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Just a reminder that ERRA will be holding its Annual Conference in Budapest on May 6-7th, 2003, and the 2nd Annual Energy Regulation & Investment Conference May 8-9th, 2003.
  

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ERRA Concurrent Meetings - Istanbul, Turkey

The Energy Regulators Regional Association (ERRA) held three concurrent meetings from February 16-18 in Istanbul, Turkey.  These meetings were co-hosted by ERRA, the Energy Market Regulatory Authority of Turkey and the U.S. National Association of Regulatory Utility Commissioners (NARUC), with funding provided by the U.S. Agency for International Development (USAID).  Representatives from 18 of ERRA's 19 Full Members participated, including Commissioners and senior staff from Albania, Armenia, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Kyrgyz Republic, Latvia, Lithuania, Moldova, Poland, Romania, Russia, Slovakia, Turkey, and Ukraine. More than 40 commissioners and staff members of Turkey's EMRA also actively participated.

The Benchmarking/Monitoring Working Group met on February 16 for a roundtable discussion on benchmarking activities in Albania, Bulgaria, Georgia, Hungary, Kyrgyz Republic, Latvia, Lithuania, Moldova, Romania, Turkey, and Ukraine. A US Commissioner and two CEER staff people also joined the discussions.

The Tariff/Pricing Committee and Licensing/Competition Committee met together to discuss ERRA in-house and external training, particularly the role of the standing committees in terms of potential training for new staff at member regulators. 

The Tariff/Pricing Committee then approved its Issue Papers:  (1) Distributed Generation; (2) Tariffs for System Services in the Energy Sector; (3) Two-Part Tariffs for Electric Power Consumers; and started development of the 2003 Issue Paper on determination of tariffs for ancillary services. Ms. Sandra Waldstein (Vermont PSC) introduced and led the discussion on the determination of tariffs for ancillary services. The Committee also considered a discussion paper on tariffs for cross-border exchanges in the Baltic States and South Europe. Mr. Jim Gallagher (New York PSC) engaged committee members in a discussion of pricing changes.

The Licensing/Competition Committee approved the Issue Paper on Cross-border Capacity Allocation Methods. In addition, they heard presentations on the Market Models of Turkey, Moldova, and Slovakia. The Committee also worked on Discussion Papers regarding: (1) ERRA market models, which was presented by Chairman Thomas Welch (Maine PUC); (2) Codes of Conduct; and (3) Licensing Practices. Chairman Pantelis Capros (Greece) and Commissioner Robert H. Anthony (Oklahoma CC) also gave presentations on Gas Transmission, and the Committee held a workshop on the Interrelationship between Privatization and Regulation.

EU Accession Working Group Meeting

Under the auspices of the USAID/NARUC Cooperative Agreement, the EU Accession Working Group organized its first 2003 meeting in Budapest, Hungary on January 13. The meeting was co-hosted by the Hungarian Energy Office. Working group members from 10 Member regulatory organizations of ERRA (Energy Regulators Regional Association) participated in the meeting. In addition, there were participants from 3 CEER members, Austria, France, and Spain. There were several presentations and discussions of renewable energy sources and stranded costs, two vital areas toward achieving the European Union's required "acquis." The Working Group also heard presentations by delegate from the Austrian regulator, E-Control, on TF Taxation and Environment and Electricity Disclosures.

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1st Technical Exchange for Romania-Moldova

The National Energy Regulatory Agency (ANRE) of Moldova and the Romanian Electricity and Heat Regulatory Authority (ANRE) of Romania held a technical exchange regarding tariff systems on October 21-25, 2003, in Chisinau, Moldova.  This activity was hosted by ERRA and ANRE/Moldova with funding provided by the U.S. Agency for International Development (USAID).  Representatives from Romania's ANRE included Mr. Florin Gugu, General Manager, Tariffs Department, and Mr. Adrian Borotea, Counselor, Tariffs Department. Many members of Moldova's regulator participated, including Commissioners and senior staff from the tariff department. In preparation for this exchange, each regulator had requested specific presentations from the other according to their needs. After presentations detailing the present electricity sectors in both Moldova and Romania, ANRE Romania was asked to describe their methodology for establishing electricity tariffs. As requested by the Romanian commission, ANRE Moldova presented their experience with privatization of distribution companies in Moldova. In addition, the commissions discussed tariff systems with representatives of Union Fenosa, which was an opportunity to develop a better understanding of the utility's point of view. The technical exchange was very successful, and all participants reported that they greatly benefited.

