European Commission Directorate-General for Energy and Transport REM-Regional Electricity Market in South East Europe n° 105/03/2000 A Vision for the Regional.

European CommissionDirectorate-General for Energy and TransportREM-Regional Electricity Market in South East Europe

n° 105/03/2000

A Vision for the Regional Electricity Market in South East

EuropeBrendan Devlin

0032 2 29 68433 Office0032 2 29 56105 Fax

[email protected] and Gas Unit

DG Transport and Energy Unit C2


n° 205/03/2000

Terms of Reference for the REM Regional Action Plan

Process: where we are at.Invite your CommentsCommence procedure for award of contracts


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ContextAchievement of REM by 2006Achievement of EU Internal

Energy Market


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Study Value€2.010.000

Single Contractor, but substantial subcontracts given nature of

Study


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Aims of Regional Action Plan1) Provide a comprehensive legal basis for regional trade, involving energy sector regulation reform

2) Provide a systematic guide for infrastructure investments


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Legal Basis for REMSystematized and standardized basis for electricity trade 1) Regulation2) Contracts3) Dispute Settlement4) Cross Border


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Legal Basis for REM

1) Regulation

- TSOs- Regulation - of Grid but not of final tariffs- Tariffs = Cost recovery +/- Capital Costs + Risk

Margin+ Profit- Unbundling


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Legal Basis for REM

2) Contracts

- Standard contracts- Trading- Ancillary Services- Balancing- Pricing Methodologies : reasonably foreseeable


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Legal Basis for REM

3) Dispute Settlement

- National- Regional- EU-Plus- Covers all issues including investment


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Harmonization

- Legislative Review- Existing Situation


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Harmonization

- Implications of Legislative Review

- Comparative and intelligible Regulation


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Harmonization

- Propose Common regional Framework- Not “One Size Fits All” - but EU Model

with considerable latitude for national situation


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Harmonization

- Minimum Legal Protections for Investments

- Capital Recovery reflected in tariffs (Moldova is a good example of this)

- Network Access for Generators


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Harmonization

- Adoption“Experience has shown that implementation is key” EBRD 2001

- Interaction with TOR I- Benchmarking- Peer Review


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Establishment of Regional Market- Facilitation of Trade

- Contracts-standardized- Regional Dispatching Model

- (new work programme ?)- Transmission Capacity

- Transparency

- Market Entry


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Transmission System Operators & Regulators

- National TSOs + Regulators- New “post EU” Model - Regional TSO - Regulators


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Infrastructure Decision Making- ISG- 6 monthly reporting- Contractor will create an objective basis

for the donor community to make decisions

- This will be done in co-ordination with Donors


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INFRASTRUCTURECapital Optimization- Trading- Transmission interconnection- Capital Stock and Complementary

- Hydro + base power- Pricing of capital stock


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Infrastructure Prioritization- Overall

- increase security of supply- least cost solutions- factual/objective criteria for

prioritization


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Infrastructure Prioritization

“The Contractor will provide to the Commission, the REM MC and the ISG a six monthly report, that on the basis of objective and certifiable criteria, ranks suggested interconnection and distribution infrastructure investments”.


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The basic criteria will be based on the following premises :

- for transmission infrastructure, the infrastructure must contribute to least cost interconnection and also to installed capital optimisation; and


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- for distribution, entail the greatest level of service delivery to final customers; and

- for both, entails high levels of uninterrupted service.


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•Revenue Optimization

- New work on this- Bills collection- Price signaling- Pricing of Efficiency


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Revenue Maximization

- Increase tariffs Cost of capital + risk premium- “Rejig the bell-jar”


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REVENUETariff Reform- Pricing at present unrelated to cost Cost based pricing- PSO’s to ease and sustain transition- Strategies to encourage efficiency

and least-energy cost solutions


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TIMINGIndigenous capital stock- Must become commercialized Must become optimized to regional market

opportunities e.g. hydropower deployed as peak power generator

- Baseload generation: common dispatching procedures

- Must have regard to a form of environmental pricing


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TIMINGUnbundling of accounts- Vertical electricity providers must be

disagregated Unbundled accounts allow clear pricing- New entrants also can enter the - Regulated transmission (TSOs)


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TIMING- REM Legislative plan will put in place:

- unbundled transmission- regulators or genesis of regulator- investment protection

- What it cannot do is encourage private investment directly

To do what we need- tariff reform- high levels of bills collection


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Timeline- For broader sector reforms- both ToRs require the contractors to undertake a

review of necessary reforms- We want to underline the need for a correct

order of activity- Regulatory Framework & Marketization of Incumbents- Unbundling- Tariff Reform and Collection- Capital optimization by trading- Next steps : private investments and change to legal

basis of generators


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Public Service Obligations

- Security of supply- Supply interruption- Vulnerable constituencies- “Global” PSOs


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New Tasks for the Donor Community

- Accelerate tariffs and payments reform and collection- Invest in human capital for regulators and rangers- Price energy efficiency-internalize the cost of

inefficiency-which not only means increasing tariffs but incentivising energy saving at transmission and distribution levels

- Emphasize PSOs


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1) Operation of REM - Secretariat- REM MC Meetings- Ministerials


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2) Operation of REM Mechanisms

- Benchmarking- Peer Review- Comprehensive Legislative

Programme [ToR 2]


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3) Operation of REMThe Role of the Contractor

- impediments to investment- information source- proposals to develop the REM

European Commission Directorate-General for Energy and Transport REM-Regional Electricity Market in South East Europe n° 105/03/2000 A Vision for the Regional.

Documents

south east europe n

regional eu

regional trade

market entry slide

rem regional action

electricity trade

energy unit c2 slide

common regional framework