Legal and Regulatory framework Regional Power Exchange Issues Apr 4, 2006 Kjell A Barmsnes

Success factors for a Regional PX Support from the TSOs Flexibility in detailed rules and regulations Information collection and distribution Non-discriminatory access and participation Access to interconnector capacity Tariff structure

Legal framework - Norway Legislation / Energy Act Ministry Provisions / Regulations RegulatorGuidelines PX – TSO – Market Participants Operational Agreements Grid Code Market Code Objectives, principles Organisation of infrastructure Licensing issues Executing body of rules and provisions Economic regulation of monopolies Management of licenses Market supervision Implementation of Energy Act Industry structure and responsibilities Overall market rules Operational procedures and detailed rules for power trade and System Operation Activities based on overall principles defined by Legislation, Ministry and Regulator

Support from the TSOs PX viewed as a tool to balance the system Access to interconnector capacities Guaranteed delivery of physical PX contracts TSO to purchase losses at the PX

Flexibility in detailed rules and regulations PX should be entrusted to work out and manage the detailed rules for its operation Flexibility is required to adapt to new market conditions, without comprehensive approval processes Procedures for changes to rules etc. must be agreed The regulator should issue licenses to the PX defining the framework of operation, not all details of the operation Regulator to intervene if license requirments are not met

Information collection and distribution Relevant market information to be collected from and distributed to participants Regulators to defined minimum requirements Obligation to provide information must be supported by the legal framework and agreements

Non-discriminatory access and participation Treat all participants equally Access to market based on predefined technical and financial criteria Low barrier to entry Low entrance fee Reasonable entrance procedures Diversity and a large number of active participants stimulate liquidity

Access to interconnector capacity Ideally, all capacity to the PX Optimal use of available transmission capacity Easy to use At least a share of the capacity should be reserved for PX trade Unused capacity should be allocated to PX trade

Tariff structure Separate transmission tariffs Transparant tariffs Harmonized tariff principles Non-distance dependent tariffs Locational signals OK No border tariffs

Summary A regional PX needs support from Ministries TSOs Regulators Participants Success factors for a Regional PX Liquidity Transparency and trust in prices High number of active participants