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CEER-ERRA Training

The Energy Regulators Regional Association (ERRA) and the Council of European Energy Regulators (CEER) held their first training course for electricity regulators of EU Accession countries from February 3-7, 2003, in Budapest, Hungary.  This training program was co-hosted by ERRA and CEER with funding provided by the U.S. Agency for International Development (USAID).  Representatives from 11 of ERRA's 19 full members participated, including Commissioners and senior staff from Albania, Bulgaria, Estonia, Georgia, Hungary, Latvia, Lithuania, Poland, Romania, Russia, and Slovakia. In addition, a CEER member from Austria attended as well as an ERRA associate member from Mongolia. The instructors came from regulatory commissions in France, Hungary, Finland, the Netherlands, Spain and Italy as well as from the European Commission. Key topics covered during the training course included: electric power systems, power pool models, wholesale electricity markets, regulatory functions, contracts, transmission systems, EU frameworks, retail market, quality of supply, tariff design. The training course was very successful as all members reported that they benefited tremendously.

For more information on the training course, please visit:  http://www.erranet.org/Events/ERRA/2003/training CEER budapest

ERRA FEE-FOR-SERVICE
STUDY TOURS AND EXCHANGE PROGRAMS

In cooperation with TESCO, the ERRA Secretariat successfully implemented a one-week study tour for Georgian energy regulators and managers in December 2002. The 10-member delegation visited the Hungarian Energy Office and select participants of the Hungarian energy sector. (See the attached agenda.)

If you are interested in these programs, please contact the ERRA Secretariat at secretariat@erranet.org or at (36 1) 477 0456 by phone or at (36 1) 477 0455 by fax.

Country Updates

Albania: Strengthening Ties: The Second Visit of the ERE/IURC Partnership

From January 11-18, a delegation from the Electricity Regulatory Authority of Albania (ERE) visited the Indiana Utility Regulatory Commission (IURC) in Indianapolis.  The delegation consisted of Chairman Engjell Cuci, Commissioner Mehdi Canga, Commissioner Pandeli Angjeli, Commissioner Rajmonda Islamaj, Commissioner Kristaq Zhupa, and Mr. Kastriot Sulka, Head of the ERE's Tariff Department.  The ERE/IURC Partnership is supported by funding from the United States Agency for International Development (USAID) and implemented by the National Association of Regulatory Utility Commissioners (NARUC).

From left to right: Commissioner Mehdi Canga (ERE), Dr. Robert Ichord (USAID), Commissioner Rajmonda Islamaj (ERE), Chairman William McCarty (IURC), Executive Director Charles Gray (NARUC), Ambassador Fatos Tarifa, Chairman Engjell Cuci (ERE), Commissioner Pandeli Angjeli (ERE), Commissioner Kristaq Zhupa (ERE)

This visit concludes the introductory aspects of the ERE/IURC Energy Regulatory Partnership.  The two introductory activities were designed to provide an in depth view of the authority, autonomy, and accountability of each agency.  The next series of activities and training opportunities will deal with specific regulatory issues of interest to both Commissions.  During the activities held in Tirana and Indianapolis, the commissioners and staff of both agencies actively participated in the sessions and engaged their counterparts on a number of issues.  The ERE/IURC Partnership is off to a successful start because both partners are dedicated to a successful Partnership and eager to learn from each other.

Bulgaria: The Third Visit of the SERC/BPU Partnership 

Regulating Energy Assets:  Licensing and Ensuring Reliability

From January 25-31, a delegation from the State Energy Regulatory Commission of Bulgaria (SERC) visited the New Jersey Board of Public Utilities (BPU) in Newark.  The delegation consisted of Vice-Chairman Ignat Tomanov; Mr. Vassil Koutintchev, Head of Licenses and Control in the Electric Power Division; Mr. Kostadin Balachev, Head of Licenses and Control in the Gas Supply Division; Mr. Ivaylo Aleksandrov, Head of the Department in the Economic Regulation Division; and Ms. Irena Kasalova, Chief Expert in the Legal Division.  The SERC/BPU Partnership is supported by funding from the United States Agency for International Development (USAID) and implemented by the National Association of Regulatory Utility Commissioners (NARUC).

