Bulgaria Developing Secondary Legislation in the Energy Sector

Concurrent Meetings of the ERRA Tariff/Pricing and Licensing/Competition Committees took place on February 25-27 in Budapest, Hungary. These meetings were co-hosted by ERRA, the Hungarian Energy Office (NARUC) and the U.S. National Association of Regulatory Utility Commissioners (NARUC), with funding provided by the Soros Foundation through its Open Society Institute and the U.S. Agency for International Development (USAID). All 17 Full Committee members from Albania, Armenia, Bulgaria, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kyrgyz Republic, Latvia, Lithuania, Moldova, Poland, Romania, Russia, Slovakia and Ukraine participated in the discussions. ERRA Associate Members from Mongolia and the Russian Inter-regional Association of the Regional Energy Commissions (IAREC) were present at the Meetings as observers. One day of each Committee's meetings was devoted to discussions of the five regulatory papers drafted in accordance with the Local Government Initiative project financed by the Soros Foundation. Committee members provided their input to the Hungarian consultants who will work to adapt the papers to the needs of local governments that will be educated on regulatory issues.

The Tariff/Pricing Committee prepared and reviewed draft Issue Papers on the following topics: (1) Tariffs For System Services (leader - Armenia) (2) Two-Part Tariffs For Electric Power Consumers (leader - Romania); (3) Pricing Policy For Small Independent Generators (leader - Lithuania). The Hungarian Energy Office presented tables with quarterly data on Electricity and Gas Prices in the 17 member countries, which was collected based on information provided by the members. Commissioner James Connelly of the Massachusetts Department of Telecommunications and Energy discussed Electric Retail Service Pricing in the US. Mr. Jim Gallagher (New York Public Service Commission), who actively participated in last year's meetings, presented proposals regarding round-table discussion on real time rates and assisted Committee members with presentations for the April Investment Conference. Mr. Florin Gugu (ANRE, Romania) was elected to serve as committee vice-chair for a two-year term.

The Licensing/Competition Committee is developing the following Issue Papers this year: (1) Conditions for the Power Pool Formation and its Development Issues, (2) Dispute Resolution Process, (3) Leasing/Concession. Committee Members also visited recently opened Hungarian System Operator. Chairman Thomas Welch (Maine Public Utilities Commission ) discussed the Dispute Resolution Process and provided numerous comments and suggestions on the paper drafts. Chairman Diane Munns (Iowa Utilities Board) contributed to the meeting by sharing her thoughts on Regional Transmission Organization Development in the U.S.

Energy Regulators from Twenty-Two Countries in Central/Eastern Europe and Eurasia Assembled for their Fifth Annual Conference
One full year after its inception last December in Bucharest, Romania, the 15 ERRA members convened on December 3-5, 2001, in Sofia, Bulgaria. The conference was co-hosted by the State Energy Regulatory Commission of Bulgaria (SERC), the U.S. National Association of Regulatory Utility Commissioners (NARUC), with funding provided by the U.S. Agency for International Development (USAID).

The conference opened with welcoming remarks from the Chairman of ERRA, Peter Kaderjak, as well as a statement from NARUC's President, William Nugent, and the Chairman of SERC, Konstantin Shushulov.

More than 90 Energy Regulators from 22 East European and Eurasian countries met to share their regulatory experience. Mr. Louis Borgo from the European Bank for Reconstruction and Development (EBRD) provided the Keynote Address, in which he discussed the role of the EBRD in Eastern Europe. In particular, Mr. Borgo addressed tariff and regulatory reforms and their ability to improve energy efficiency.

Major developments at the conference included the inclusion of two new full members: the Energy Regulatory Office of the Czech Republic and the Regulatory Office for Network Industries of Slovakia. Also, the General Assembly Representatives voted to accept two new associate members: the Energy Regulatory Authority of Mongolia and the Inter-regional Association of Regional Energy Commissions of the Russian Federation. As Chairman Kaderjak noted in his Welcoming Remarks, "the international recognition of ERRA activities is increasing."

ERRA continues to grow because of the ever-increasing need for regulation in the energy sector of Central Eastern European and Eurasian nations. In response to this growing need, select conference participants divided their time between the two Standing Committees of ERRA: the Tariff/Pricing Committee, and the Licensing/Competition Committee. At the same time, other participants delivered reports devoted to the current status and future of energy regulation in their countries. These meetings led to many lively debates and fruitful exchanges of information.

Other topics of the conference included an Introduction to EU Electricity Trade Access Issues, presented by Commissioner Jacques-Andre Troesch of the Electricity Regulatory Commission of France and the Council of European Energy Regulators (CEER). Professor Thomas Sterner from the University of Gothenburg concluded the conference with a speech on The Role of the Regulator in Environmental Issues.

The Fifth Annual Conference provided a unique opportunity for Central and East European Energy Regulators to share their knowledge and experiences with each other, with four U.S. Commissioners, and with several West European officials. NARUC and CEER participants deserve a special thanks for their invaluable input to the meeting: President William Nugent, NARUC (Commissioner, Maine PUC), Commissioner Thomas Welch (Chairman, Maine PUC), Commissioner Frederick Butler (New Jersey BPU), Commissioner Linda Kelly (Connecticut DPUC), Mr. Jim Gallagher (New York PSC), and Commissioner Jacques-Andre Troesch, CEER (Electricity Regulatory Commission, France).

