In contrast with the previous Committee meetings, which focused on preparation of Issue Papers, the Chisinau meeting was structured as an informal roundtable discussion among member countries. This unusual setting allowed the commissioners and the heads of respective tariff departments to focus all of their attention on a single topic - tariff design.

As an introduction, Mr. Ede Treso, a Senior Advisor at the Pricing Department of the Hungarian Energy Office, presented the tariff statistics information collected by the Committee. Mr. Treso, who designed the data collection questionnaire, discussed the challenges of comparing this type of cross-country data. Among other challenges, he mentioned the absence of a unified interpretation of value-added taxes (VAT) and the difficulties of converting prices provided in 15 national currencies to US dollars. Particular problems were encountered while comparing electricity prices in large federations with many regions that have different consumption patterns and respectively divergent prices (e.g., Russia or Kazakhstan) with those in smaller states where electricity tariffs are uniform (e.g., Moldova or Latvia). Since not all the countries have presented their data yet, the Committee anticipates continuing this work in the future.

     Special attention will be given to collecting not only cross-country data but also time-series data that would allow for tracing of price dynamics. Additional calculations will be performed to compare the price of electricity with the purchasing power parity indicators (PPP) in each country. This, for instance, would show the regulators how much USD 0.06 is worth in a relatively expensive country such as Hungary, where this is the price of 1 kilowatt/hour and compare it with an arguably less expensive country such as Moldova.

     After reviewing the statistical information, participants had a chance to discuss in-depth the methods of designing the tariff systems and associated challenges and difficulties. Mr. Jim Gallagher (Chief/Retail Competition Section/ New York Public Service Commission and Co-Chair of NARUC Staff Subcommittee on Energy Resources and Environment) moderated this six hour-long roundtable discussion. As an expert in this field, Mr. Gallagher was able not only to structure the debate, but also to answer many questions about the issues faced by the regulators in the US and solutions developed during the annual NARUC meetings. At the end of the roundtable, Mr. Gallagher noted that "while the member countries demonstrated significant progress and achievements in the tariff area, several remaining challenges emerged." He summarized most significant issues troubling regulators in CEE/Eurasia as follows:

• Tariffs are often established at well below true costs. The goal of virtually all countries is to eventually equalize costs with revenues;
• Subsidies (such as customer non-payments) are often a significant issue, and efforts are underway to decrease them;
• Tariffs often provide no incentives for capacity or demand management, and there may be significant opportunities for seasonal or more sophisticated time of use rate design;
• There is often a lack of flexibility to revise tariffs because governments sometimes establish ceiling prices that can not be modified;
• Connection charges, and there proper application, are an emerging issue; and
• The current focus is often on tariffs to implement existing regulatory models, while efforts need to continue to identify appropriate tariff strategies needed for the introduction of more competitive markets.

     The roundtable participants found the discussions productive, and there was general agreement to continue efforts to identify and document the tariffs in the individual countries, and to explore the development of appropriate strategies and model tariffs to address the challenges.

     In continuation of the discussion of tariff design methods, Mr. Tomasz Kowalak, Acting Director, Tariff Department, of the Energy Regulatory Authority of Poland, presented his views on one the most complex regulatory tasks - determination of connection charges. Countries that are transitioning from centrally planned economies to free markets must decide how to set connection charges that will allow the growth of power distribution. In the past, this development was accomplished through investments administered by the central government and connection charges were built in utility's own resources and the resources of the connected users. These days, power distributors must perform certain public service functions and at the same time cope with the profound changes in the structure of users. The latter is exemplified by a decline of high voltage sales due to a decline in heavy industry production, simultaneous decline of sales of electricity per individual user and intensification of connections of new business and residential users to the low and medium voltage lines. The formula for solving this problem, proposed by Mr. Kowalak, is based on a revenue ceiling model. It presents a way of distributing the cost of developing the grid between users connected now and the future users and also allows determination of a rational ceiling on connection charges as an "entry barrier" while distinguishing residential, industrial users and power generators. Mr. Kowalak suggested several approaches to calculating connection charges, which could be based on lump sum payments, be functions of connection capacity or connection length, include additional components for the grid expansion required for the connection or be a combination thereof.

Viacheslav Ovchenkov, First Deputy Chairman of the Federal Energy Commission of the Russian Federation, provided the Committee with a first-hand report and his comments about the recently adopted new power sector reform initiative in Russia. This reform has been long anticipated by investors and since November 2000 has been a point of contention between the investors, foreign advisors, minority stakeholders and the Russian government.

