ECRB Tariff Study - Electricity

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					      Energy Community Regulatory Board
 Energy Affordability; Can Poor Pay for Power?
              Heating or Eating?

TARIFFS AND CONSUMPTION PATTERNS
         Edin Zametica, CWG Chairman

      2nd Social Forum of the Energy Community
            Zagreb, 13-14 October 2009
ECRB Structure

                                    Energy Community
                                     Regulatory Board




                        ECRB Section
                         of the ECS




                                                                        SEE Co-ordinated
  Electricity                 Gas                    Customer             Auction Office
Working Group            Working Group              Working Group        Implementation
   (EWG)                    (GWG)                      (CWG)                 Group
                                                                          (SEE CAO IG)

2nd Social Forum of the Energy Community – Zagreb, 13-14 October 2009                  2
Some EnC Documents on Affordability



  •    Best Practice Guidelines on the Protection of Vulnerable
       Household Customers (2007) – presented to the Social
       Conference
  •    Report on the Implementation of BPG (2008) – presented to
       the 1st Forum
  •    Study “Tariff Methodologies And Impact On Prices And
       Energy Consumption Patterns In The Energy Community”
       (finalized early 2009)




2nd Social Forum of the Energy Community – Zagreb, 13-14 October 2009   3
Scope of the Study
  •    Geographical scope: seven Contracting Parties of the
       Energy Community (Albania, Bosnia and Herzegovina,
       Croatia, FYR Macedonia, Montenegro, Serbia and UNMIK)
       and Georgia as an Observer
  •    The period covered 2005 – 2007
  •    The major topics covered by the Study:
       ○    the regulatory framework
       ○    the level of end-user prices by customer type including an
            analysis on cost coverage and cross-subsidies
       ○    tariff and price evolution
       ○    assessment of the relation between tariffs and consumption
            patterns
       ○    breakdown of electricity revenues
       ○    investment self sufficiency and allocative efficiency
       ○    productive efficiency for generation, transmission, distribution
            and supply

2nd Social Forum of the Energy Community – Zagreb, 13-14 October 2009          4
Overall End-user Prices

                          Average retail price (all customers)

               9
                                                                        Albania
               8
                                                                        Bosnia and
               7                                                        Herzegovina
                                                                        Croatia
               6
               5                                                        FYR Macedonia
       c/kWh




               4                                                        Montenegro
               3                                                        Serbia
               2
                                                                        UNMIK
               1
                                                                        Georgia
               0
                   2005         2006        2007        2008



2nd Social Forum of the Energy Community – Zagreb, 13-14 October 2009                   5
Tariff Levels by Customer Type (1/2)

                                   2007 Average tariff by Customer type
                       18                                                                        Industrial
                       16                                                                        Commercial
                       14
                                                                                                 Residential
                       12
        c/kWh




                       10                                                                        Government
                        8
                        6
                        4
                        2
                        0




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                                                                                      Note (1): data for 2008


2nd Social Forum of the Energy Community – Zagreb, 13-14 October 2009                                           6
Tariff Levels by Customer Type (2/2)



  •    Residential tariffs relatively low, particularly compared to
       commercial, in most countries. Industrial tariffs higher
       than residential in many.
  •    Large differences are subject to adequate action of
       regulators (rebalancing)
  •    Gradual rather than sudden rebalancing due to political
       unacceptability of large price shocks




2nd Social Forum of the Energy Community – Zagreb, 13-14 October 2009   7
Consumption and Price Changes (1/2)

                                            Impact of changes in tariff on consumption
                                                              50%

                                                              40%
                                                                                       y = -0.84x + 0.0614
    % change in consumption




                                                                                           R2 = 0.1703
                                                              30%

                                                              20%

                                                              10%

                                                               0%
                              -20%   -15%      -10%     -5%          0%         5%   10%      15%        20%
                                                              -10%

                                                              -20%
                                                           % change in tariff




2nd Social Forum of the Energy Community – Zagreb, 13-14 October 2009                                          8
Consumption and Price Changes (2/2)


  •    No evidence of meaningful relationship between prices
       and consumption from the data
  •    Other factors affect consumption levels much more over
       the period e.g.
       ○    Weather
       ○    It may be difficult or expensive for smaller consumers to change
            to alternative energy sources
       ○    Other economic factors changing consumption levels e.g.
            changes in industrial output




2nd Social Forum of the Energy Community – Zagreb, 13-14 October 2009          9
Conclusions of the Study (1/2)
  •    Tariff levels:
       ○    significant variations (much of it due to impact of generation cost)
       ○    increasing towards more cost-reflective levels
       ○    moving closer to each other
  •    Charges to residential consumers generally lower than
       either industrial or commercial consumers; regulators are
       generally aware of the issue and are gradually taking
       measures to address it
  •    Similar tariff methodologies; however, differences in the
       practical application (e.g. rate of return and depreciation)
       affect costs
  •    No evidence of meaningful relationship between prices and
       consumption from the data – Other factors affect
       consumption levels much more (e.g. weather)


