ANRE
Romanian Electricity and Heat Regulatory Authority
TRANSITION STEPS IN THE ENERGY SECTOR
ION LUNGU
PRESIDENT OF ANRE
ANRE
Romanian Electricity and Heat Regulatory Authority
KEY PRINCIPLES OF THE ROMANIAN ENERGY POLICY
creating 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
ANRE
Romanian Electricity and Heat Regulatory Authority
GENERAL RULES FOR THE ORGANIZATION OF THE
ELECTRICITY SECTOR
• Electricity Law 318/2003
• Government Decisions regarding the restructuring of
electricity sector
ANRE
Romanian Electricity and Heat Regulatory Authority
INSTALLED POWER GENERATION 17.9GW
RESERVE MARGIN 2003 = 46,9 %
(Available capacity – Peak demand/Available capacity)
TYPE OF FUELS USED FOR GENERATORS PARTICIPATION TO
ELECTRICITY GENERATION IN 2003 ELECTRICITY GENERATION IN 2003
Total overhead transmission lines – 8 800 km
Substations – 76; Power transformers - 207
CONSUMERS - 8537476
Total distribution lines – 310127 km
Substations – 1296
ANRE
Romanian Electricity and Heat Regulatory Authority
EVOLUTION OF ELECTRICITY GENERATION
ANRE
Romanian Electricity and Heat Regulatory Authority
FROM AN INTEGRATED MONOPOLY TO A COMPETITIVE ELECTRICITY
MARKET (1)
Government Decision no. 365/1998
CONEL
RENEL Electrica
Hidroelectrica
Termoelectrica
Nuclearelectrica
Govora Romag
ANRE
Romanian Electricity and Heat Regulatory Authority
FROM AN INTEGRATED MONOPOLY TO A COMPETITIVE ELECTRICITY
MARKET (2)
Government Decision no. 627/2000
CONEL Transelectrica
OPCOM
Electrica
Electrica
Hidroelectrica
Hidroelectrica
Termoelectrica
Termoelectrica
Nuclearelectrica
Nuclearelectrica
Govora Romag
Govora Romag
ANRE
Romanian Electricity and Heat Regulatory Authority
FROM AN INTEGRATED MONOPOLY TO A COMPETITIVE ELECTRICITY
MARKET (3)
T1 T2 T3 T4 T5 T6 T7 7 Thermal producers
Hidroelectrica Hydro Producer
Nuclearelectrica Nuclear producer
Almost 20 municipal CoGen
producers and IPP’s, other
RENEL producers
Transelectrica Transmission and system operator
Market operator
D_S1 D_S2 D_S3 D_S8
8 Distribution and supply companies
(two of them will be privatized in the
second quarter of 2004)
S9 S10 S11 S53 45 Suppliers
ANRE
Romanian Electricity and Heat Regulatory Authority
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 authorisation
TRANSMISSION SYSTEM OPERATOR
function fulfilled by CN Transelectrica SA, member of UCTE from May 2003
MARKET OPERATOR
function fulfilled by CN Transelectrica SA’ subsidiary SC OPCOM SA
DISTRIBUTION SYSTEM OPERATOR
function fulfilled by the 8 distribution and supply companies created
following the restructuring of SC Electrica SA
MARKET OPENING – 40%
ACCESS TO THE NETWORK - REGULATED
ANRE
Romanian Electricity and Heat Regulatory Authority
TRANSMISSION SYSTEM OPERATOR
May 8, 2003 – UCTE membership
Fully 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
ANRE
Romanian Electricity and Heat Regulatory Authority
PRIVATIZATION OF THE ENERGY SECTOR - the most important target
of the Romanian Government
ELECTRICITY DISTRIBUTION
• Electrica Dobrogea and Electrica Banat
Finalization of the negotiation and signature of the contract:
end of June 2004
• Electrica Moldova and Oltenia
Receiving letters of interest from investors: 31 May 2004
Short listing of the investors: 30 June 2004
• Continuation of the privatization for 4 distribution companies
N.B. Transparency of the process based on the by the public tender procedures
Basic principles, the investors have to comply:
•Full compliance with EU Directives
•Non discriminatory access to the grid based on regulated tariffs
•Investors will operate based on clear regulatory framework published by A.N.R.E.
•Opening of the market is mandatory
•Legal unbundling of the supply from distribution by 2007
ANRE
Romanian Electricity and Heat Regulatory Authority
POWER GENERATION
• Promotion of two green field projects by private equity participation
with a total capacity of about 500 MW
- Selection of the investors: June 2004
• Promotion 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 2004
• Hydro 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 group
Privatization will continue based on a monthly fixed schedule till
the end of 2004
ANRE
Romanian Electricity and Heat Regulatory Authority
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
consumers
Appointment 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.
