information supply • Cooperation with other authorities • Wide scope of international relations

  15. Generation for competitive market Generation for public utility purposes Cross - bordering Organised electricity market Public utility wholesaler Independent System Operator Public utility supplier Electricity trader Public utility consumers Eligible consumers ELECTRICITY PURCHASE ON LIBERALISED MARKET

  16. FEED-IN GUARANTEED IN PPAs, EFFECTIVE FEED-IN AND EXPECTED DEMAND

  17. RESOURCES FOR THE FREE MARKET • Yearly and shorter-period auctions for • Cross-bordering (import) capacities • Domestic (virtual) power plant capacities • „Temporary spare capacities” offered by the public utility wholesaler • Domestic power plants producing for free market • Balancing energy

  18. MEETING DAILY ELECTRICITY DEMAND OF AN ELIGIBLE CUSTOMER

  19. TARIFFS FOR SYSTEM USE (1) • Tariffs for system control and ancillary services • Transmission network tariffs • Distribution network tariffs The components of tariffs for system control and ancillary services: • System operator charge • Charge of ancillary services • Charge of transmission losses • Stranded cost charge • Green charge Guidelines governing the tariffs for system use: - System control and ancillary services and transmission charges are to paid for the volume of electricity on a monthly basis (HUF/kWh).

  20. TARIFFS FOR SYSTEM USE (2) - distribution network tariffs vary according to the voltage level of the connection point (based onthe „poststamp” principle) and contains a fix charge, a capacity charge and energy-dependant rates (HUF/ connection point/ year); HUF/ kW/ year; HUF/ kWh; HUF/ kVArh), - charges are to be paid by customers (in the beginning, generators do not pay).

  21. EFFECTIVE MARKET OPENING IN ELECTRICITY INDUSTRY (2003-2004)

  22. END-USER PRICES OF ELECTRICITY 1985-2003

  23. AVERAGE FINAL CUSTOMER PRICES OF ELECTRICITY, 2003 Unit: HUF/ kWh

  24. ACCESS RIGHTS IN NATURAL GAS SYSTEM

  25. SOME QUESTIONS OF MARKET OPENING IN GAS INDUSTRY (1) • What is the expected ratio of market opening? Legal market opening: since 1 January 2004 - 70 %, since 1 July 2007 - 100 %. Ratio of active market is expected to be 5-10 % in the first years according to international experiences. • Is there sufficient cross-border capacity? • Is there free gas source in neighbouring countries?

  26. SOME QUESTIONS OF MARKET OPENING IN GAS INDUSTRY (2) • Administrative tariff rates additional to gas prices (at prices of January 2004): - appr. 4.1 HUF/m3transport charge, - appr. 2.2 HUF/m3storage charge, - appr. 3.7 HUF/m3 distribution charge in the case of customers connected to distribution network and contracting capacity over 500 m3/h. Total regulated system use charge of eligible customerscontracting capacity over 500 m3/h : 10 HUF/m3.

  27. Transmission tariff Transmission tariff Storage tariff Distribution tariff Gas charge Capacity charge Storage tariff Földgáz Natural gas cost tarifa költség Storage-in charge Storage-out charge Mobile charge Csúcs díj Peak charge COMPONENTS OF CUSTOMERS BILLS

  28. END-USER PRICES OF GAS 1985-2003

  29. EXPECTED LEVEL AND MINIMUM QUALITY REQUIREMENTS OF GAS SUPPLY(1) Key factors in association with the level of supply (distribution, public utility supply) - with regard to distribution activity: ·specific number (pcs/1000 customers/year) and duration (hour/1000 customers/year) of outages (breakdowns, maintenances), ·outage index calculated as the annual aggregation of the multiplications of durations of outages and ofnumber of concerned customers (in ‰). In case any of the mentioned quality indices of the distribution licensee decreases significantly in 2004, it has to give a quality price discount from distribution charges in the following year; however if the indices improve significantly, the revenue limit of the company will shift.

  30. EXPECTED LEVEL AND MINIMUM QUALITY REQUIREMENTS OF GAS SUPPLY(2) - with regard to the public utility supply activity: ·duration of handling claim of new captive customers for gas supply (calendar day), ·duration of inspection of connection pipeline and consumer equipment design (calendar day), ·replyingwritten complaints in connection with gas supply (calendar day), etc. In case the described minimum quality requirements (e.g. specified deadline) are not met, the public utility supplier is obliged to pay a penalty of HUF 3,000– even without requested by the customer.

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