1. Legal developments in the Polish Power Sector Arkadiusz Krasnodębski

2. Major steps already taken to implement EU regulations  Amendments to the Polish Energy Act of 1997 – incorporating EC Directive 2003/54 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC and EC Directive 2003/55 concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC

3. The key mechanisms of Directives 2003/54 and 2003/55  TSO/DSO unbundling  Combined operator  Third Party Access  Market opening and reciprocity  Direct lines  Regulatory authorities  Safeguard measures  Supplier of last resort

4. Recent and current implementation steps in Poland  Amended Energy Act in force from May 2005, i.e. almost one year delay  New amendments to the Energy Act are being prepared to harmonize Polish law with the new directives

5. Developments in EU legislation since the Energy Act amendments  Directive 2004/8/EC on the promotion of cogeneration based on a useful heat demand in the internal energy market  Directive 2004/67/EC of 26 April 2004 concerning measures to safeguard security of natural gas supply  Directive 2005/89/EC of 18 January 2006 concerning measures to safeguard security of electricity supply and infrastructure investment

6. EC Directive 2004/8 on the promotion of cogeneration based on a useful heat demand in the internal energy market (I)  The use of combined heat and power (CHP) - a substantial potential for increased energy efficiency and reduced environmental impacts is a priority area for many EU Member States  The efficient use of fuel, in simultaneous production of heat and power can offer energy savings and reduce CO 2 emissions compared with separate production; developments in CHP generators show a trend towards cleaner fuels

7. EC Directive 2004/8 on the promotion of cogeneration based on a useful heat demand in the internal energy market (II)  The Directive provides a framework for the promotion of this efficient technique in order to overcome still existing barriers, to advance its penetration in the liberalised energy markets and to help mobilise unused potentials  The Directive defines high efficiency cogeneration as cogeneration providing at least 10% energy savings compared to separate production  The Directive does not include targets - instead the Directive urges EU Member States to carry out analyses of their potential for high efficiency cogeneration  Poland already late in the implementation process

8. EC Directive 2004/67 of 26 April 2004 concerning measures to safeguard security of natural gas supply  Establishes measures to safeguard an adequate level for the security of gas supply, which also contribute to the proper functioning of the internal gas market  Establishes a common framework within which EU Member States shall define general, transparent and non-discriminatory security of supply policies compatible with the requirements of a competitive internal gas market  Clarifies the general roles and responsibilities of the different market players and implements specific non-discriminatory procedures to safeguard security of gas supply  Poland already late in the implementation process

9. Directive 2005/89/EC of 18 January 2006 concerning measures to safeguard security of electricity supply and infrastructure investment (I) (EU Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 24 February 2008)  Establishes a framework within which EU Member States are to define transparent, stable and non-discriminatory policies on security of electricity supply compatible with the requirements of a competitive internal market for electricity

10. Directive 2005/89/EC of 18 January 2006 concerning measures to safeguard security of electricity supply and infrastructure investment (II)  Establishes measures aimed at safeguarding security of electricity supply so as to ensure the proper functioning of the internal market for electricity and to ensure:  an adequate level of generation capacity  an adequate balance between supply and demand  an appropriate level of interconnection between EU Member States for the development of the internal market

11. Status of implementation of the above Directives into Polish law  Draft amendments to the Energy Act complying with Directive 2004/8/EC have been prepared  Amendments not adopted to date - huge discrepancies, especially between the definitions in the Energy Act and the Directive  Draft amendments to the Energy Act complying with Directive 2004/67/EC have been prepared –30 March 2006

12. Regulation on renewable energy of 19 December 2005, replacing the regulation of 9 December 2004  Provides for the guarantee of origin system  Regulates the scope of obtaining guarantees of origin and presenting them to the President of ERO  Regulates the obligation to purchase renewable energy; indicates volumes  Provides for various calculation methods

13. Regulation regarding obligation of cogeneration energy purchase of 9 December 2004  Contains a different definition of CHP from that proposed in Directive 2004/8/EC  Cogeneration sources mean sources which generate power and heat with at least a 70% efficiency when converting the chemical energy of a fuel into power together with the heat  Indicates the amounts of CHP energy which have to be purchased by energy entities

14. Directive 2003/87/EC of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC  Implementation of the Directive in Poland with almost a 1.5 year delay  To date, Poland adopted appropriate measures in order to become a participant in the European emission trading market

15. Salans D. Oleszczuk Kancelaria Prawnicza Sp. k. ul. Emilii Plater 53 00-113 Warsaw Poland Tel: +48 22 520 64 50 Fax: +48 22 520 64 00 Email: akrasnodebski@salans.comakrasnodebski@salans.com www.salans.com