New Jersey Board of Public Utilities

From left to right: Ms. Caroline Savage (NARUC), Mr. Ivaylo Aleksandrov (SERC), Vice-Chairman Ignat Tomanov (SERC), President Jeanne Fox (BPU), Mr. Vassil Koutintchev (SERC), Ms. Irena Kasalova (SERC), Mr. Kostadin Balachev (SERC), Mr. Jason Czyz (NARUC)

This is the third exchange activity between SERC and the BPU.  In September 2002, Commissioner Frederick Butler led a delegation of senior BPU staff to Sofia.  In May 2002, the BPU, SERC, and NARUC held a Signing Ceremony at the Bulgarian Embassy in Washington, DC to initiate their Partnership.

Bulgaria: New Draft Energy Act

Bulgaria: SERC Adopts New List of Power Plants

In December, SERC has adopted a list of power plants and amounts of energy and capacity, which can be renegotiated by eligible customers after July 1^st, 2003.

Bulgaria: SERC Approves Indicative Terms on Electricity Market Opening

Indicative terms on electricity market opening have been approved by SERC in the end of March as follows:

Estonia: News in brief

During January and February 2003, the Estonian Parliament approved the following four acts: the Electricity Market Act, the Liquid Fuel Act, the Gas Act and the District Heating Act. These legislative acts will go into effect July 1^st, 2003. Implementing this legislation will change the EMI's workload considerably. Of these, the most significant is the Electricity Market Act. On the basis of the Electricity Market Act, a grid code is currently being prepared. The Electricity Market Act will provide various new regulatory areas of responsibility for EMI, such as: systems responsibility and system operator, obligations of system operator, and calculating the price of balancing energy. This act will also change the procedure for issuing licenses.

Hungary: Gas Bill to Launch Market Opening Likely to Pass 

The Government decided on an increase in the price of natural gas. The price of natural gas has increased by an average of 12% in the case of consumers consuming less than 500cmc and 0% in the case of consumers of more than 500cmc consumption. According to another governmental decision, natural gas price compensation will be introduced in October.

The electricity market has been opened as of January 1st, 2003. The ratio of market opening is 35%. The actual number of eligible consumers is 24, representing 17% of the total domestic electricity consumption. The competition is stimulated to a large extent by the opportunity to import.

Latvia: Governmental Issues

In February, the Cabinet of Ministers made the decision that the previously accepted legally independent status of Transmission system operator of SJSC -Latvenergo- is out of force, and, after that, the Constitutional Court stopped the proceeding. In the near future, the Latvian Transmission system operator will have independence only in management terms and will retain separate bookkeeping.

Latvia: Regulatory Issues

In January 2003, the Public Utilities Commission (PUC) accepted the tariff calculation methodologies for gas storage, transmission, distribution and sales and for electricity production (big HPP and CHPP), transmission, distribution and sales. Price caps are used as methods for tariff calculation and allow correction for actual inflation and estimated efficiency gains.  The profit components in the capital costs are based on return on regulatory assets. The return is based on the average government bond rate of OECD countries (risk-free rate) plus a risk premium specified by the regulator. The tariff review cycle is three years. Tariffs for the first year are based on the cost estimates submitted by the service provider, and a price cap is used to determine the tariffs for the following two years. The next review cycle starts with another cost-based tariff determination.

The gas distribution tariff separates between the high pressure and medium/low pressure levels and also takes into account the volume of gas consumption through a coefficient; a consumer with higher working pressure and higher consumption pays less for distribution services. Gas methodologies contain principles for allocation of costs of transmission and storage to Latvian consumers as storage capacity is also used outside Latvia. Gas methodologies have eliminated the features that previously caused cross-subsidies between different customer groups.

The gas company -Latvijas Gaze,- in accordance with the new methodologies, presented a tariff project in which the company was asked to increase gas sales tariffs at an average of 12,5% from July 1^st, 2003. The PUC is in the process of analysing the draft project. The projects presented in 2002 were rejected. 