    Russia's power sector is one of the world's largest, with nearly 200 gigawatts of nameplate capacity and three million kilometers of high-voltage transmission lines. The sector is incorporated and consolidated primarily under one entity - the Russian Joint Stock Company "Unified Energy Systems" (RAO UES), which owns Russia's high-voltage transmission grid and central dispatch systems, as well as between 14 percent and 100 percent of the shares in Russia's 72 regional utilities. The majority of the regional utilities, and UES itself, have been privatized; however, the Russian government still holds a majority of their stock. During a recent Cabinet meeting, Mr. Anatoly Chubais, CEO of RAO UES, reported that despite strengthening payment discipline and a rising level of cash payments, the Russian power sector is still experiencing major difficulties caused by a slump in investment. Mr. Chubais estimated that between US $ 30-60 billion must be invested in the Russian electricity sector in the next ten years.

    With this goal in mind, the government of the Russian Federation has committed itself to de-monopolization in power generation and sale, implementation of unbundling, and provision of non-discriminatory access to market infrastructure to all producers and users of electric power. The key institutional result of reform should be the development of a competitive wholesale electric power market. Reform of the power sector shall be carried out in three stages, with the last one implemented by 2008. "Although the debate on the form of restructuring seems to have come to an end" concluded Mr. Ovchenkov, "it is only the beginning of the restructuring itself, which will be a long and challenging process."

     Other items on the agenda of the Tariff/Pricing Committee Meeting in Chisinau pertained to the implementation of the Issue Papers developed by the Committee in 1998-2001 and discussion of the immense restructuring reforms recently approved by the government of the Russian Federation.

Tatyana Kramskaya, Program Manager

09:00 Welcoming Remarks and Introduction to the Meeting

• General Director Triboi, National Energy Regulatory Agency of Moldova
• Chairman Vardan Movsesyan, Committee Chairman and Chairman, Armenian Energy Commission
• Mr. Jamshid Heidarian, Senior Energy Advisor, Energy and Infrastructure
  Division, Bureau for Europe and Eurasia, U.S. Agency for International Development
• Ms. Tatyana Kramskaya, Program Officer, NARUC

09:30 Presentation of Tariff Statistics Data Gathered in 2001
Mr. Ede Treso, Senior Advisor Pricing Department, Hungarian Energy Office

10:15 Discussion of the Presentation on Tariff Statistics
Questions and Answers

10:45 Break

11:00 Connection Charges
Mr. Tomasz Kowalak, Acting Director, Tariff Department, URE of Poland

11:20 Discussion of the Presentation on Connection Charges
Questions and Answers

12:30 Lunch

14:00 Tariff Methodology
Background: The purpose of this session is to exchange information on the
tariff systems and methodologies in each of the participating countries. Each Member will provide a short presentation of the tariff system (no more than 10 minutes), followed by a 5-minute Question and Answer session.
Moderator: Mr. James Gallagher, Chief, Retail Competition Section, NY PSC

14:00 Albania, Mr. Kastriot Sulka
14:15 Armenia, Chairman Movsesyan
14:30 Bulgaria, Ms. Svetla Todorova
14:45 Georgia, Commissioner Demur Chomakhidze
15:00 Hungary, Mr. Ede Treso
15:15 Kazakhstan, Ms. Aida Askarova

15:30 Coffee Break

15:45 Kyrgyzstan, Mr. Jekshen Sydykov
16:00 Latvia, Ms. Galina Sirone
16:15 Lithuania, Vice-Chairman Vygintas Sidzikauskas
16:30 Moldova, Ms. Lidia Zestrea
16:45 Poland, Mr. Tomasz Kowalak
17:00 Romania, Mr. Florin Gugu
17:15 Russia, First Deputy Chairman Viacheslav Ovchenkov
17:30 Ukraine, Ms. Olga Ossadcha

17:30 Conclusion

Wednesday, June 20

09:00 Continuation of Discussion of Tariff Methodologies
Moderator: Mr. James Gallagher, Chief, Retail Competition Section, NY PSC

10:45 Coffee Break

11:00 Restructuring of the Russian Electricity Market
Viacheslav Ovchenkov, First Deputy Chairman of the Russian FEC

11:30 Roundtable Discussion of the Implementation of the Issue Papers Developed by the Committee in 1998-2001 and Report by the Committee Chairman
Moderator: Mr. Jamshid Heidarian, USAID

12:30 Lunch

14:00 Continuation of The Roundtable Discussion of the Implementation of the Issue Papers and Planning of Future Activities

15:15 Discussion of the Fall 2001 Joint Meeting of the Licensing/Competition and Tariff/Pricing Committees

