1. Märt Ots Estonian Competition Authority Baltic Electricity Market Forum Kuressaare 4.06.2010 Latest developments in Estonia

2. Market developments (1) Transitional period of opening of the electricity market in Estonia  Until 2009 market opening level was 12%. Eligibility level 40 GWh.  From 1.01.2009 35%. Eligibility level is 2 GWh.  From 2013 100%. The price cap on non-eligible customers tariff is set by the regulator. Until 01.04.2010 the eligible consumers have had the right to purchase electricity with regulated price. Since 01.04.2010 the eligible customers have no right to purchase electricity with regulated price.

3. Market developments (2) The Nord Pool Tallinn power exchange has started by 01.04.2010. Today's market price is some how higher the regulated price. The full market opening scheduled by 01.01.2013. Expected abandon of all type of price regulation (except network tariffs).

4. Estlink (Finland-Estonia) Estlink 1 (365 MW).  In operation since 2006 as a commercial link.  TPA regime for capacity of 250 MW today.  Estlink 2 (650 MW)  Planned as a part of TSO-s with TPA. 100 million € support from the EU. Positive decisions made by the Finnish and Estonian TSO. Should be in operation by 2013. The links to well-functioning Scandinavian market are essential for the market developments in Baltic's.

5. Ownership unbundling of TSO Since January 2010 the Estonian TSO is an independent company. The shares of the company have been transferred from Eesti Energia AS to the Ministry of Economic Affairs and Communications. Since 100% of the shares of Eesti Energia AS are owned by the government, the final goal is to transfer the shares of Eesti Energia AS and TSO to the different ministries.

6. New tariffs for TSO Main reason for increased tariffs  The drop in transmission volumes due to the economic recession by 8%.  Higher return on capital invested WACC 7,56% instead of 6,27%  Tariff increase 11%. But average tariff increase since 2005 1,6%, which is lower than inflation.

7. New generation capacity Opening of two new wood and peat CHP units in Tallinn and Tartu. 25 MW el each.  30 % of heat supply in Tallinn and 95% in Tartu relies now on wood and peat. Opening of 39 MW el wind park in Aulepa (western part of Estonia). New 25 MW el CHP plant in Pärnu, using of wood and peat. In operation in the beginning of 2011. But all of those investments are heavily subsidised by green energy tax.

8. Subsidies on renewables and CHP-s. High levels subsidies paid to renewables and CHP-s  Renewables (wood, wind, biogas) 53,7 €/MWh + market price.  CHP-s (peat, gas, waste) 32 €/MWh + market price. 8,1 €/MWh paid the by each of electricity customers as green energy tax, 20% from the generation cost. The Competition Authority has started a market analyse on the size of green energy subsidies.

9. 9 Using of competition act for the energy issues The electricity sector is regulated by sector (electricity market) and general (competition) acts.  In the electricity sector the network business is very well regulated by electricity market act.  The abuse of market dominant position in generation and supply is not well regulated by sector legislation. The definition of the market dominance:  the position enables to operate in the market to an appreciable extent independently of competitors, suppliers and buyers;  market share of 40% by turnover

10. Proceedings according to the competition act. In the energy sector a number of proceedings were commenced under the competition act.  The abuse of market dominating power by Narva Power Plants (the daughter company of Eesti Energia AS). The precept was issued by ECA, the fine was imposed to the company.  Third party access to the district heating network.  Applying of dissimilar conditions to equivalent agreements with the gas customers by AS Eesti Gaas (market dominating entrepreneur, the single gas importer). To the similar customers gas was sold with different prices.  Imposing unfair trading conditions to the secondary gas market by AS Eesti Gaas.

11. Thank You for Your Attention! Further information www.konkurentsiamet.ee