Regional Energy Market in South East Europe …siteresources.worldbank.org/PGLP/Resources/Zametica.pdfFINAL REPORT ON COMPLIANCE WITH ELECTRICITY BENCHMARKS ... from 1 January 2008,

Edin ZAMETICAState Electricity Regulatory Commission

Bosnia and Herzegovina

Fourth Poverty Reduction Strategies Forum June 26-27, 2007, Athens, Greece

Regional Energy Market in South East EuropeIMPLICATIONS FOR CONSUMERS

Implications for Consumers 2

Agenda

Introduction - Regional market (Energy Community)Market openingPower to chooseDemand and price trendsRight to cover the costsVulnerable customers support systems in the regionOngoing activities on customer protection

Implications for Consumers 3

Regional Market (Energy Community)

Implications for Consumers 4

Regional Market (Energy Community)

General Objectives of the Treaty Establishing the Energy Community

enhance the security of supply that is essential for economic development and social stabilitydiversification improve the environmental situation improve energy efficiency, foster the use of renewable energy

South East European countries are to introduce energy markets based on competition in generation and supply

Implications for Consumers 5

Energy Community Characteristics / Electricity

ENERGY COMMUNITY FINAL REPORT ON COMPLIANCE WITH ELECTRICITY BENCHMARKS April 2007

Implications for Consumers 6

Energy Community Characteristics / Gas

ENERGY COMMUNITY REPORT ON COMPLIANCE WITH THE GAS BENCHMARKS December 2006

Implications for Consumers 7

Consumer Interests

Competition improves efficiency and reduce prices increaseIncreased transparency, market discipline, reduced corruptionRegional framework for necessary investments results in reduction of the total investmentsMore efficient utilization of existing and new infrastructureAffordability - Article 33 of the Treaty: The Energy Community may also make Recommendations to support effective reform … and to foster the affordability …

Implications for Consumers 8

Market Opening

Each Contracting Party must ensure that the eligible customers within the meaning of the European Community Directives 2003/54/EC and 2003/55/EC are:

from 1 January 2008, all non-household customers; andfrom 1 January 2015, all customers.

Network related activities (transmission and distribution –natural monopoly)Supply activities (+generation) – market activities – to be deregulated

Implications for Consumers 9

Market Opening in the Region

Source: Data from National Regulators, Energy Community Secretariat

80% (de facto)6 GWh/a (all households 2011)Turkeypartially open % (all households July 2007)partially open (all households July 2007)Slovenia

>50 bcm (47-50%, January 2007)>3 GWh (21%, January 2007)Serbia

75% (all non hh Jan 2007, all households July 2007)all non households (all July 2007)Romania

gradual opening without dynamics specifiedMontenegrocustomer at 110 kV (four)UNMIK Kosovo

100%80% [non households] (all households July 2007)Italy67%all non households [67%] (all hh July 2007)Hungary

>25 GWh/a (CHP and electricity producers)70% (all non hh July 2007)Greece>10 bcm>20 GWh/aFYROM

45% (>100 bcm/a)>9 GWh/a (all non households July 2007, all households July 2008)Croatia

85% (de iure)>20 GWh/a [till June 2006] /9 GWh/a (till Dec 2006) (all non till June 2007; all households july 2007Bulgaria

33% (>10 GWh/a Jan 2007, all non hh Jan 2008, all households Jan 2015)

Bosnia and Herzegovina

100%100%Austria100 GWh/yearAlbania

Gas (threshold, market opening %)Electricity (threshold, market opening %)

Implications for Consumers 10

EU Market Opening and Regulation of Prices

Electricity

Implications for Consumers 11

EU Market Opening and Regulation of Prices

Gas

Implications for Consumers 12

Power to ChooseThis is changing

Customers choose the supplier that provides the energy.

This stays the same

Electricity is delivered over the same poles and wires.

Reliability will stay the same.

Implications for Consumers 13

Power to Choose

Energy Community promotes freedom of energy suppliesAt the latest from July 2007, and January 2015, all consumers in EU and SEE respectively, will be free to shop around for gas and electricity supplies. The current (default) supplier will nolonger be the only choice.

Switching Supplier – process to be “user-friendly” with easy, cost efficient and standardised procedures for leaving one supplier and signing up with another. This process will be monitored by regulators, so that customers can be confident that the market is working in their interests.

Implications for Consumers 14

Demand and Price Trends 1/2

Rising demand for electricityImproving living standardsEconomy in Europe is expected to growWeather conditions

Implications for Consumers 15

Demand and Price Trends 2/2

Eurostat 11/2006 : EU-25 electricity prices expressed in euro per kWh increased by 5% for households* and by 16% for industrial consumers* between January 2005 and January 2006.Eurostat 18/2006: EU-25 electricity prices expressed in euro per kWh increased by 7% for households* and by 15% for industrial consumers* between July 2005 and July 2006.

