Memorandum of Understanding Price Agreement

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Lithuanian PX
    Giedrius Radvila

 AB “LIETUVOS ENERGIJA”
       2009-09-16
         Minifora
         Vilnius
                   Is there a need for a change?
                                                       1




                   NORD POOL
                      PX                   NORD POOL
                                              PX
 APX UK
             APX          Gielda
           Belpx

       Powernext
                   EEX
                          Energi
                       OTE PXE
                       EXAA
                     South Pool
                                   Opcom
                                                   ?
OMEL                GME
         Issues that need to be
         addressed                           2




 Closure of second unit of Ignalina NPP

 Exporting system becomes importing

 Diversification of fuel     for    electricity
production in Baltic states

 Projects of new interconnections
             Background for changes
                                                            3




 2008 Cooperation agreement between NPS and Lietuvos
energija – Planning of establishment of Estlink price area.

Joint declaration of the prime ministers council of the Baltic
(27th April 2009)

Memorandum of understanding of the Baltic energy market
interconnection plan (17th June 2009)

Baltic energy market interconnection plan (17th June 2009)

LV, LT, SW memorandum of understanding (9th July 2009)

Lithuanian electricity expansion plan (8th of July
2009)
                         Lithuanian electricity market
                         expansion plan
                                                                           4




http://www3.lrs.lt/pls/inter3/dokpaieska.showdoc_l?p_id=349252&p_query=&p_tr2=
             Goals of market development
                                                          5




 To improve conditions for consumers to choose or change
supplier without any barriers;

To stipulate competition among generators, importers and
suppliers;

To remove barriers for the trade with parties from EU;

To set transparent conditions for the trade of electricity
imported from non EU countries;

To develop transparent electricity market organization and
surveillance based on Nord Pool Spot principles.
                                     Changes                                           Support of effective
                                                                                        co-generation and
                                                                                        renewable energy                  6
                                                    Unfettered bilateral trade             generation
                                                        with EU countries,
                                                     transparently regulated
                                                  trade with non EU countries
                                                                                                         The support of
              Organization of trade at PX                                                             generators does not
                based on Nord Pool Spot                                                              distort electricity price
              principles. Goal – determine                                                           s and does not create
               market price of electricity          PX,                                              barriers for electricity
                                                    Wholesale market                                   market operation.
                                                                                    Generators

    Hourly trade and balance        Suppliers
          responsibility




                                                                                    Transmission
                                                                                    grid
                                                                     Distribution
    Regulated tariffs
                                                                     grid
                                                                                                      Transparent
   applicable only for
household consumers and
                                                     Source: Svenska Kraftnät                      transportation of
    small commercial
                               Consumers                                                               electricity.
      consumers.
                                Ability to choose supplier, which offers
                                best price and make an agreement for
                                         the electricity provision.
            Changes of electricity market
            from 1st January 2010
                                                          7




 Implementation of Nord Pool Spot (NPS) principles for
wholesale trade organization.
 Price formation principle - marginal price setting.
 Trading platform for anonymously trading at auction until
2011.
 Hourly trading and balancing responsibility applied for all
market participants.
Unfettered trade with EU countries; Transparent and
competition ensuring tariffs for electricity market and
transmission grid entrance, clear regulation and control
towards electricity produced and imported from non-EU
countries.
 Implemented non discriminatory and transparent principles
of electricity transportation.
 Securing independency of TSO according EU regulation.
             Application of regulated
             tariffs                                     8




 Starting from 1st of January 2010, regulated
tariffs is going to be abolished for the
consumption totaling 35% of Lithuanian demand.

