Electricity Restructurings: The Legal Perspective Robert Lane CMS Cameron McKenna (London)

Laws and documents underpin and support the structure

Restructuring and reform: Overview Vertical Integration RESTRUCTURING Retail Market Wholesale Market COMPETITION GridcoPrincipal Buyer Gs Transmission Distribution Generation Supply

Whatever the market structure –Principal Buyer –Bilateral Trading –Combination Basic requirements for documents are the same

RESTRUCTURING: THE LEGAL FRAMEWORK TIER ONE TIER TWO TIER THREE TIER FOUR ELECTRICITY LAW IMPLEMENTING REGULATIONS GRIDCO LICENCE LICENCE STANDARDS CO-GENERATION LICENCES DISTRIBUTION LICENCES PRINCIPAL BUYER LICENCE TARIFF ARRANGEMENTS NETWORK CODES SYSTEM SERVICES ECAs/PPAsCONNECTION AGMTS INDUSTRY DOCUMENTSWHEELING AGMT

"Unbundled" Restructured Industry Independent Transmission Company (GRIDCO) GG CC DD C D GGPrincipal Buyer Contractual power flows

Legal Arrangements Example: GridCo GridC o Electricity Law and Implementing Regulations - rights and obligations Licence obligations Transmission Code Scheduling and Dispatch Connection Code Planning Code Operating Code Metering Code Data Exchange Generators Distrib. Cos Customers Principa l Buyer Connection and UoS Arrangements System Services Interconnectors Tariffs

Legal Arrangements Example: Principal Buyer Electricity Law and Implementing Regulations - rights and obligations Licence obligations Generators Distrib. cos Customers Energy Conversion Agreements Procurement activities Energy Sale Agreements Fuel Supply Scheduling Principa l Buyer GridC o Fuel Supplier

International Example: UK - Northern Ireland Principal Buyer Transmission Distribution Non-EligibleCustomers GGGG EligibleCustomers IPPIPP

Key Considerations Robust legal and regulatory regime with flexible governance arrangements – capable of evolving Defining roles, such as: –Role of GridCo: e.g. –Structuring of tariff arrangements –Role in system planning –Role of Principal Buyer: e.g. –Structuring of ECAs –Role in generation / wires procurement

Overall Conclusions Legal and Regulatory Framework supports and implements successful restructuring process Restructuring supports KSAs policy objectives in the sector Staged introduction of competition allows incremental changes and fine tuning Other elements will also be important: e.g. revenue sufficiency, stakeholder involvement, investment planning

Background information on presenter Robert Lane Head of Electricity Team at CMS Cameron McKenna, which is consistently ranked as an industry leader in electricity, nuclear and renewables by legal directories Formally recognised by UK Government (with appointment as CBE) for his work Has advised energy clients throughout the world for over 18 years, since advising on the England & Wales privatisation in 1990 Acts for governments, regulators, utility companies, investors and others on transactions in the energy sector and on the establishment of complete legal and regulatory frameworks Areas involved in include the following: E&W Restructuring Northern Ireland Restructuring Ireland Restructuring Kingdom of Saudi Arabia Greece Italy Russia South Africa Australia Canada Belgium India

Electricity Restructurings: The Legal Perspective Robert Lane CMS Cameron McKenna (London)