Presentation on theme: "TRANSITION STEPS IN THE ENERGY SECTOR"— Presentation transcript:
1 TRANSITION STEPS IN THE ENERGY SECTOR ION LUNGUPRESIDENT OF ANRE
2 gradual introduction of competition in generation and supply; KEY PRINCIPLES OF THE ROMANIAN ENERGY POLICYcreating an electricity market based on transparency, fairness and non-discrimination;establishing a regulator to regulate monopolies (where they remain), and to foster competition;unbundling the activities of generation, transmission, distribution and supply;gradual introduction of competition in generation and supply;licensing the new market participants;non-discriminatory, regulated access for third parties to the electricity network
3 GENERAL RULES FOR THE ORGANIZATION OF THE ELECTRICITY SECTOR Electricity Law 318/2003Government Decisions regarding the restructuring of electricity sector
4 CONSUMERS - 8537476 INSTALLED POWER GENERATION 17.9GW RESERVE MARGIN 2003 = 46,9 %(Available capacity – Peak demand/Available capacity)GENERATORS PARTICIPATION TO ELECTRICITY GENERATION IN 2003TYPE OF FUELS USED FORELECTRICITY GENERATION IN 2003Total overhead transmission lines – kmSubstations – 76; Power transformers - 207CONSUMERSTotal distribution lines – kmSubstations – 1296
6 CONEL RENEL RENEL Government Decision no. 365/1998 FROM AN INTEGRATED MONOPOLY TO A COMPETITIVE ELECTRICITY MARKET (1)Government Decision no. 365/1998RENELRENELNuclearelectricaGovoraRomagCONELElectricaHidroelectricaTermoelectrica
7 CONEL Government Decision no. 627/2000 FROM AN INTEGRATED MONOPOLY TO A COMPETITIVE ELECTRICITY MARKET (2)Government Decision no. 627/2000NuclearelectricaGovoraRomagCONELElectricaHidroelectricaTermoelectricaNuclearelectricaGovoraRomagElectricaHidroelectricaTermoelectricaTranselectricaOPCOM
8 FROM AN INTEGRATED MONOPOLY TO A COMPETITIVE ELECTRICITY MARKET (3) 7 Thermal producersT1T2T3T4T5T6T7HidroelectricaHydro ProducerNuclearelectricaNuclear producerAlmost 20 municipal CoGenproducers and IPP’s, other producersRENELTranselectricaTransmission and system operatorMarket operatorD_S1D_S2D_S3D_S88 Distribution and supply companies(two of them will be privatized in the second quarter of 2004)S53S9S10S1145 Suppliers
9 ACCESS TO THE NETWORK - REGULATED The restructuring process and the development of the regulatory framework followed the European Directive provisions:GENERATION - the construction of new capacities for electricity generation, cogeneration, transmission and distribution and the refurbishment of the existing ones are subject to authorisationTRANSMISSION SYSTEM OPERATORfunction fulfilled by CN Transelectrica SA, member of UCTE from May 2003MARKET OPERATORfunction fulfilled by CN Transelectrica SA’ subsidiary SC OPCOM SADISTRIBUTION SYSTEM OPERATORfunction fulfilled by the 8 distribution and supply companies created following the restructuring of SC Electrica SAMARKET OPENING – 40%ACCESS TO THE NETWORK - REGULATED
10 TRANSMISSION SYSTEM OPERATOR May 8, 2003 – UCTE membershipFully unbundling - independent TSO company ( legal, management, ownership)Neutral toward electricity market arrangements (not allowed to be involved in electricity business)Technical Grid Code in line with UCTE Operation Handbook- full responsibility for the Power System security of Supply- no major incidents since unbundling (2000); facing very tough operational conditions in 2003 (severe drawn, NPP outage)Cross border capacity over 15 % - complying with Barcelona target
11 PRIVATIZATION OF THE ENERGY SECTOR - the most important target of the Romanian GovernmentELECTRICITY DISTRIBUTIONElectrica Dobrogea and Electrica BanatFinalization of the negotiation and signature of the contract:end of June 2004Electrica Moldova and OlteniaReceiving letters of interest from investors: 31 May 2004Short listing of the investors: 30 June 2004Continuation of the privatization for 4 distribution companiesN.B. Transparency of the process based on the by the public tender proceduresBasic principles, the investors have to comply:Full compliance with EU DirectivesNon discriminatory access to the grid based on regulated tariffsInvestors will operate based on clear regulatory framework published by A.N.R.E.Opening of the market is mandatoryLegal unbundling of the supply from distribution by 2007
