Presentation on theme: "Achieving a sound investment climate – the role of regulators Boaz Moselle Joint-Chair, CEER Gas Working Group Managing Director – Corporate Strategy Ofgem."— Presentation transcript:
Achieving a sound investment climate – the role of regulators Boaz Moselle Joint-Chair, CEER Gas Working Group Managing Director – Corporate Strategy Ofgem
2 Background Infrastructure investment generally happens through: –Regulation (e.g. for onshore transmission networks); or –Competitive markets (e.g. for power stations). Changing industry environment –Moving towards the new world –Increasing reliance on the market –Inevitable changes to the way investment is secured
3 Regulation and Investment Appropriate level of infrastructure is key for: –development of an internal energy market –Security of supply It is also necessary but not sufficient for effective competition within the EU gas market –Also need transparent and non-discriminatory access Promotion of investment and protection of regulated investment are core duties of the regulator –For example, Ofgem has a duty to ensure that licencees can finance their duties and statutory obligations.
4 Moving towards the ‘new world’ In the past, the European gas industry developed largely on the basis of national or regional monopolies, with investment often co- ordinated through planning rather than market-based means –Much was achieved! Now however Europe faces new challenges and has committed to a new approach In the new world: “full liberalisation…is the dominant prerequisite for the efficient use of existing infrastructure and the development of new infrastructure. In these circumstances, a key focus should be on the ability of signals emerging from trade to highlight the need for new investment” (CEER, March 2003)
5 CEER infrastructure principles CEER set out a number of principles for infrastructure investment: –Public authorities should encourage sufficient investment to implement the internal energy market, facilitate competition and safeguard security of supply –TSOs must manage networks in a way that ensures efficient use of infrastructure –Public Authorities should establish transparent, non- discriminatory and standardised options for development of infrastructure and minimise regulatory risk as far as possible
6 CEER infrastructure principles –Public Authorities should enforce a minimum procedure or publication of TSOs’ infrastructure plans –TSOs must be effectively unbundled to ensure no conflict of interest when making investment decisions and sufficient incentives for non-discriminatory 3rd party access So…transparency (by all parties), market signals and minimisation of regulatory risk (i.e. ensuring stability) are key to efficient investment..
7 Possible approaches Applying the CEER principles gives three broad approaches: –Regulated reinforcement with regulated tariffs –Non-regulated reinforcement with regulated tariffs –Non-regulated reinforcement with non regulated tariffs – “merchant line” approach
8 Example: bringing new gas to GB UKCS Forecast Decline
9 Proposed new projects ProjectSize (mcm/day)Start date Isle of Grain LNG12 (phase 1)Early 2005 Belgian interconnector compression 22 (phase 1) 19 (phase 2) Late 2005 Late 2006 Dutch interconnector232006/7 Ormen-Lange (Langeled)702006/7 Exxon LNG36 (phase 1)2007/8 Petroplus LNG16.5Late 2007 Various storage60 or more2005–8
10 Consultation Transparency (by all parties) is key to stable framework and efficient investment –ERGEG formally established by Decision of the European Commission. ERGEG consultation procedure approved. –Madrid Forum – key forum for consultation –Industry initiatives – e.g., UK offshore data release
11 Conclusions Investment in infrastructure is key to the development of effective competition in EU energy market Investment must be efficient and respond to needs of market participants Transparency, reduction of regulatory risk and increasing use of market based signals are key to achieving this aim Market opening and the promotion of competition should not and need not undermine a sound investment climate for the European gas industry
12 Promoting choice and value for all gas and electricity customers