Moldova: THE THIRD VISIT OF THE ANRE/IUB PARTNERSHIP

COMING TOGETHER: THE THIRD VISIT OF THE ANRE/IUB PARTNERSHIP

Visiting the Pella Cooperative Electric's maintenance facility (standing left to right): Caroline Savage (NARUC), Nina Haruta (ANRE), Barb Oswalt (IUB), Lidia Zestrea (ANRE), Natalia Dvornic (ANRE), John Harvey (IUB), Vasile Carafizi (ANRE), Jason Czyz (NARUC), John Smith (Coop); (kneeling): Lilian Barcaru (ANRE), Regi Goodale (IEAC) 

From March 15-21, a delegation from the National Energy Regulatory Agency of Moldova (ANRE) visited the Iowa Utilities Board (IUB) in Des Moines, Iowa for the third activity of their Energy Regulatory Partnership.  The delegation consisted of Director Vasile Carafizi; Mrs. Lidia Zestrea, Chief, Tariffs Department; Mrs. Nina Haruta, Main Specialist Tariffs Department; Mr. Lilian Barcaru, Main Specialist Regulations Department; and Ms. Natalia Dvornic, Financial Specialist. The Partnership activity was of great consequence to all involved, because, as IUB Chairman Diane Munns said, "in preparing our presentations and in answering questions, we have to think through the reasons why we do things the way we do.  It must be explained at all levels and it is beneficial for everyone, from the most experienced to the least experienced, to review our work in this manner." Further, she added, "it gives a much broader perspective on our system of government and regulation when interacting with our new [Moldovan] friends."

The ANRE/IUB Partnership is supported by funding from the United States Agency for International Development and implemented by the National Association of Regulatory Utility Commissioners. The next Partnership activity is scheduled to take place in Chisinau during the month of June.  This visit will focus on the Consumer Protections and Public Relations, as outlined in the work plan.

Moldova: The Republic of Moldova Announces Opening of the Electricity Market

In the first stage, the market was opened by 10% for consumers connected at 110 kV.  The industrial consumers who hoped to find cheaper sources of electricity initiated the market opening.

To obtain the right to choose a supplier, the consumers have to meet certain general criteria, such as, for example, having no debts for electricity and they should be solvent.

Alongside liberalization of the electricity market, the tariff differentiation by types of voltage is also being introduced.  In November 2002, ANRE adopted a differentiated tariff for consumers connected at 110 kV - 46 bani/kW, which is two times lower than the basic tariff.  In order to use the lower tariff, the economic entities must install metering devices with electronic memory.  Application of this tariff would not significantly affect residential consumers. However, introduction of tariffs differentiated by voltage levels 35, 10 and 0.4 kV would inevitably lead to an increase in the cost of electricity for residential consumers.

Moldova: Further Steps Towards the Improvement of the Legal Framework for the Energy Sector of the Republic of Moldova

The National Energy Regulatory Agency (ANRE) has developed and approved a number of new legal acts aimed at the improvement of the regulatory norms for the energy sector in compliance with the requirements of the free energy market.

Quite recently, the Electricity Market Rules were adopted, which is one of the fundamental documents developed for the purpose of regulating relations between market participants in the market economy.

In connection with the liberalization of the electricity market of Moldova, ANRE has developed and approved Regulations on Accreditation of Independent Consumers.  This document grants the right of solvent consumers who have no debts to choose a supplier.

For the same purpose, ANRE has developed such fundamental legal acts as Regulations on the Quality of Electricity Supply, Methodology of Determination, Approval and Revision of Prices for Ancillary Services Rendered by Electric Distribution Companies, and several instructions on accurate accounting for losses of electricity.

In its operations, ANRE strives in every possible way to combine domestic regulatory norms with requirements set by the European Union energy bodies.

Mongolia: New Tariffs

The Energy Regulatory Authority (ERA) of Mongolia has approved energy tariffs for the following licensees:

ERA has approved new tariffs for licensees of the Central Energy System and end-users (consumers) based on the Licensees proposals according to the July 2003 Law on Energy of Mongolia. Consumer tariffs of the Central Energy System for electricity increased by 4.4% to 4.14 US cents/kWh.

Consumer tariffs for electricity now constitute 0.44 - 8.1 US cents/kWh in regions, which is not connected to the Central Energy System.

