1. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 1 Development of the Market Monitoring process in ERRA countries Maria Manicuta ANRE – Romania

2. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 2 Development of the Market Monitoring process in ERRA region Content: Market Monitoring process – general principles Development status of the Market Monitoring process in ERRA countries

3. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 3 Market Monitoring process – general principles Content: Aim of market monitoring Monitoring process Reporting frequencies Confidentiality Reporting requirements

4. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 4 Aim of market monitoring The aim of monitoring is to identify: whether the market operates effectively and efficiently according to the Market Rules; any inappropriate market conduct including abuses of market power and gaming; any flaws in the Market Rules design, in the market operator’s procedures and in the overall structure of the markets.

5. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 5 Monitoring process Steps of monitoring process : Market participants provide routine reports to Regulator; Regulator reviews the report to check for compliance with market rules. Report should require market participants to notify Regulator of any incidents of non-compliance.

6. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 6 Reporting frequencies Frequency of monitoring and reporting Market operator’s has to publish a daily report in a standard format on the activities, prices and volumes of trading in its market. Regulator decides the frequency with which other reports are produced and published.

7. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 7 Confidentiality Reports confidentiality Reports should be public if market participants are to retain confidence in the market. Some investigations may need to be confidential; in this case the public documents has to incorporate any necessary amendments, but protecting the commercial clauses.

8. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 8 Reporting requirements Implementation and initial operation monitoring The reports should aim to answer key questions, such as the following: Has been agreed among Market Participants and Market Operator: - a comprehensive financial settlement process? - a comprehensive set of Market Rules? - the implementation of Market Committee and its key advisory committees (Operating, Development, Disputes, Metering and Audit Committees)? - a Road Map for all Market Rules?

9. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 9 Reporting requirements Market is effectively operating (1) Regulator has to monitor the following issues: financial Has the market operator stayed within its agreed budget? market operations: has the market operator Applied the Market Rules thoroughly? Applied the settlements procedures according to the Market Rules? Applied the dispute procedure properly?

10. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 10 Reporting requirements Market is effectively operating (2) market trends: Is the volume of trades rising according to expectations? How many Participants have been established? disputes: Has the Disputes Committee implemented and applied the agreed disputes procedures to every dispute brought before it?

11. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 11 Reporting requirements Market is effectively operating (3) technical: these apply more to TSO than MO, but should include: Summaries of generation, reserve and demand; Summaries of transmission constraints and losses; Summaries of major system incidents; Trends in interconnection flows.

12. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 12 Development Status of the Market Monitoring process in ERRA countries Content: Market Opening Structure of the Market Monitoring of the Market 21 state representatives sent answers to the monitoring questionnaire

13. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 13 Market Opening Role of Regulator Market opening degree is established, in most countries, by the Energy Low. In some countries, Regulatory body in coordination with the Government is appointed to establish the degree of market opening.

14. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 14 Market Opening Market opening degree 11 countries have a Market opening degree higher then 30%. 6 countries have not yet opened market. The biggest degree of market opening: – Romania, 80%, –Czech Rep., 50 %.

15. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 15 Structure of the Market Wholesale Market – Bilateral contract: with DAM in 2 countries - Czech Rep., Lithuania; with BM in 3 countries - Bulgaria, Macedonia, Turkey; with DAM and BM in Romania; –Hybrid market: public utility supply segment operates in parallel with free market segment in Hungary; –Ukraine has mandatory pool type market; –Mongolia has single buyer type market; –3 states have not yet real time market.

16. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 16 Structure of the Market Wholesale Market TSO role on Wholesale Market: –Bulgaria - administers electricity transactions and organizes Balancing Market; –Czech Rep. – organizes contract payment including clearance of deviation; –Hungary - public utility wholesaler; –Romania – administers Balancing Market and Ancillary Services Market; –Turkey, Georgia and Ukraine – market operator (pool operator); –Macedonia - responsible with balancing regulation. For 6 countries are no answers and 2 countries have not TSO legal unbundling.

17. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 17 Structure of the Market Wholesale Market Settlement responsible In most countries the TSO is settlement responsible. In other countries the TSO is the market operator, too – Macedonia, Turkey and Ukraine.

18. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 18 Structure of the Market Wholesale Market Allocation of interconnection capacity Only 4 countries have rules for allocation – Hungary, Macedonia, Romania and Slovakia.

19. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 19 Structure of the Market Wholesale Market Internal congestions management 5 countries have not network congestion – Bulgaria, Estonia, Latvia, Lithuania and Mongolia. In some countries the congestions management rules are not yet issued – Georgia and Turkey. Congestions management rules by re–dispatching are used in 3 countries – Hungary, Macedonia and Slovakia. Congestions management rules by the Balancing Market or/and directly bilateral contracts for Fast and Slow Tertiary Reserves are used in Romania.

20. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 20 Structure of the Market Ancillary Service Market and Balancing Market Only 5 countries have Balancing Market – Estonia, Lithuania, Macedonia, Romania and Turkey – and only 3 countries have AS market - Lithuania, Macedonia and Romania -. Settlement responsible for balancing market and ancillary service are the TSOs (ISO) in Bosnia&Herzegovina, Bulgaria, Estonia, Hungary, Mongolia, Slovakia, Turkey and market operator for a few countries – Czech Rep., Lithuania and Romania.

21. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 21 Structure of the Market Balancing Market (1) Arrangements to offer and call balancing /regulating electricity are based on auctioning process. Pricing mechanism for balancing /regulating electricity varies from state to state as follow: –cost based price – Estonia; –indexed to DAM price – Lithuania; –marginal cost for capacity and/or electricity increment and marginal cost for electricity decrement - Macedonia; –for Dispatchable Units, the lowest prices from Daily Offer will be considered for Downward Regulation and all others for Upward Regulation; for Dispatchable Loads, the lowest prices from Daily Offer will be considered for Upward Regulation and all others for Downward Regulation – Romania.

22. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 22 Structure of the Market Balancing Market (2) Regulator approves the methodology used to calculate condition for balancing services in most countries and sets the methodology in some countries – Croatia, Estonia and Czech Rep. Regulators from some countries are not involved in setting methodology - Latvia and Slovakia. Romanian Regulator sets general rules for Balancing Market.

23. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 23 Structure of the Market Ancillary Service Market Most countries have the same type of ancillary services. In most countries TSO is responsible for AS acquisition. AS are procured and priced through auction process in Lithuania, Macedonia and Romania. For Romania, Secondary Reserve is paid at the marginal price and Tertiary Reserves are paid the price from offer (for a transition period – regulated prices).

24. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 24 Structure of the Market Retail market Concerning the number of eligible customers that already change the supplier on the free retail market, only 3 countries answered to this question – Lithuania, Romania and Ukraine.

25. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 25 Monitoring of the Market Competition (1) Regulator is responsible for ensuring effective market competition in most countries. In few countries, Commission (Agency) for Protection of Competition monitors competition – Bulgaria and Croatia. According to the Energy Law, Regulator monitors accounting unbundling of different activities. In most countries, legal unbundling among transmission, generation and distribution there is already in force.

26. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 26 Monitoring of the Market Competition (2) Regulator establishes Market Rules and Grid Code, in most countries. In 3 countries, Regulator approves market rules and Grid Code. In Bosnia&Herzegovina, the TSO establishes them and in Estonia, Ministry approves them.

27. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 27 Monitoring of the Market Market monitoring (1) Appointment of market monitor is established in the frame of Regulators in Armenia, Bulgaria, Georgia, Kyrgyz, Romania, and Slovakia or in the frame of Market Operators in Czech Rep., Kosovo, Macedonia and Romania. Type of prices on wholesale market is administered in most countries. In Bulgaria there are non-administered prices. In Czech Rep. are hourly fixed prices and in Ukraine are hourly non-fixed prices. In most countries, market monitoring team has some people in the frame of Regulator and monthly collects data directly from the market participants and receives daily/monthly data from the MO and TSO.

28. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 28 Monitoring of the Market Market monitoring (2) Regulator and Competition Authority are both responsible with customers complaints and market power abuse. Only a few countries have special rule sharing responsibilities between two bodies – Czech Rep., Kyrgyz, Hungary, Romania and Turkey. Frequency of the market monitoring report is yearly in 6 countries – Armenia, Kyrgyz, Latvia, Lithuania, Macedonia and Slovakia -, monthly in 5 countries - Bulgaria, Hungary, Moldavia, Romania, Turkey - and quarterly in 2 countries – Georgia and Mongolia. No answer to the question concerning market monitor control potential generation capacity withholding.

29. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 29 Monitoring of the Market Congestion management Regulator is authorized to approve rules for congestion management in 7 countries: Estonia, Latvia, Lithuania, Montenegro, Romania, Slovakia, Turkey. TSO is responsible with the establishment of the congestion management rules in 6 countries: Czech Rep., Georgia, Hungary, Macedonia, Romania, Turkey.

30. Licensing/Competition Committee Meeting September 5-6, 2005, St. Petersburg, Russia 30 Monitoring of the Market Dispute resolution regarding market issues In the most countries, Regulator resolves disputes regarding market issues and applies penalties and tariffs revision, suspension or revoking license in most countries. In other country, Regulator and/or court resolve disputes – Czech Rep., Estonia, Hungary, Latvia, Macedonia and Mongolia. In Romania, The Arbitration Committee resolve disputes.