12 POWER GENERATIONPromotion of two green field projects by private equity participation with a total capacity of about 500 MW- Selection of the investors: June 2004Promotion of the privatization on the lignite based on energy complexes:- Turceni – negotiation with the 5 candidates and selection of the qualified bidder till the end of 2004;- Rovinari and Craiova Isalnita – selection of the consultant till the end of September 2004Hydro power generation: Equity participation in more than 100 small hydropower generation with a total production of 300 – 400 GWh. Process has started for the first groupPrivatization will continue based on a monthly fixed schedule till the end of 2004
13 ANRE - public institution under the co-ordination of the Prime Minister Mission - to create and implement fair and independent regulations to ensure an efficient, transparent and stable functioning of the electricity and heat sector and markets while protecting the interests of consumersAppointment Power - President and Vice President of ANRE are appointed by the Prime Minister for 5 years, upon proposal of the Minister. The Commissioners are appointed for 5 years by the Minister.Financing - sources outside the state budget covered from license and authorization fees and contributions paid by sector companies.
14 THE MAIN FUNCTIONS OF ANRE AS A REGULATORY BODY Issue and withdraw authorizations and licensesRegulate the access to the T & D gridsDraw up the pricing methodology and set the tariffs and prices for the activities with monopoly characteristicIssue technical and commercial regulations, supervise the functioning of market mechanismsPre-contractual disputes resolutionProtect the interests of investors and energy end-users
15 ORDERS AND DECISIONS ISSUED BETWEEN 1999-2003 Orders and decisions on:YearTotal199920002001200220031Licenses, permits and authorisations71562622431578252Commercial regulations195028231393Resolution of pre-contractual disputes-3283381814Prices and tariffs50982156719921005Technical regulations1011426Other regulations regarding the electricity and heat sector and the in-house organisation of ANRE44121921041134748487912849845303761-There were cases when several licenses or authorisations were granted, withdrawn or modified through a decision.- The number of orders and decisions diminished in 2002 due to the take over by ANRSC of a part of ANRE activity.
16 THE MAIN SECTOR REGULATIONS ISSUED BY ANRE Wholesale Electricity Market Commercial CodeNetwork Codes (Grid Code, Distribution Code)Metering CodesTechnical and commercial regulationsTariffs methodologiesAuthorizations and licensesRules regarding the connection to the networksbased on the Romanian legislation and the Aquis Communautaire for the electricity sector provisions
17 The objectivity and transparency of the regulatory process is ensured by: permanent consultations with the parties involved by means of surveys, public and bilateral discussions as well as through mediation meetings to accommodate divergent viewpoints,the ANRE’s orders and decisions may be appealed in Courtwithin 30 days from the notification of the parties or, if of general interest, from the date of their publication in the Romanian Official Monitorthe annual reports regarding ANRE’s activity and budgetthe regulator’s code of ethics
18 AUTHORIZATIONS AND LICENSES authorisations:22 establishment authorizations and 5 operation permits365 operation authorizationsNo.Type of license19992000200120022003ElectricityHeat1Generation3-1048495193772Transmission6Dispatch&Market operationAncillary services5Distribution233314Supply491391303118TOTAL126202205983
19 WHOLESALE TRADING ARRANGEMENTS GeneratingCompaniesEligibleConsumersTRANSELECTRICATransmission SystemOperatorElectricitySuppliersCaptive ConsumersImport/ExportImport/ExportLEGEND:Power Purchasing ContractsTransmission & System Services ContractsAncillary Services Purchasing ContractsPower Purchasing over the SpotMarketDistribution ContractsELECTRICADistribution& SupplyTheSpot Market(OPCOM)
20 TRADING ARANGEMENTS ON: CAPTIVE MARKETCOMPETITIVE MARKETPortfolio contracts for the sale and purchase of electricity, with set quantities and regulated pricesLong term must run/PPA contract for the sale and purchase of electricity, with regulated prices (Nuclearelectrica)Framework contracts for electricity purchase from independent power producers and autoproducersFramework transmission contracts, ancillary service provision contracts and market administrationFramework distribution contractsFramework supply contracts.Bilateral contracts for the sale and purchase of electricity between the market participants, with negotiated quantities and pricesThe day-ahead market to ensure a balance between contracted quantities and actual consumption.