Implications for Consumers 16

Electricity Prices for Households 1/2

Composition of electricity price for household Dc in € per 100 kWh, on January 1, 2006 Source: Eurostat11/2006 household category Dc, with annual consumption of 3500 kWh, of which 1300 kWh during night hours

0

5

10

15

20

25D

enm

ark

Italy

Net

herla

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Ger

man

y

Luxe

mbo

urg

Nor

way

Irel

and

Slov

akia

Belg

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Swed

en

Cypr

us

Euro

pean

Uni

on 2

5

Portu

gal

Aus

tria

Fran

ce

Pola

nd

Spai

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Finl

and

Hun

gary

Slov

enia

Rom

ania

Uni

ted

Kin

gdom

Czec

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publ

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Mal

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Croa

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Latv

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Bosn

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nd H

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Esto

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Lith

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a

Gre

ece

Bulg

aria

Serb

ia

Mac

edon

ia

W ithout T ax Other T axes VAT

d

Implications for Consumers 17

Electricity Prices for Households 2/2

Composition of electricity price for household Dc in € per 100 kWh, on July 1, 2006 Source: Eurostat18/2006household category Dc, with annual consumption of 3500 kWh, of which 1300 kWh during night hours

0

5

10

15

20

25

30D

enm

ark

Net

herla

nds

Italy

Ger

man

y

Nor

way

Luxe

mbo

urg

Swed

en

Irel

and

Belg

ium

Euro

pean

Uni

on 2

5

Aus

tria

Cypr

us

Slov

akia

Portu

gal

Fran

ce

Uni

ted

Kin

gdom

Spai

n

Pola

nd

Finl

and

Slov

enia

Mal

ta

Czec

h Re

publ

ic

Hun

gary

Rom

ania

Croa

tia

Esto

nia

Lith

uani

a

Gre

ece

Latv

ia

Bulg

aria

Bosn

ia a

nd H

erze

govi

na

Serb

ia

Mac

edon

ia

W ithout T ax Other T axes VAT

Implications for Consumers 18

Right to Cover the Costs

The concept of energy being a public good resulted in price bellow the market valueMarket-model implies that both for generation/supply and for network companies

costs will be coveredin addition a reasonable return on capital must be allowed for.

The transition to market model will imply rise in end-user energy prices, which might be not affordable to certain consumer groups

Implications for Consumers 19

Vulnerable Customers Support Systems in the Region

Tariff based solutions – regulated tariffs for certain well defined consumer groupsNon tariff based solutions – typically introducing a social security system

Non tariff based solutions should be preferred as they do not obstruct market forces.

Two countries have a social electricity tariff scheme (EU members) Countries with significant number of vulnerable customers do not have any support system (Bosnia and Herzegovina, Montenegro, Macedonia)UNMIK provides only some of the absolute poorest families to exclude them from paying their electricity bills; however, pensioners with a monthly income of about 40EUR are not beneficiaries of the system. Serbia provides for discounts only for special categories of customers, which are not necessarily the poorest ones and which are defined by the welfare centre.

Implications for Consumers 20

Vulnerable Customers Support Systems in the Region

A (transitional)TurkeySlovenia

OOSerbiaA (targeted)A (not targeted)T (targeted)Romania

MontenegroAUNMIK Kosovo

ItalyAT (permanent)HungaryAAGreece

FYROMAACroatia

AA (used for heating)Bulgaria

A (Sarajevo only)A (Sarajevo only)Bosnia and HerzegovinaA (targeted)Austria

AAlbania

HeatingGasElectricityT-social tariff, A-social allowance, O-Other

Source: ERGEG (TF on South East Europe Customers): Protection of Vulnerable Household Customers in SEE – Report

Implications for Consumers 21

Sector Associations

Industry – well organized (ETSO, UCTE, EURELECTRIC, EFET...)Regulators (ERGEG, CEER, ECRB, ERRA, IERN, MEDREG…)GovernmentsMost important stakeholder – H.E. CUSTOMEREmpty place for “EURO-Customer” or “EURO-Consumer”

Implications for Consumers 22

Ongoing Activities on Customer Protection

General guidelines on the protection of vulnerable household customers in SEE

Memorandum of Understanding on the Social Dimension of the Energy Community

Conference dedicated to household customers including vulnerable customers and energy efficiency

Implications for Consumers 23

Guidelines

The European Energy Regulators Group for Electricity and Gas(ERGEG) Task Force on South East Europe Customers: GENERAL GUIDELINES ON THE PROTECTION OF VULNERABLE HOUSEHOLD CUSTOMERS IN SEE

approved at the ERGEG CFG levelCouncil of European Energy Regulators (CEER) GA decided to provide them without CEER or ERGEG General Assembly approval to the European Commission as advice

The documents now is handed over to the ECRB to be further developed according to the needs of the region / country specificities

Implications for Consumers 24

Memorandum of Understanding

Memorandum of Understanding on the Social Dimension of the Energy Community (on the Agenda of the Ministerial Council Meeting 29 June 2007)MoU covers two social aspects:

consumers protection compatible with a sustainable and competitive market industry workers rights

It is envisaged that the implementation of Article 3 of Directive 2003/54 EC will primarily be focused on the interests of the most vulnerable customers. The European Commission is invited to develop strategies to deal with the issues of affordability, energy poverty, district heating reform, rural distribution, isolated systems and social impacts of reforms.Establishment of Social Forum to be assessed

Implications for Consumers 25

Conference

European Commission and Energy Community Secretariat: high level conference dedicated to household customers including vulnerable customers and energy efficiencyScope: electricity, gas and heatingParticipants: ministers (energy and social affairs), municipalities, regulators, market players, donorsInvitees: Energy Community plus ObserversDate: 2nd half of October, 2007Place - to be determinedRough agenda mid July

Implications for Consumers 26

THANK YOU FOR YOUR ATTENTION!

Edin Zametica, M.Sc. E.E.Chief of Staff

State Electricity Regulatory CommissionBosnia and Herzegovina

[email protected]: +387 35 302060Fax: +387 35 302077