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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 IK ia tia a o ) ia a (1 ni gr M in an rg oa do ne UN ov a eo b bi Cr Al eg e te G r ac Se on rz M He M R FY d an a ni s Bo 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) 2nd Social Forum of the Energy Community – Zagreb, 13-14 October 2009 10 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: email@example.com URL: www.derk.ba 2nd Social Forum of the Energy Community – Zagreb, 13-14 October 2009 17
"ECRB Tariff Study - Electricity"