25 Transmission network is robust and well developed REGULATED TRANSMISSION TARIFFS (1)Transelectrica responsible for transmission and system operation service (TSO)Transmission network is robust and well developedNo congestion due to sufficient transmission capacity and severe reduction of industrial consumption during the last decade
26 REGULATED TRANSMISSION TARIFFS (2) 14 zonal tariffs with two components:injection componentextraction componentTransmission charge is USD 5.0/MWh on average and does not depend on the electric paths and distancesNodal pricingREI-DIMO network reduction techniqueBased on SRMC including losses and congestion to establish efficient price signals
27 5 different tariffs for the use of: 110 kV network MV network REGULATED DISTRIBUTION TARIFFS5 different tariffs for the use of:110 kV networkMV networkLV network110 kV/MV transformersMV/LV transformersDistribution charge does not depend on the electric paths and distancesRate of return regulation
32 Consumer protectionEnsured through:License conditions requesting the holder to be responsible to provide dependable servicesMonitoring of license holders by enforcing a standard content for the Annual Activity Report and Financial Reports submitted by companies to ANRE on a yearly basisMarket mechanisms to prohibit deceptive and anti-competitive market practicesSolving pre-contractual disputes in the sector and between suppliers and consumersMonitoring compliance of suppliers with the guaranteed performance standardsInformation and counseling for consumers in order to be able to make appropriate choices.
33 Imbalance volumes by company EVOLUTIONS ON MEDIUM AND LONG TERM Bilateral contracts market with self-scheduling of generators, supplemented by a voluntary power exchange (day-ahead market) and a balancing market.BILATERAL CONTRACTSDAY AHEADON THE DAYSETTLEMENTSystem OperatorBalancing MarketMPPQSGDay Ahead MarketSimple BidsFirm Volumes by CompanySimple bids by unitMetered VolumesMeter dataImbalance volumes by companyAdjustments to Day Ahead scheduleBM VolumesMarket OperatorG- generatorsS - suppliersPhysical Notifications by unit
34 Principle of the Day Ahead Market Bilateral contractsPrinciple of the Day Ahead Marketall generators and suppliers (consumers) submit bids for the amount of energy they are willing to produce (consume) for a certain price in each hour (trading participants may also submit export and import offers)the market clearing price is set as the intersection between the supply and demand curvebidding on portfolio/company basisgenerators decide themselves how to allocate total production on individual generation units, physical notifications to System Operatorestablishment of balance responsible parties
35 Principle of Balancing Market (BM) TSO contracts reserves before day ahead (on a company basis)the balancing market starts on the day ahead, following the acceptance of physical notifications by the TSOthe BM operates on a unit basis, producers have to offer all remaining capacities (price, quantity)all accepted offers establish an obligation for the unit to deliver the corresponding type and amount of balancing energy
36 Technical interconnection capacity (ATC) established by TSO Allocation of cross-border interconnection capacityTechnical interconnection capacity (ATC) established by TSOCommercial allocation through auctions: yearly, monthly, dailyUse it or lose it principle.The mechanism should be agreed with neighboring countries.
37 Physical notifications Participants to the new trading platformMarketOperatorAuctionParticipantsBalancingBRPSettlementAdministratorTSOTradingScheduling& imbalancesAncillaryservicesDAMCross-BordercapacitiesDetermine &publish ATCOfferOperateSettlesplittingPhysical notifications(for DAM)Submit physicalnotificationsPay for imbalancesDetermine needsUse for systemoperationCheck and approveand procure
38 Evolutions of transmission and distribution price control Transmission price controlRevenue cap regulation in order to improve efficiency and increase incentivesTransmission connection service (i.e. connection charges) regulated as excluded service and not part of the capsTransmission caps supplemented by quality monitoringDistribution price controlTariff-basket approachMulti-variant network tariffs with multinomial parametersRegulatory period’s length: 3 yearsBuilding blocks approachReal, risk-adjusted pre-tax WACCPrice control supplemented by quality regulation