ELECTRICITY REGIONAL INITIATIVE REGULATION UPDATE LATVIA Ivars Zariņš Public Utilities Commission Latvia Baltic ERI , 3 April 2007

KEY INDICATORS Growth in Latvia in 2006 versus 2005 GDP 11,9 % Electricity demand 7,1 % Natural gas demand 3,5 %

NEW INVESTMENTS Power generation CHP with capacity 144 MWe has been commissioned in Riga, October 2005 CHP with capacity 50 MWe in Riga, May 2006 Plans to build CHP with capacity 400 MWe in Riga in 2008

ACTIVITIES Licensing activities: Active participation in design of: Assessment of tariff proposals: Cogeneration Electricity - transmission and distribution services and sales Natural Gas Licensing activities: Electricity distribution Electricity trading Active participation in design of: Regulatory reform New regulation on support to power production using renewable resources New regulation on electricty trading

LVL/ 1000m³ (heavy fuel oil in exchange FOB ARA, 6 m avr. 260 USD/t) GAS TARIFFS Natural gas from May, 1 2007. LVL/ 1000m³ (heavy fuel oil in exchange FOB ARA, 6 m avr. 260 USD/t) increase > 0.5 th. m3 169.47 22.5% 0.5 – 25 th. m3 168.48 22.7% 25 –126 th. m3 157.54 31.6% 126 – 1260 th. m3 150.58 31.0% 1260 – 12600 th. m3 144.62 31.2% 12600 – 20 000 th. m3 140.15 30.9% 20 000 – 100 000 th. m3 128.71 30.9% < 100 000 th. m3 120.27 31.4% Abonent fee – 0.65 LVL/month 1 LVL = 1.43 EUR

ELECTRICITY TARIFFS previous present increase Avarage electricty price for captive customers from January 1, 2007 (LVL/KWh) previous present increase 0.4 KV busbars 0.03544 0.04223 19% 0.4 KV lines 0.04663 0.05059 9% Inhabitant* 0.04500 0.05099 13% *Incuding VAT

previouse present increase ELECTRICITY TARIFFS Avarage electricty price for captive customers from January 1, 2007 (LVL/KWh) previouse present increase 110 kV busbars 0.02077 0.03006 45% 110 KV lines 0.02077 0.03127 51% 6-20KV busbars 0.02528 0.03123 24% 6-20KV lines 0.03166 0.03713 17%

? CHALANGES security costs environment How to solve power shortage and find the proper balance among: security ? costs environment

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