UPDATES ON THE LATEST DEVELOPMENTS IN LITHUANIA Aistija Zubaviciute National Control Commission for Prices and Energy 3 April 2007, Riga

2 LEGISLATION Parliament approved the National Energy Strategy (NES) in January, 2007 Strategic objectives: 1) energy security 2) sustainable development of the energy sector 3) competitiveness 4) efficient use of energy

3 SOME MAIN TASKS OF NES To complete implementation of the requirements of EU directives with regards to liberalisation of the electricity and gas sectors, taking account of the national interests of energy security A new regional nuclear power plant not later than by 2015 in order to satisfy the needs of the Baltic countries and the region Not later than by 2012 to connect Lithuania’s high voltage electricity networks with the networks of Scandinavian countries (Sweden) and Poland (investments amounting to 0.4 billion EUR and 0.43 billion EUR respectively) The renewable energy resources in the national balance of primary energy at least up to 20% by 2025 The electricity generated by CHPPs during the heating period in the national balance of electricity generation up to 35% in 2025 To implement technical measures by 2015 necessary for the synchronised operation of the Lithuanian power system with the UCTE system To construct a natural gas storage facility in Lithuania

4 NUCLEAR POWER PLANT Partners: Estonia, Latvia, Poland, but the final result should be clear after the Law approved by the Parliament National investor? Planned shares: Lithuania – 34%, others – 22% Discussed capacity: MW Preliminary price: billion EUR Planned start of operation in 2015

5 STATISTIC AND FORECASTS In 2005, the average electricity consumption per capita in the enlarged EU was about 2.5 times higher than in Lithuania During the period until 2025, the basic scenario forecasts an annual average increase in electricity demand in branches of the economy by 3.7 % In 2008, the natural gas price in the Baltic States will be according to the formula - price in the Western Europe excluding transmission Taking into account the decommissioning of Unit 2 of the Ignalina NPP at the end of 2009 and the forecasted rise in the natural gas price, the average electricity generation cost in 2010 could stand at 4.6 EUR cent/kWh (doubled comparing with it in 2005), and the price for the final consumer could go up by 39 % and amount to 9.3 EUR cent/kWh

6 TARIFFS AND MARKET Since 01/01/2007 the final average electricity price increased by 13% due to the higher prices of the natural gas and its effect on the generation and transportation services by 7% End of introduction of the two-part tariff in the low voltage network Annual Report: –in 2006 declared market opening – 74%, real – 13% –4 eligible customers chose the independent suppliers (IS) –20 licensed IS, 5 of them – in the market –Sold contract electricity – 60%, at auction – 25%, PSO – 15%

7 AVERAGE ELECTRICITY PRICES IN 2006, EUR cents/kWh Price component/ Month IIIIIIIVVVIVIIVIIIIXXXIXII Auction price * Transmission ( kV) price with the reserves 1.04 Distribution (35-6 kV) price RST/VST 1.66 / 1.78 Distribution (0,4 kV) price RST/VST 2.07 / 2.66 IS* /Public Supplier price RST/VST 0.06 / 0.06 * - Electricity generation and IS price could be negotiated as well

8 PLANS In Lithuania: –100% market opening –Unbundling of the electricity supply (?) –Elimination of the ‘end-users’ tariffs In the regional market –Harmonisation of the documents according to the Regulation (EC) No 1228/2003: Principles on cross-border transmission charges A general scheme for calculation of the TTC and the transmission reliability margin or The allocation of available capacities of interconnections between national transmission systems Explicit auction procedures A compensation mechanism for cross border flows of electricity

9 QUESTIONS TO ANSWER How to avoid the existing ‘pancaking’? (the Memorandum in 2002) What else do we need for moving forward? (Power exchange)

10 THANK YOU FOR THE ATTENTION