15:30 Closing Remarks

• Chairman Vardan Movsesyan, Committee Chairman and Chairman, Armenian Energy Commission
• Mr. Jamshid Heidarian, Senior Energy Advisor, Energy and Infrastructure Division, Bureau for Europe and Eurasia, USAID
• Ms. Tatyana Kramskaya, Program Officer, NARUC

15: 45 Meeting Concludes

Albania
Electricity Regulatory Authority
Mr. Kastriot Sulka, Head of the Tariff Department
Tel: (355 42) 22 963 / 32 245; Fax: (355 42) 22 963

Armenia
Energy Regulatory Commission of Armenia
Chairman Vardan Movsesyan, Tariff/Pricing Committee Chair
Tel: (374 2) 52 25 22; Fax: (374 2) 50 73 61

Bulgaria
State Energy Regulatory Commission
Mrs. Svetla Todorova, Director
Tel: (3592) 5490 356; Fax: (3592) 9888 782
Internet: http://www.dker.bg

Georgia
Georgian National Energy Regulatory Commission (GNERC)
Commissioner Demur Chomakhidze
Tel: (995 32) 253 392; Fax: (995 32) 253 397

Hungary
Hungarian Energy Office
Mr. Ede Treso, Senior Advisor Pricing Department,
Internet: http://www.eh.gov.hu

Kazakhstan
Agency of the Republic of Kazakhstan for Regulation of Natural Monopolies, Protection of Competition and Small Business Support
Ms. Aida Askarova, Acting Head of the Oil and Gas Department
Tel: (7 3172) 32 36 47; Fax: (7 3172) 32 77 22)

Kyrgyz Republic
State Energy Agency under the Government of the Kyrgyz Republic
Mr. Jekshen Sydykov, Lead Specialist, Economy and Finance Division
Tel: (996 312) 42 46 07; Fax: (996 312) 62 08 06

Latvia
Energy Regulation Council
Mrs. Galina Sirone, Head, License Office, Tariff Division,
Tel: (371) 7013 241; Fax: (371) 7312 763
Internet: http://www.erp.riga.lv/

Lithuania
National Control Commission for Prices and Energy in Lithuania (NCC)
Vice-Chairman Vygintas Sidzikauskas, Lithuanian NCC
Tel: (370 2) 236 332; Fax: (370 2) 235 270
http://www.regula.is.lt

Moldova
National Energy Regulatory Agency (ANRE)
Mrs. Lidia Zestrea, Head, Tariff and Economic Analysis Department
Tel: (373 2) 21 23 85; Fax: (373 2) 54 05 34

Poland
Electricity Regulatory Authority
Mr. Tomasz Kowalak, Acting Director, Tariff Department
+48 22 66-16-210, or 211; fax 66-16-219

Romania
National Electricity and Head Regulatory Authority (ANRE)
Mr. Florin Gugu, Director, Tariff Department
Tel: (401) 311 2244; Fax: (401) 312 4365
Internet: http://www.anre.ro/

Russian Federation
Federal Energy Commission (FEC)
First Deputy Chairman Viacheslav Ovchenkov
Tel: (7 095) 220 4975; Fax: (7 095) 206 8108

Ukraine
National Electricity Regulatory Commission (NERC)
Mrs. Olga Ossadcha, Head, Tariff Department
Tel: (38044) 241 9011; Fax: (38044) 241 9011

United States
National Association of Regulatory Utility Commissioners (NARUC)

Mr. James Gallagher, Chief, Retail Competition Section, Office of Electricity and Environment, New York Public Service Commission
 Tel: 1 (518) 474-1932; Fax: 1 (518) 474-5026
Internet: http://www.dps.state.ny.us/

U.S. Agency for International Development
Internet: http://www.info.usaid.gov/
Mr. Jamshid Heidarian, Senior Energy Advisor, Energy and Infrastructure Division, Bureau for Europe and Eurasia;

Presentation of Tariff Statistics Data Gathered in 2001
Mr. Ede Treso, Senior Advisor Pricing Department, Hungarian Energy Office
(Microsoft Word, 62 Kb) download>>

Connection Charges
Mr. Tomasz Kowalak, Acting Director, Tariff Department, URE of Poland
(Microsoft Word, 40 Kb) download>>

Restructuring of the Russian Electricity Market
Viacheslav Ovchenkov, First Deputy Chairman of the Russian FEC
(Microsoft Word, 71 Kb) download>>

Implementation of the Issue Papers Developed by the Committee in 1998-2001 and Report by the Committee Chairman
(Microsoft Word, 53 Kb) download>>