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Conclusions of the Study (2/2)
  •    Transmission efficiencies less significant in overall tariffs
  •    Distribution efficiency: losses generally high, especially
       commercial ones
  •    Most noticeable differences in efficiency was in the
       collection rate. Some countries have historically had very
       low collection rates and although these are improving they
       are still some way below other countries in the region.
  •    Low collection rates discourage new entrants in competitive
       supply market
  •    A combination of tariff and non tariff based customer
       protection exists is Albania - there is an initiative to remove
       tariff based component
  •    ECRB Best Practice Guidelines on the Protection of
       Vulnerable Household Customers advises that non-tariff
       protection is preferable to tariff-based protection

2nd Social Forum of the Energy Community – Zagreb, 13-14 October 2009   11
Athens Forum Conclusions Follow Up
The study was presented to the 14th Electricity Forum of the
Energy Community – Athens Forum held on 12-13 May 2009.
  •    ECRB is invited to keep the Forum updated on related
       improvements and development with regard to prices and
       tariffs
       ○    ECRB CWG will develop and update prices and tariffs by early
            2010 and report to the second next (16th) Athens Forum - the data
            presented in the Electricity Tariff Study 2008 shall be extended to
            2008 and 2009 data.
  •    The Forum invited the ECRB to identify a common
       understanding of “vulnerable customers”
       ○    ECRB CWG is preparing a discussion paper: “Vulnerable
            Household Customers” – An ECRB Contribution to a Common
            Understanding


2nd Social Forum of the Energy Community – Zagreb, 13-14 October 2009        12
From the Discussion Paper Draft
  •    No common understanding or definition of vulnerable
       customers – neither in EU nor within the Energy Community
       Contracting Parties
  •    3rd EU legislative package for electricity and gas only calls
       for definition of “vulnerable customers” on national level
       ○    Acknowledged by the 2nd Citizens’ Energy Forum (London Forum)
  •    No common criteria for defining vulnerable customers -
       monthly income mostly used as a criterion
  •    Different approaches to the vulnerability issue: general
       social support scheme or energy related support
       ○    network tariff related discounts, social tariffs, rebates, state
            heating aid and governmental subsidies to regulated energy prices
            for certain customer groups


2nd Social Forum of the Energy Community – Zagreb, 13-14 October 2009     13
From the Discussion Paper Draft
  Recommendations:
  • The protection of vulnerable energy household customers
     has to be taken into account when implementing the Social
     Action Plans of CPs
  • “Vulnerable customers” should be defined on national level
  • The challenge should be addressed with market oriented
     instruments!!!
       ○    Regulated prices should be abolished and, where necessary,
            substituted by instruments neutral on competition


  The other relevant documents:
       ○    ERGEG “Status review of the definitions of vulnerable customer,
            default supplier and supplier of last resort”
       ○    USAID/NARUC paper “Support programs for low-income
            customers in the U.S. energy sector”

2nd Social Forum of the Energy Community – Zagreb, 13-14 October 2009         14
ECRB CWG Activities in 2010
Focus on:
TF1 - Customer Protection
       ○    Vulnerable customer issues
       ○    Improving participation of consumer representations in the
            regulatory process (workshop 3rd quarter)


TF2 - Quality of Electricity Service and Smart Metering
       ○    Follow up on the Report on the Quality of Electricity Service –
            Study “Assistance to regulators in introducing and approving
            service quality regulation in the Energy Community” (two
            workshops, 1st and 2nd quarter)
       ○    Survey on smart metering




2nd Social Forum of the Energy Community – Zagreb, 13-14 October 2009         15
ECRB CWG Activities in 2010 (cont.)

TF3 - Electricity Tariffs
       ○    Update on prices and tariffs



TF4 - Gas Distribution Tariffs and Quality of Supply
       ○    Study on regulation of tariffs and quality of the gas distribution
            service in the Energy Community


TF5 - Billing
       ○    Survey on the status quo of billing methodologies in the
            Contracting Parties and possible recommendations for a best
            practice approach



2nd Social Forum of the Energy Community – Zagreb, 13-14 October 2009            16
                                  THANK YOU!

                                                               Contact:
                                                               Edin Zametica
                                                               ECRB CWG Chairman
                                                               Chief of Staff
                                                               State Electricity Regulatory Commission
                                                               Bosnia and Herzegovina
                                                               Tel.: +387 35 302060
                                                               Fax: +387 35 302077
                                                               E-mail: ezametica@derk.ba
                                                               URL: www.derk.ba




2nd Social Forum of the Energy Community – Zagreb, 13-14 October 2009                             17

				
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