Implementation and results from Deregulation

1. Implementation and results from Deregulation • Introduction • Consequences of the liberalization • Illustration : the Electrabel case • Example of an important change program • Lessons and recommandations • Conclusion

2. 1. Introduction •  schedules and rhythms of liberalization •  starting situations •  possibility to compare  action plans  final business models already liberalized countries •  return of experience countries still in the starting blocks

3. 2. Consequence of the liberalization losses of synergy • breaking up of value chain (high) costs of unbundling • to compensate by : • new horizontal synergies • maximising efficiency of asset management and operation new functions • performant IT applications optimizing existing processes

4. 3. Illustration by the Electrabel case • complex and interesting case : 4 Regulating Bodies • unbundling  - generation  low cost producer - transmission network :  new independent company (Elia) - trading  risk management - sales activity  new products, services, pricing techniques - distribution networks  • in association with the municipalities • pressures regulators NB : shareholders grid companies - State and/or municipalities (B,NL,F, SP)  2  tendencies - Privatising (UK)

5. 4. Example of an important change program 4.1. regulated network business  - independant environment - new contractual rules • - connections contracts - supply contracts - access contracts

6. The new situation (contractual) GEN supply contract Supplier 1 supply contract Customer access contract connection contract DGO • management of the networks • management of * connection contracts • *access contracts • billing to supplyers for *acces to the networks • *use of the networks DGO

7. 4.2. transformation program  - supply projects  - network projects : • access and transit • meter reading, treating and forwarding • management of customer request • data bases  3 major factors : • process reengineering • IT development • "on-site" implementation  applications, integration and data

8. PHYSICALL SCENARIOS As today but modified NEW Relational Scenarios Contact Clients Project TTG/UNINOM Project China Net Call Center Acces Register Access & Transit Treat Complaints – Outages – Technical Problems Project Acces & Transit Project Smallworks / ISUNET National Communication Network WORKS Client Collect Treat Forward Metered Data INDEXIS Supplier Access Responsible Supply Call Center OTHER PLAYERS Project MRCO

9. 4.3. on the field implementation heavy impact on organizations - unbundling call center - works applications - access and transit facility - independant organization  Indexis - service level agreements - flexibility

10. 4.4. some milestones and figures - start : end 2000 - milestones : 1-1-2002 1-1-2003 1-7-2003  full liberalization E and G in Flanders 1-1-2004 (?) 1-1-2007 (?) - estimated budget : > 60 M € till 1-7-2003 - ressources : > 200 people

11. 4.5. major observed risks - instability of regulation - migration of huge quantities of data - interfaces between IT applications - field implementation

12. 5. Lessons and recommandations • to anticipate the evolution and cooperate for the establishment of the rules. • being a private incumbent and vertically integrated dominant company  comfortable !  - constructive dialogue with authorities - efficiency of activities on home market - to expand core activities outside home market • experience of deregulation  - increase in efficiency (but manpower ) - no increase of revenues on the traditionnal home market - increase of revenues outside the home market only if sound expanding policy.

13. 6. Conclusions • Key words of the Electrabel transformation program : - progressiveness, harmonization and synergies / Regions • Keep the customer happy !