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by Vidmantas Jankauskas Chairman ERRA

10 éves a Magyar Energia Hivatal 10th anniversary of the Hungarian Energy Office. REGULATORY EXPERIENCES IN THE CENTRAL AND EASTERN EUROPEAN REGION. by Vidmantas Jankauskas Chairman ERRA. Budapest, 16 September 2004. Plan of the presentation. regulatory institutions in the CEE region ERRA

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by Vidmantas Jankauskas Chairman ERRA

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  1. 10 éves a Magyar Energia Hivatal 10th anniversary of the Hungarian Energy Office REGULATORY EXPERIENCES IN THE CENTRAL AND EASTERN EUROPEAN REGION by Vidmantas Jankauskas Chairman ERRA Budapest, 16 September 2004

  2. Plan of the presentation • regulatory institutions in the CEE region • ERRA • liberalisation of the electricity market • gas market liberalization V.Jankauskas, Chairman

  3. Regulation of energy markets • until 1990 State was an owner and a regulator of the energy sector in almost all countries • independent energy regulation was existing in the U.S. and some other countries • liberalization and privatization of the energy sector caused a need for an independent regulation • in Europe the reform started with the implementation of the Thatcher’s liberalization and privatization program in the U.K. • OFFER and OFGAS were first independent energy regulatory institutions in Europe V.Jankauskas, Chairman

  4. Development of regulation in the former communist countries • the State was sole owner and regulator of the energy sector • the need for an independent regulation arose with the privatization • Hungarian Energy Office was established in 1994 with the on-going privatization of the energy sector • gradually independent energy regulators were introduced in most of the former communist countries in Europe V.Jankauskas, Chairman

  5. Development of regulation in the CEE countries • the other important driving force to create independent regulatory agencies for the CEE countries was a goal to join EU • EU Electricity and Gas Directives setting the legal background for the liberalization were transposed into the national legislation of the EU Accession countries • until 2001 independent energy regulatory agencies were established in all the CEE countries V.Jankauskas, Chairman

  6. Independent energy regulatoryagencies established • 1994 - Hungary (MEH) • 1997 - Poland (URE), Lithuania (VKEKK) • 1998 - Estonia (EEI) • 1999 - Bulgaria (DKEP), Romania (ANRE) • 2000 - Slovenia (AE) • 2001 - Latvia (SPRK), Slovakia (URSO), Czech Republic (ERU) V.Jankauskas, Chairman

  7. Regulatory institutions of the new EU MS V.Jankauskas, Chairman

  8. Sectors regulated by the CEE regulatory institutions V.Jankauskas, Chairman

  9. Establishment of ERRA • USAID and NARUC were arranging technical forums, meetings and study tours for the countries in the region • participants expressed a need to create more formal organization • in December 2000 representatives from 15 regulatory authorities signed a treaty establishing ERRA • today there are 22 full and 3 associate members V.Jankauskas, Chairman

  10. Purpose of ERRA identified by the founding members • to improve national energy regulation in member countries • to foster development of stable energy regulators with autonomy and authority and to improve cooperation among energy regulators • in addition, the Association strives to increase communication and the exchange of information, research and experience among members and increase access to energy regulatory information and experience around the world and promote opportunities for training V.Jankauskas, Chairman

  11. ERRA activities • 2 standing committees: Tariff/pricing and Licensing/competition • European Integration Working Group and Benchmarking monitoring WG • Annual Energy regulation and investment conferences in Budapest - already 3 • study tours and exchange programs • peer reviews • training programs V.Jankauskas, Chairman

  12. Market openingsource: EC DG TREN Memo, July 2004 V.Jankauskas, Chairman

  13. Liberalisation issues in the CEE region:electricity sector • EC Electricity Directive in practice (sometimes, also legally) is not implemented • market is not functioning: few switches • large generators dominate in the market • stranded costs caused by long-term PPAs • power exchange for some longer time operates in Warsaw only • not always adequate structure and level of network tariffs V.Jankauskas, Chairman

  14. Market concentration in generationsource: EC benchmarking report 2003 V.Jankauskas, Chairman

  15. Favourable conditions for the regional trade V.Jankauskas, Chairman

  16. Gas market structuresource: EC benchmarking report 2003 V.Jankauskas, Chairman

  17. Gas market liberalisation issues • very limited or no domestic resources • in most cases - supply from one country - Russia • no other supply routes • so all countries except of Hungary may ask for a derogation according to Gas Directive art. 28, p. 1 • but market opening already has started (except Latvia) • national monopolies clearly dominate in the market • so what is the choice for consumer? • liberalisation of the Russian gas market is a necessary condition for the liberalisation of the CEE markets V.Jankauskas, Chairman

  18. CONCLUSIONS • Hungarian Energy Office (HEO) was the 1st independent energy regulatory agency in the region • HEO was one of the main founders and developers of the ERRA • Hungary is leading in liberalization of the energy sector in the region • long live HEO! V.Jankauskas, Chairman

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