ANRE
Romanian Electricity and Heat Regulatory Authority
THE MAIN FUNCTIONS OF ANRE AS A REGULATORY BODY
Issue and withdraw authorizations and licenses
Regulate the access to the T & D grids
Draw up the pricing methodology and set the tariffs and prices for
the activities with monopoly characteristic
Issue technical and commercial regulations, supervise the
functioning of market mechanisms
Pre-contractual disputes resolution
Protect the interests of investors and energy end-users
ANRE
Romanian Electricity and Heat Regulatory Authority
ORDERS AND DECISIONS ISSUED BETWEEN 1999-2003
Orders and decisions on: Year Total
1999 2000 2001 2002 2003
1 Licenses, permits and 7 156 262 243 157 825
authorisations
2 Commercial regulations 19 50 19 28 139
23
3 Resolution of pre-contractual 181
disputes - 32 83 38 28
2100
4 509 821 567 199
4 Prices and tariffs
5 Technical regulations 10 11 7 4 10 42
6 Other regulations regarding the
electricity and heat sector and the 474
in-house organisation of ANRE 44 121 92 104 113
7 Total 84 879 1284 984 530 3761
-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.
ANRE
Romanian Electricity and Heat Regulatory Authority
THE MAIN SECTOR REGULATIONS ISSUED BY ANRE
Wholesale Electricity Market Commercial Code
Network Codes (Grid Code, Distribution Code)
Metering Codes
Technical and commercial regulations
Tariffs methodologies
Authorizations and licenses
Rules regarding the connection to the networks
based on the Romanian legislation and the Aquis Communautaire for the
electricity sector provisions
ANRE
Romanian Electricity and Heat Regulatory Authority
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 Court
within 30 days from the notification of the parties or, if of general
interest, from the date of their publication in the Romanian Official
Monitor
the annual reports regarding ANRE’s activity and budget
the regulator’s code of ethics
ANRE
Romanian Electricity and Heat Regulatory Authority
AUTHORIZATIONS AND LICENSES
licenses:
No. Type of license 1999 2000 2001 2002 2003
Electricity Heat Electricity Heat Electricity Heat Electricity Heat Electricity Heat
1 Generation 3 - 10 48 4 95 19 37 7 2
2 Transmission 1 - 1 6 - 1 - 1 - 1
3 Dispatch& 1 - 1 - 1 - - - - -
Market operation
4 Ancillary services - - - - 1 - - - 1 -
5 Distribution 1 - 4 23 1 33 10 14 5 3
6 Supply 1 - 14 49 13 91 30 31 18 1
7 TOTAL 7 - 30 126 20 220 59 83 31 7
authorisations:
22 establishment authorizations and 5 operation permits
365 operation authorizations
ANRE
Romanian Electricity and Heat Regulatory Authority
WHOLESALE TRADING ARRANGEMENTS
TRANSELECTRICA
Transmission System Captive Consumers
Operator ELECTRICA
Distribution
& Supply
Companies
Electricity
Suppliers
Generating
Companies
Import/
Export
The
Spot Market
Operator Eligible
(OPCOM) Consumers
Import/Export LEGEND:
Power Purchasing Contracts
Ancillary Services Purchasing Contracts
Power Purchasing over the Spot
Market Distribution Contracts
Transmission & System Services Contracts
ANRE
Romanian Electricity and Heat Regulatory Authority
TRADING ARANGEMENTS ON:
CAPTIVE MARKET COMPETITIVE MARKET
Portfolio contracts for the sale
and purchase of electricity, with
set quantities and regulated
Bilateral contracts for the
prices sale and purchase of
Long term must run/PPA contract electricity between the
for the sale and purchase of market participants, with
electricity, with regulated prices
(Nuclearelectrica) negotiated quantities and
Framework contracts for electricity prices
purchase from independent power
producers and autoproducers The day-ahead market to
Framework transmission ensure a balance between
contracts, ancillary service contracted quantities and
provision contracts and market
administration actual consumption.
Framework distribution contracts
Framework supply contracts.
