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Czech Republic

Czech Republic. Monica Shah Abby Price Kelly Steinhebel David Levitt. Overview. ERO regulation Ownership of utilities and transmission capacity Gas market reform history Electricity Infrastructure Liberalization Price regulation Summary. ERO Regulation.

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Czech Republic

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  1. Czech Republic Monica Shah Abby Price Kelly Steinhebel David Levitt

  2. Overview • ERO regulation • Ownership of utilities and transmission capacity • Gas market reform history • Electricity • Infrastructure • Liberalization • Price regulation • Summary

  3. ERO Regulation • 2001 Energy Act created Energy Regulatory Office (ERO) • Grant licenses to operate in energy sector • Regulate and set max prices • Resolve disputes related to access to transmission or distribution networks • Responsible for opening of market • Manage privatization

  4. Ownership of Utilities and Transmission Capacity • Electric • CEZ – owns majority of production capacity • - 68% owned by National Property Fund • Remaining 32% distributed voucher privatization in 1992 and 1994 • CEPS – owns transmission capacity • 34% owned and operated by CEZ • 66% owned by state, considering sale

  5. Gas – Market Reform Timeline • 1989: Czech Gas Works (CPP) in initial move towards capitalism • 1994: CPP divided into 8 RDCs and Transgas • Monopoly on gas imports • Owns and operates transmission system • Operates almost all storage facilities • Sells gas to RDCs • 1994-98: Privatization begins with vouchers • 2001: Transgas becomes joint stock company • 2002: Transgas and shares in RDCs sold to German RWE for $3.6 billion

  6. Shares sold by the National Property Fund of the Czech Republic: 2002 • Transgas 96.99% • Prague Gas 49.18%* • Central Bohemian Gas 48.49% • Eastern Bohemian Gas 47.10% • Northern Bohemian Gas 49.18% • Western Bohemian Gas 45.84% • Southern Bohemian Gas 46.66%* • Southern Moravian Gas 47.65% • Northern Morovian Gas 40.05% *RWE gas received only minority shares of these companies

  7. Ownership of Utilities and Transmission Capacity • Gas • Transgas- sold along with majority shares in 6 of 8 RDCs to German RWE in 2002 • “One-package sale” • Owns 32,000 of gas pipelines • 2 RDCs – Foreign investors own majority shares

  8. Electricity - Infrastructure • CEZ • Joint stock company majority owned by NPF • Dominant electricity generator • Most of electricity sold to 8 regional distribution companies (REAS) • CEPS • Sole transmission operator • 66% owned by state • 34% owned by CEZ  will sell to third party ordered by Competition Office • Exclusive license for transmission until 2026

  9. Electrical Transmission System

  10. Electricity - Infrastructure • Regional Electricity Distribution Companies (REAS) • Natural monopolies in respective regions • CEZ controls 5 distributors and minority interest in other 3

  11. Electricity - Liberalization • CEZ must sell minority stake and one of majority stake in distribution companies • Attempts to sell CEZ failed • Timetable for third party access • 2002: largest customers (approximately 2/3 of demand) able to choose supplier • 6 out of 77 eligible customers switched suppliers • 2006: all customers able to choose their supplier

  12. Prices • Moving away from industry subsidy of residential • 22% VAT in 2002 across the board • Gas • Quarterly price adjustments at the retail level • Monthly price adjustments at the wholesale level based on historical ave. fuel price • ERO determines rate with Transgas input • Two decreases in 2002, 4-5% increase in 2003 • Electricity • Individual rates to captive RDCs and end users prepared for 2003 with aim of eliminating cross subsidies • Low voltage users: 50% of cost is transmission, 41% generation, 7% service fee • High voltage users: 29% transmission, 60% generation,10% fee • Small increase in transmission fee in 2003

  13. Change in Gas Price

  14. Change in Electricity Price

  15. Summary • Recent efforts towards privatization to accommodate European Union • Expected entry on May 1st • Much of “privatized” industry still held indirectly by state, especially electric • Prices regulated by ERO • 3rd Party access to electricity grid by 2006, 1/3 of gas grid by 2008 • Is it working?

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