The Central Energy System  observes the "Single Buyer Model." In accordance with this model, the -Central Electricity Transmission Network- Co., Ltd is in charge of the wholesale market and operates as a single buyer. The single buyer purchases electricity from producers and sells it to distributors. The single buyer also deals with market banking functions and collects money from wholesale purchasers to pay for generators.

Energy Partnership Program

With funding from the U.S. Agency for International Development (USAID), the United States Energy Association (USEA) is implementing the Energy Partnership Program between Minnesota Public Utilities Commission (MPUC) and Energy Regulatory Authority (ERA) of Mongolia.  On October 1-3, 2002 Chairman Greg Scott of the MPUC, Executive Secretary Burl Haar and Consumer Affairs Office Manager Deborah Motz visited with USEA staff to meet with ERA staff in Ulaanbaatar, to begin the regulatory partnership and prepare the partnership Work plan.

During the second executive exchange of the MPUC/ERA Partnership, Chairman Ganjuur Radii and 4 specialists of the ERA of Mongolia traveled to St. Paul, Minnesota & Washington, DC for a partnership executive exchange with the MPUC and the Federal Energy Regulatory Commission (FERC) from February 15 to February 26, 2003. The partners addressed improvement of tariffs, consumer protection & public relations, and performance assessment & monitoring processes of licensees.

Romania: Electricity news in brief

Prices and tariffs:

Trade Arrangements:

Following this Government Decision, ANRE issued Order no. 7/24.03.2003, which modifies and completes the previous ANRE Order no. 34/2002 by establishing a new way to ensure the demand of the captive consumers. Beginning April 1^st, 2003, newly established producers will conclude purchase contracts on the regulated and competitive market. On the regulated market, they will conclude contracts with each of the eight Electrica (distributor and supplier) subsidiaries. Another point of the Order no. 7/24.03.2003 regarding the integrally regulated operation of Hidroelectrica Company, states that the company will no longer conclude contracts on the competitive market with eligible consumers, other suppliers or for export. ANRE has also reviewed and modified provisions regarding cover for losses in the transport grid (ANRE Decision no. 127/2002).

The eight power distribution companies (discos) became fully operational in early 2003 when they took over the responsibility of their power contracting from Electrica.  The disco privatization process has begun. After the prequalification stage based on the expression of interest letters, 4 companies were short-listed in the privatization process of the first two disco (Dobrogea and Banat), and they are expected to be privatized in the course of 20032) New legislation or laws - The Energy Law is in final phase of approval in Parliament.

Romania: Natural Gas news in brief

·        At the end of 2002, the National Regulatory Authority in the Natural Gas Sector (ANRGN) issued a new Regulation for Accrediting Natural Gas Eligible Consumers, approved by the Decision of the president of ANRGN no. 974/2002, published in Monitorul Oficial no. 924/December 18, 2002. This new regulation brings some modifications to the old one, abrogated now. The key modifications refer to:

-         The date the Centralized List of Eligible Consumers comes into force is now April 1^st (rather than May 1^st, as the old regulation stipulated);

-         After the decision of the President of ANRGN for approving the Centralized List of Eligible Consumers is published, ensuring 15 calendar days for concluding the contracts for natural gas supply and, in some cases, for performing services;

-         Simplifying financial requirements by maintaining only the condition for payment in term of debts representing natural gas equivalent value, storage, transportation and distribution services and the related increases; this requirement has been introduced for reconfirmation of accreditation procedure too;  

-         Reducing to one year the period after which a consumer which had withdrawn its accreditation is allowed to request a new one;

-    Giving up the Temporary List of Eligible Consumers, approved by Regulatory Committee of ANRGN; the new accreditation proceeding approves only the Centralized List of Eligible Consumers, which is a list published by Monitorul Oficial of Romania.

·        By Decision no. 997/2002 of the President of ANRGN (published in

Monitorul Oficial of Romania no. 947/December 23, 2002), the opening degree of natural gas internal market for the year 2003 has been established at 30% of total internal consumption of the year 2002.

·        By Decision no. 180/2003 of the President of ANRGN (published in

Monitorul Oficial of Romania no. 164/March 14, 2003), 54 companies were accredited for 67 consumption points, covering the entire quantity of natural gas available for the liberalized market.

