Belgrade , 25 . April 201 3 .

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Regional electricity market I panel:

How to integrated electricity market in South East Europe- Regulatory aspects -

Belgrade,25. April 2013.

Ljiljana HadzibabicCouncil member

Energy Agency of the Republic of Serbia

Content1) The objectives of SEE Regional market integration2) EU Target Model for Electricity Market Integration3) The 8th Region - SEE4) Regional and national programs 5) Allocation of roles and responsibilities of relevant institutions 6) Regulatory role7) Current state and development possibilities for Serbian

market• Market model and market participants in Serbia• The dynamics of the Market Openning• The legal framework for the functioning of National Market• Comparative Electricity Prices for the industry in some EU countries

The objectives of SEE Regional market integration

The main goals are:

• Creating a competitive integrated Regional energy market – more efficient than national markets

• Efficient management of interconnection capacities: Capacity Allocation and Congestion Management (CACM)

• Attracting investments in energy• Providing a secure and sustainable supply of

customers at reasonable prices

EU Target Model for Electricity Market Integration

• Common vision for completion of Internal Electricity Market (IEM) by 2014• Electricity markets across Europe must share a set of common features and be

linked by efficient management of interconnection capacities• In order to achieve this: CACM and Balancing have been identified as priority areas

→ 3rd Legislative Package

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9 Energy Community Treaty Contracting Parties

the neighboring countries Bulgaria, Greece, Hungary, Romania and Slovenia

Italy with regard to the interconnections between Italy and the CPs to the EnC Treaty (DC undersea cables)

+ Moldova and Ukraine are not technically in parallel synchronous operation within ENTSO-E, and thus cannot perform operationally CACM mechanisms in the 8th region

SEE 9 contracting parties

>20 borders

Population: 137 million

The 8th Region - SEE

The ultimate goal is to achieve a single platform for yearly, monthly and daily implicit auctions for the SEE region.

Legal Basis• Directive 2009/72/EC 13 July 2009 concerning common rules for

the internal market in electricity and repealing Directive 2003/54/EC

• Regulation (EC) No 713/2009 of 13 July 2009 establishing an Agency for the Cooperation of Energy Regulators

• Regulation (EC) No 714/2009 of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003

• EU Legislation implementation within SEE RegionContracting Parties (CP) shall bring into force the laws, regulations and administrative provisions necessary to comply with Directive 2009/72/EC, Directive 2009/73/EC, Regulation (EC) No 714/2009 and Regulation (EC) No 715/2009, as adapted by the PHLG Decision (Jun/Oct 2011), by 1 January 2015

New Institutions

New EU institutions based on the 3rd Package: ENTSO-E (TSOs) ACER (Regulators)

Joint preparation of:Framework Guidelines Network Codes Target models for capacity allocation and congestion management..............

Regional and national programs /1 National developmentRegional cooperation

Parallel development of regional and local electricity market?

• SEE local markets are underdeveloped in average - mainly bilateral markets

• Markets are largely illiquid• Dominant existing production company• Legislative changes are still ongoing• Obstacles to market development in each jurisdiction

in SEE (except Hungary, Italy, Moldova and Ukraine)

Parallel

Regional and national programs /2 The committed institutions:

TSOs to develop concepts and make proposals

Consultants to moderate and make recommendations

Regulators to decide or approve

• Supports and encourages the adopted policies and market development in line with the

EU Target Model

• Approves of TSOs proposals related to organizational, commercial and legal aspects

• Verifies of compliance with national legal framework and development schedules and

with EU legal framework

Energy Community joint projects:

• Wholesale Market Opening (WMO)• Balancing Energy Market• Market monitoring • Supplier switching

National Market

Electricity MarketBilateral

Balancing MarketPower Exchange

By the Energy Law 2011

The Legal Framework for the Market Functioning

Legal Framework EU directives - mandatory baseline

The Energy Law 2nd package

3rd package by 2015 Transmission and Distribution Grid Codes Cross-border transmission capacities - Rules governing the allocation of rights Market Code

Power Excange Code Supplier changing Rules Methodologies for the determination of the price for access to electricity transmission and distribution system

Market Participants

ElectricityProducersSuppliers (60)

Public Suppliers (1)The final buyers (3.6 million)Transmission System OperatorDistribution System OperatorMarket Operator

Balancing responsibilities of all market participants;Relations of Market participants are regulated by agreements.

Current state of Serbian electricity market - model

The Dynamics of the Market Opening

Potentialy, 43% of market was oppend in 2008 (all non-household) The markets will be 100% be open from 1 Jan 2015, but the households and small consumers may choose from the market or the public supply

Current state of Serbian electricity market - data

2012:GWh %

Transmitted electricity GWh 40,197 100

Transmission losses % 2.55

Maximum daily gross consumption

GWh 141.43

Maximum hourly load MW 6,622

Total consumption GWh 28,457 70.8

Transit GWh 8,176

Traders activities in the 2011 and 2012

The physical flow of the interconnectors in 2012

Comparasion of the Electricity Prices for the Industry (31) - The second half of 2012 -

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The trend of electricity prices in the future

Price now Price after2020.

ProfitCostsrationalization

New power plants and ecology

Renewable EnergyCost

Cost of CO2

?

The trend of electricity prices in Serbia

Regulated / Free Market+ Public Supply

+ Distribution

+ Transmission

- Electricity production and purchase

Regulated prices approved by the Regulator since October 2012

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Thank you for your attention!

Ljiljana HadzibabicCouncil member

Energy Agency of the Republic of Serbia

www.aers.rs