Matti Supponen Electricity and Gas unit 3rd Internal Market package EUROPEAN COMMISSION EEF

| 2 Structure of the presentation. Status and content of the third package. Consequences of the third package to the market. Market challenges. Conclusions

| 3 EEF rd package: main measures. Effective unbundling of transmission networks. EU Regulatory Agency. Cooperation of network operators (ENTSO). Stronger powers for national regulators. Also » Transparency » Retail market & consumer protection » Third country clause » Level playing field

| 4 EEF Third Package : main remaining issues. TSO Unbundling: will Council prevail ?. Fuel poverty: will EP get what they want?. Comitology on European guidelines : needed for making the rules legally binding  First priority… climate and renewables package

| 5 EEF Third Package : timing. Informal conciliation through trialogues has started. Second reading of the Parliament has to agree on a compromise latest in April Formal adoption by the Council can be in September 2009 => If not, important delay

| 6 EEF Third Package : implementation. Agency setup: 18 months. ENTSO setup by summer Starting to prepare codes and guidelines in practise Make best use of transition period  Stakeholder involvement

| 7 EEF Network codes

| 8 EEF Network codes 1.network security and reliability rules including rules for technical transmission reserve capacity for operational network security; 2.grid connection rules; 3.third party access rules; 4.data exchange and settlement rules; 5.interoperability rules; 6.operational procedures in an emergency; 7.capacity allocation and congestion management rules; 8.rules for trading related to technical and operational provision of network access services and system balancing; 9.transparency rules; 10.balancing rules including network related reserve power rules; 11.rules regarding harmonised transmission tariff structures including locational signals and inter-TSO compensation rules; 12.energy efficiency regarding electricity networks

| 9 EEF ENTSO-E network planning

| 10 EEF Market challenges. Three major challenges: Wind, wind and wind. There will be huge investments in renewable energies » How will the necessary network infrastructure be built? » How will the renewable energy be introduced into the market?. Renewables alone will not be enough. Only difficult choices available: » Gas » Coal » Nuclear

| 11 EEF Kriegers Flak Separate Solution Rødsand Storebælt Güstrow Rostock Kiel Lübeck Siedenbrünzow Herrenwyk Audorf Siems Kontek Gørløsegård Bjæverskov Hovegård Fraugde Kingstrup Herslev Rislev Radsted Kriegers Flak Baltic Line Lüdershagen Lubmin Bentwisch Kruseberg Barsebäck Hurva Sege Söderåsen Baltic I Combined Solution Kriegers flak Which solution is better?

| 12 EEF Regulated prices

| 13 EEF How is the market doing?. Herfindahl-Hirschman index » Belgium8390 » Latvia8110 » Slovenia7208 » France6960  Dominant positions

| 14 EEF Conclusions. Third package will give a push for further development of the market : quick adoption needed. No-compromise climate change policy is the underlying assumption : objectives!. Pressure towards higher prices, Governments scared about price increases, regulated prices seriously hamper investments. Investments urgently needed both in production capacity and in networks

| 15 EEF The end Thank you for your attention

| 16 EEF Regional market approach IPS/UPS CWE Nordic UK/IE CEE SWE CSE SEE Baltic

| 17 EEF Regional markets: results of the regional forums Market coupling is spreading. Capacity allocation moving to flow based methods. Stakeholder involvement Progress slower than wanted. Unanimous approach showing its limits. Old unsolved problems block the progress. No full power exchange coverage yet

| 18 EEF Strategic energy review. Vision for 2050 » Decarbonisation of electricity » Away from oil in transport » Low energy and positive power buildings » Smart interconnected power grid  Rest of the world to follow!