·        After negotiation between Romanian Government and IMF, in the context of Stand-by Agreement approved by Managing Board in October 2001, beginning in March 2003, the natural gas price has been established at 90 USD/ 1000 c.m. (approved by the Common Order of ANRGN and ANRM no. 121/20/2003, published in Monitorul Oficial no.93/February 12, 2003, on Establishing regulated prices and tariffs for captive consumers in natural gas sector)

·        The Phare contract RO 0005.01-04 "Gas Distribution Privatization in Romania" came into force on March 19, 2003. The running period of the contact is 12 months, and the consultant in charge of implementing this project is a consortium lead by Credit Suisse First Boston International. The consultant will settle the privatization strategy and will assist with privatization transactions.

Slovakia: News in brief

During the first months of year 2003, the Regulatory Office for Network Industries (RONI) approved commercial conditions for transmission systems and changes in the network code (grid code). RONI faces a year of great challenges ahead connected with preparation of the new act on power industry and also novelization of act on power industry. RONI cooperates with the Ministry of Economy on creation of these law norms, which will also include directives about energy efficiency in the power industry and about support of renewable and cogeneration sources. The office is also preparing a publication of legislative directives for evaluation of auxiliary and system services in the electro-power industry. Stranded costs are  one of the important problems to solve. The privatization of Slovenské Elektrarna, dominant generator of electricity in Slovakia, also depends on the solution of this problem.

Turkey: News in brief 

September 3^rd 2002 was one of the most important milestones in the Turkish electricity market: "Licensing Day." As of September 3^rd 2002, upon completion of the majority of the key secondary legislation, current and prospective participants of the electricity market started filing license applications with the Energy Market Regulatory Authority (EMRA). On March 24^th 2003, the first licenses were granted to public and private sector agencies. EMRA granted a total of 49 licenses, 41 of which are for electricity market activities and 8 of which are for natural gas market activities. In addition, EMRA approved tariffs for wholesale by the state-owned company as well as distribution, transmission and retail sale. As of April 1^st, 2003, these changes are being implemented.

March 3^rd, 2003 was "Eligible Consumer Day," another very important milestone for the Turkish electricity market. As of this date, consumers defined as "eligible consumers" in the relevant legislation acquired the right to contract directly with suppliers of their choice. On March 2^nd and 3^rd 2003, EMRA held a series of meetings in Abant, Bolu, which was attended by the Minister of Energy and Natural Resources, Deputies from the Turkish Grand National Assembly and many electricity and natural gas market participants. During this two-day event, EMRA?s electricity and natural gas departments conducted concurrent meetings to provide information about energy sector restructuring efforts. The organization proved to be very effective and beneficial for all parties and further strengthened relations between EMRA and market participants.

Website updates
ERRAnet.org website significantly expanded in the last several months. Please be sure to check these new links:

English

      EU Accession Working Group Meeting (January 13, 2003. Budapest, Hungary) http://www.erranet.org/Events/ERRA/2003/eu_budapest
1st ERRA-CEER Training Course For Electricity Regulators of EU Accession Countries (February 3-7, 2003. Budapest, Hungary)
http://www.erranet.org/Events/ERRA/2003/training_CEER_budapest
"Benchmarking/Monitoring" Working Group (February 16, 2003. Istanbul, Turkey)
http://www.erranet.org/Events/ERRA/2003/joint_istanbul      Licensing/Competition Committee Meeting (February 17-18, 2003. Istanbul, Turkey)
http://www.erranet.org/Events/ERRA/2003/joint_istanbul_licencing
Tariff/Pricing Committee Meeting (February 17-18, 2003. Istanbul, Turkey)
http://www.erranet.org/Events/ERRA/2003/joint_istanbul_tariff
 Strengthening Ties: The Second Visit Of The  Albania/Indiana Partnership
(January 11-18, 2003)
http://www.erranet.org/OtherActivities/Partnerships/ProgramReports
Draft Agenda of the 2nd Energy Regulation & Investment Conference (May 8-9, 2003. Budapest, Hungary)
http://www.erranet.org/Events/ERRA/2003/investmentconference
2002 Issue Papers
http://www.erranet.org/library/issue-papers.htm
ERRA Presidium Meeting  (January 14-15, 2003. Budapest, Hungary)
http://www.erranet.org/Events/ERRA/2003/presidium_january
New fully automated and updated Database of Electricity and Natural Gas Prices
http://www.erranet.org/Committee-WG/Tariff