ANRE
Romanian Electricity and Heat Regulatory Authority
Electricity market opening degree
ANRE
Romanian Electricity and Heat Regulatory Authority
ANRE
Romanian Electricity and Heat Regulatory Authority
CONTRACTS ON WHOLESALE ELECTRICITY MARKET – 2003
ANRE
Romanian Electricity and Heat Regulatory Authority
ANRE
Romanian Electricity and Heat Regulatory Authority
REGULATED TRANSMISSION TARIFFS (1)
Transelectrica responsible for transmission and system
operation service (TSO)
Transmission network is robust and well developed
No congestion due to sufficient transmission capacity
and severe reduction of industrial consumption during
the last decade
ANRE
Romanian Electricity and Heat Regulatory Authority
REGULATED TRANSMISSION TARIFFS (2)
14 zonal tariffs with two components:
• injection component
• extraction component
Transmission charge is USD 5.0/MWh on average and
does not depend on the electric paths and distances
Nodal pricing
REI-DIMO network reduction technique
Based on SRMC including losses and congestion to
establish efficient price signals
ANRE
Romanian Electricity and Heat Regulatory Authority
REGULATED DISTRIBUTION TARIFFS
5 different tariffs for the use of:
110 kV network
MV network
LV network
110 kV/MV transformers
MV/LV transformers
Distribution charge does not depend on the electric
paths and distances
Rate of return regulation
ANRE
Romanian Electricity and Heat Regulatory Authority
ELECTRICITY - AVERAGE PRICES PER ACTIVITIES
ANRE
Romanian Electricity and Heat Regulatory Authority
STRUCTURE OF ELECTRICITY AVERAGE PRICE TO END-USERS
ANRE
Romanian Electricity and Heat Regulatory Authority
EVOLUTION OF AVERAGE ELECTRICITY PRICES TO CAPTIVE END-USERS DURING 2001-2007
- USD/M Wh -
100
94.6
90
82.6
80 76.3
69.7
70
60
52.5
50
42.5
40 35.2
30
20
10
0
2001 2002 2003 2004 Year 2005 2006 2007
ANRE
Romanian Electricity and Heat Regulatory Authority
AVERAGE ELECTRICITY TARIFFS (EXCLUDING TAXES)
ANRE
Romanian Electricity and Heat Regulatory Authority
Consumer protection
Ensured through:
License conditions requesting the holder to be responsible to provide
dependable services
Monitoring of license holders by enforcing a standard content for the
Annual Activity Report and Financial Reports submitted by
companies to ANRE on a yearly basis
Market mechanisms to prohibit deceptive and anti-competitive market
practices
Solving pre-contractual disputes in the sector and between suppliers
and consumers
Monitoring compliance of suppliers with the guaranteed performance
standards
Information and counseling for consumers in order to be able to make
appropriate choices.
ANRE
Romanian Electricity and Heat Regulatory Authority
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 CONTRACTS DAY AHEAD ON THE DAY SETTLEMENT
Market Operator
Imbalance
Simple Firm Volumes by Company volumes
G G Day Ahead
Bids by
Market Market Operator
P company
MP
Simple Balancing
Q
Bids Q Market BM Volumes
S S
Simple bids by unit Meter
Adjustments
to Day Ahead data
schedule
G- generators Metered
Physical System Operator Volumes
S - suppliers
Notifications by
unit
ANRE
Romanian Electricity and Heat Regulatory Authority
Bilateral contracts
Principle of the Day Ahead Market
• all 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 curve
• bidding on portfolio/company basis
•generators decide themselves how to allocate total
production on individual generation units, physical
notifications to System Operator
•establishment of balance responsible parties
ANRE
Romanian Electricity and Heat Regulatory Authority
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 TSO
the 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
ANRE
Romanian Electricity and Heat Regulatory Authority
Allocation of cross-border interconnection capacity
Technical interconnection capacity (ATC) established by TSO
Commercial allocation through auctions: yearly, monthly, daily
Use it or lose it principle.
The mechanism should be agreed with neighboring countries.
ANRE
Romanian Electricity and Heat Regulatory Authority
Participants to the new trading platform
Balancing
Determine & TSO Determine needs Market
publish ATC Use for system Participants
operation
Offer
Determine needs
Auction Offer Cross-Border and procure
Participants capacities Balancing
Check and approve Market
Ancillary
services
Market Settle Settlement
splitting Settle
Administrator
Auction Scheduling
Trading Offer & imbalances
DAM capacities Submit physical
Participants
notifications
Physical notifications Pay for imbalances
Operate
(for DAM)
Market
BRP
Operator
ANRE
Romanian Electricity and Heat Regulatory Authority
Evolutions of transmission and distribution price control
Transmission price control
• Revenue cap regulation in order to improve efficiency and increase incentives
•Transmission connection service (i.e. connection charges) regulated as excluded
service and not part of the caps
•Transmission caps supplemented by quality monitoring
Distribution price control
Tariff-basket approach
Multi-variant network tariffs with multinomial parameters
• Regulatory period’s length: 3 years
• Building blocks approach
• Real, risk-adjusted pre-tax WACC
• Price control supplemented by quality regulation