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Romanian Energy Regulatory Authority – ANRE –

Romanian Energy Regulatory Authority – ANRE –. Regulatory Issues in Romania Bogdan Anton Expert ANRE – Annual Reports Analysis Division Southeast Europe Regional Regulatory Reporting and Accounting Systems Workshop. Contents. ANRE – the Romanian Energy Regulatory Authority;

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Romanian Energy Regulatory Authority – ANRE –

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  1. Romanian Energy Regulatory Authority – ANRE – Regulatory Issues in Romania Bogdan Anton Expert ANRE – Annual Reports Analysis Division Southeast Europe Regional Regulatory Reporting and Accounting Systems Workshop May, 19-20, 2008 Bucharest - Romania

  2. Contents • ANRE – the Romanian Energy Regulatory Authority; • Assets valuation; • O&M Costs; • Cost Allocation; • Disallowed Costs; • Supply Costs. May, 19-20, 2008 Bucharest - Romania

  3. ANRE • ANRE – the Romanian Electricity, Heat and Gas Regulatory Authority • ANREwas established by Government Emergency Ordinance 29/1998, approved and modified by Law 99/2000, as an independent regulator for the electricity and heat sector • 2007:ANRE is the regulator for the gas sector, too • ANREis a public autonomous institution under the co-ordination of the Romanian Prime Minister May, 19-20, 2008 Bucharest - Romania

  4. Assets valuation The valuation at the time of privatization: • Book value - year 2003; • Maximum value : 200%; • No assets excluded. May, 19-20, 2008 Bucharest - Romania

  5. O&M Costs If the activity is provided by an economic entity, outside the utility (external costs): • Auctions If there are not Auctions: • The O&M costs are updated/ indexed to inflation index May, 19-20, 2008 Bucharest - Romania

  6. Cost Allocation The Romanian Energy Law (no.13/2007) specify for all License holders: • Article 17: “To keep separate accounts for each activity that is within the object of the license granted by the competent authority for the vertically or horizontally integrated undertaking in the electricity sector, in the same way as it is proceeded when the respective activity is performed by separate sector undertakings and to draw up financial reports as per the standard format issued by the competent authority” • Article 11: “Effective separation of accounts, according to Art. 17, in order to avoid cross-subsidies among electricity generation, transmission, distribution and supply” May, 19-20, 2008 Bucharest - Romania

  7. Cost Allocation The Allocation of Costs – Major requirement: • The existence of a clear financial separation between: • Licensed and Non-licensed Activities; • Regulated and Non-regulated Activities. In order to: • avoid cross-subsidies May, 19-20, 2008 Bucharest - Romania

  8. Cost Allocation The basic Criterion for cost allocation between Regulated and Non-regulated activities: • Sharing the costs by types of items: • Direct Costs; • Indirect Costs; • Overhead Costs. May, 19-20, 2008 Bucharest - Romania

  9. Cost Allocation Costsallocation between “parent” and “daughter” companies: Not allowed For Indirect and Overhead Costs: • Allocation Keys; • Different keys for different activities; • The keys are set by each utility May, 19-20, 2008 Bucharest - Romania

  10. Cost Allocation • The keys are defined in the IT software used for costs management (e.g: SAP); • The Regulator is informed about the allocation keys; • The Regulator aims keys that will not change in time (in a regulatory period); May, 19-20, 2008 Bucharest - Romania

  11. Cost Allocation • Examples of allocation keys: • Percentage (%) – for indirect costs; • Number of persons directly involved in the activity – for overhead costs; For O&M costs: • Number of meters, • Number of telecom equipments, • Number of lines - equivalent Km. May, 19-20, 2008 Bucharest - Romania

  12. Disallowed Costs • There is no any “prudency test” • for O&M Costs; • for investments (capex). • The max. limit for distribution price increase: 18% - during the first regulatory period (2005-2007); • The max. limit for distribution price increase: 12% - in the second regulatory period (2008-2012); May, 19-20, 2008 Bucharest - Romania

  13. Cost of new construction • In Romania, there are not allowed costs of new construction, before the plant is put into service; • The investment costs will be recovered - based on the future price/tariff (the assets’ depreciation is a cost element). May, 19-20, 2008 Bucharest - Romania

  14. Supply Costs • The Romanian electricity market consists in: • One Regulated Area; • One Non-regulated (Free) Area; • The Regulated Area is working as “smoothing” mechanism for the Non-regulated Area – in order to avoid the high volatility of the prices (on the free market) May, 19-20, 2008 Bucharest - Romania

  15. Supply Costs • Inside the Regulated Area: • For regulated entities • To avoid high volatility of supply, the competent authority (ANRE) regulate the activities on the “whole route”: • Generation; • Transmission; • Distribution; • Supply. May, 19-20, 2008 Bucharest - Romania

  16. Thank you for your attention ! b_anton@anre.ro www.anre.ro May, 19-20, 2008 Bucharest - Romania

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