1. 1 Regulatory Participation & Communication Workshop October 26-27, 2005, Hotel Rus, Kiev, Ukraine Nikolay Minkov Chairman, Energy & Utilities Committee, Bulgarian International Business Association Member, Electricity Market Liberalization Working Group, SEWRC Sofia, BULGARIA Sunshining Electricity Market Liberalization An Equilibrium Navigation over the Stakeholders’ Dream / Reality Ratio

2. 2 Sunshining Electricity Market Liberalization The complicated environment of energy market liberalization Energy Sector Reforms: Assets revaluation and restructuring Unbundling and rearrangements Utilities financial and corporate rehabilitation Ownership control transfers (privatization, BOT, etc.) Legal and regulatory relief - design and harmonization Regulatory authorities - capacity building Grid systems expansion and integration (electricity & gas, water & environment) Massive investments in rehabilitation and new facilities Market liberalization (fuels & emissions, electricity & gas) Market regionalization and European integration Industrial Sector Reforms: Acquiring post-privatization ownership control Reengineering business processes and cost optimization Market survival, redirections and new positioning Substantial investments in rehabilitation and new facilities Environmental liabilities and imperatives Other Reforms: Political System; Judiciary System; …

3. 3 Stakeholders and Balancers Assumptions (Stakeholders): Stakeholders as per legislation “Market but System”, “Commercial but Grid Code” Fair access to system data and market statistics Equally positioned on the market sphere Fair system risk allocation and management Equally distanced from the regulatory body Transparency on “Rules of the Game” preparation process Rights but obligations and contributions to the market developments Necessity of a critical mass market players and expertise Assumptions (Balancers): Involvement of all the balancing parties Independence in inference and judgment Dependence of facts and knowledge Quality of services assurance Sunshining Electricity Market Liberalization

4. 4

5. 5 Fair Risk Allocation

6. 6 Sunshining Electricity Market Liberalization Fair Transparency

7. 7 Sunshining Electricity Market Liberalization Fair Representation of Stakeholders

8. 8 Balanced Commercial Code / bilateral contracts Balanced market pricing model improvement Balancing groups model development Spot-market and Electricity exchange development Sustainable integration into the regional market Sunshining Electricity Market Liberalization

9. 9 Splitting the TSO and public wholesaler functions within the National Electricity Company Creating trustee over the TSO critical infrastructure development and cost controls Sunshining Electricity Market Liberalization

10. 10 Fair to all stakeholders GenCos’ free capacity allocation Encouragement of more active participation into the liberalized market The Price of New / Renew Investments Sunshining Electricity Market Liberalization

11. 11 Sustainable association of the demand-side interests Investments into energy savings and advanced enterprise energy management Channeling know-how and experience from elsewhere Sunshining Electricity Market Liberalization

12. 12 Post-privatization restructuring Development of MV/LV market environment Import of market know- how from elsewhere Support in development of critical mass market experts Sunshining Electricity Market Liberalization

13. 13 Pro-active policy towards licensing of trading companies Independent.OR. Tied traders? Eligible customers and tied traders… Sunshining Electricity Market Liberalization

14. 14 Fair and fast track Parliamentary response over the market needs Expertise capacity building for market related legal engineering Establishment of lobbying drivers to the energy market Sunshining Electricity Market Liberalization

15. 15 Market related knowledge and capacity building within the actors into judiciary system Quality assurance of the judgment processes “The independence of the inference and conclusion machine but dependence from facts and knowledge” Sunshining Electricity Market Liberalization

16. 16 Public / private partnership towards market liberalization, regional and European integration Support and capacity building of regulatory authorities Regulatory administration competitiveness over the regional market Sunshining Electricity Market Liberalization

17. 17 Support in knowledge and capacity building within branch associations, municipal authorities, consumer protection NGOs, media and universities with respect to energy market liberalization Sunshining Electricity Market Liberalization

18. 18 Thank you! with special acknowledgements to USAID and CIDA, NARUC and ERRA for their contribution to Bulgarian and SEE Electricity Market development Nikolay MINKOV Nikolay MINKOV Chairman, Energy & Utilities Committee Bulgarian International Business Association Sofia, Bulgaria Phone: +359 2 9376 276 Fax: +359 2 9376 435 Email: nminkov@uconomics.comnminkov@uconomics.com Sunshining Electricity Market Liberalization