Gradual increase of a share of consumers with
non-regulated tariffs:
   Starting January 1st, 2011 - 45 %
   Starting January 1st, 2012 - 55 %
   Starting January 1st, 2013 – regulated tariffs are
    applied only for the household consumers.
   Starting January 1st, 2015 for all consumers (except the
    guaranteed tariffs for the consumer groups designated
    by EU regulations)
                         Changes
                         Restructuring Lietuvos energija AB
                                                                                               9

             Lietuvos energija AB
             TSO functions
             Market operator functions
Today



             Import/Export
             Operation of power production (KHPSPP, KHPP)


             Lietuvos energija AB                                 Independent supplier AB
             Import/Export                                        Trade of electricity
Until 2010




             Operation of power production (KHPSPP, KHPP)
                                                                  TSO AB
                                                                  TSO functions
                                                                  Market operator functions

             Lietuvos energija AB                                 Independent supplier AB
             Import/Export, Holding company                       Trade of electricity

                                                                  TSO AB
2010




                                                                  TSO functions
                                                                  Market operator functions

                                                                  Kruonis HPSPP
                                                                  and Kaunas HPP
                                                                  Power production

             Lietuvos energija AB      Kruonis HPSPP        MO AB              TSO AB
2011




             Import/Export             and Kaunas HPP       Market operator    (ISO)
             Holding company           Power production     functions          TSO functions
               Changes
               Auctioning
                                                                       10



                                                   Import/Export



Producers LT                    PX                  Producers LT




                      BP1               BP..N


   Suplaer1          Suplaer2           Suplaer3            Suplaer4




Consumers         Consumers          Consumers           Consumers
                           Changes
                           Price formation
                                                                      11




                  Price, €/MWh
                                      Demand


                                               Supply


Marginal price for all transactions
at auction, €/MWh




                                                        Volume, MWh
                    Changes
                    Gate closure
                                                                                                        12
                                   13:00-16:00
                                   submission of   correction of regulation
Announcement of                                    power bids volumes
                                   regulation
transmission capacities                            and prices
                                   power bids to
by TSO                             TSO
    10:00                                                                     1 hours before
                                                                              operation hour
                                       13:00                                                      balance
                                    gate closure                                                  settlement
   10:00
Start of DAM     Day ahead auction                                                  Operation
    trade                                                                           hour

                                                                                   Regulation/B
               until 13:00 market                                                    alancing
               participants must submit
               bids and offers




                             Physical electricity market


                     1 day before operation day              Operation day (physical delivery)
                                     Changes
                                     Cooperation with Nord Pool Spot
                                                                                                                13

               2009-05-05            Prefeasibility study by Nord Pool Consulting.
               2009-06-06            Seminar by NPC on proposals for Lithuanian
              DAM
               2009-06-23             – 2009-08-28 Negotiations with Nord Pool
              Spot
               2009-08-28            Letter of Intent was signed.

                                                         Service Level Agreement
                 TSO               MO                                                                    NPS



No.73/2009 Nord Pool Spot will deliver the technical solution for new Lithuanian market place
Nord Pool Spot AS and Lietuvos Energija AB today announced that they have signed a Letter of Intent to
implement a new market model for the Lithuanian electricity market.
In the future the Lithuanian market will be based on the same principles as the Nordic power market,
where price and flow are calculated at the same time to increase market efficiency (implicit auction). The parties
aim to establish a service contract where Nord Pool Spot will provide the systems and services from the
Nordic market to the Lithuanian market place.
The technical solution will be ready prior to 1 January 2010, when the new market model is scheduled to start
operating in Lithuania.
Lysaker, 28 August 2009.
                                  Towards an integrated
                                  market                                                                           14
                                                     2010-2013
                                         Creation of common Baltic’s
                                      electricity market based on Nordic
                                        electricity market organization
                                     principles and gradual abolishment
                                      of regulated tariffs for consumers
            2009
Isolated Baltic electricity
         market.
                                                                                                            Estlink II
                                                                                              Estlink I
                                                                                           Baltic electricity
                                                                                          market integration
                                                         Estlink I                      Swedish-
                                                                                        Baltic link
                                            Common Baltic                                                 LitPol
                                                                                                           link
                                              electricity                                Polish PX
                                               market                                    Gielda Energii

                      Estlink I
                                        Polish PX
                                        Gielda Energii



                                                                                  2014 - 2015
     Polish PX                                                       Integration of Baltic electricity market
     Gielda Energii                                                  into the Nordic and continental Europe
                                                                               electricity markets.
                                                                      Implementation of projects of new
                                                                             interconnections.
             15




Thank you.

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