Country Updates

Albania Approves a Two-Tier Tariff System
Electricity Regulatory Authority
The Albanian government approved a decision to introduce new ceiling prices for electricity aimed at curbing the use of power, which is in short supply in the Balkans state. The tariff change will only affect consumers who consume on average over 300kWh per month, for which they will pay Lek8/kWh ($0.06/kWh). Those who consume less than 300kWh per month will continue to pay just Lek4/kWh ($0.03/kWh). The tariff changes will be implemented by the Albanian Power Corporation (KESH) and the three semi-independent distribution companies Elektriku Elbasan, Elektriku Vlore and SESA Shkoder.
Government officials pointed out that this decision will mainly affect consumers in towns where electricity consumption is higher, but stressed that these consumers usually also have other energy sources at their disposal. "This tariff system will stimulate households to use electricity rationally and will create the appropriate financial and economic conditions to attract foreign investment in building new plant. This decision also aims to reduce and eliminate state subsidies for the import of power," read the government press statement. The new tariff system will also allow KESH to recover its capital costs through revenues and create better conditions for foreign investment.

Armenia
Energy Commission of the Republic of Armenia
No materials were submitted

Bulgaria Developing Secondary Legislation in the Energy Sector
State Energy Regulatory Commission

The government has taken the first step in defining the long-term direction of Bulgaria's energy sector by approving a so-called concept for the national energy strategy. After public discussion, the concept is to lead to a draft strategy to be published in March 2002, which will provide the basis for a new energy law to be adopted by parliament later this year. The strategy will replace one adopted in 1999 under the previous government, now rejected as insufficiently market-oriented and based on doubtful consumption forecasts. Key dates in the 25-page document include 2002-2003 for the privatization of electricity distribution companies, 2003-2004 for the privatization of the Bobov Dol, Rousse and Varna thermal power plants, and 2007 for the end to NEK's monopoly of imports and exports.

The process of licensing energy companies operating in the country is completed. Conditions were created for active assistance in case disputes arise between companies and their clients; as a result of this, a great number of complaints were processed. Most of the disputes were resolved in favor of subscribers of energy companies. At the end of 2001, SERC proposals on the changes in the current energy law were adopted. These changes are aimed at improvement of conditions for efficient monitoring of issued licenses and strengthening financial independence of the Commission.

The Energy Regulatory Office (ERO) was established in 2001 by the § 17 of the Government Act 458/2000. It is responsible for the business conditions and public administration in the energy sector, and is the central authority of the state administration.

U Sovovych mlynu 9, 118 00, Prague 1, Czech Republic
Tel.: (420 2) 57 183 554, Fax: (420 2) 57 183 512
http://www.eru.cz

Estonia
Energy Market Inspectorate
No materials were submitted

Georgia Adopts New Tariffs
Georgian National Energy Regulatory Commission
According to a decision approved by the Georgian National Energy Regulatory Commission (GNERC), consumer electricity tariff for all categories of consumers, including residential ones, with voltage 380/220 volt, is set at $ 0.0496/kWh in Tbilisi and between $0.0321-0.0325/kWh for other regions of Georgia. The weighted average tariff for generation is currently $ 0.0123/kWh. The relatively high level of the consumer tariff in Tbilisi results from significant investments made by the AES corporation in 1999-2000. In the near future, GNERC intends to introduce in Tbilisi the so-called "subscriber fee" and two-tier consumer tariffs. This decision is aimed at the social protection of low-income households.

Georgia Signs Management Contracts with Spanish Ibedrola and Irish ESBI
At the end of 2001, Spanish company "Ibedrola" was invited to the wholesale electricity market of Georgia for a five year period. The goal of the signed management-contract is to improve financial situation of the Georgian energy sector and increase economic efficiency of the wholesale market.

According to the decision of the Government of Georgia, two separate companies dealing with electricity transmission and dispatching merged. Following an international tender, the Irish company ESBI was selected to introduce a modern management system in the merged company. To ensure technical re-equipment of the electricity transmission and dispatching system, and for further development of the wholesale market, the World Bank granted a long-term credit in the amount of US$ 56 million.

Currently negotiations with the Greek company "TERNA" are being held. The idea is to delegate management of "Vartsikh" coordinated hydroelectric system (184 megawatt) for 3.5 years to this company. This company will rehabilitate the coordinated hydroelectric system within the framework of KFW credit.
In the near future, Georgia plans to announce tenders for the privatization of hydro power stations and distributions companies that are state-owned.

Hungary Adopts New Electricity Act
Hungarian Energy Office
On December 18, 2001, the Hungarian Parliament approved the new Electricity Act. One of the aims of the Act is to ensure that consumers have low cost electricity supply of appropriate quality. The Act foresees that in the near future part of the market will remain regulated while the other part will be open to competition. The other aim of the Act is to create a framework for the operation of the electricity market and to contribute to its flexible, long-term adaptation to the market changes. To fulfill these goals, more detailed regulations will be established via governmental and ministerial decrees. The Act confirms the independence of the Hungarian Energy Office. The President and his deputy are nominated for six years by the Prime Minister. The Hungarian Energy Office makes recommendations on the official prices, which will continue to be approved by the Minister of Economy.

The electricity market will officially open to competition only in January 2003, but the traders and the generators have already made their first offers to industrial consumers. In the first round, the stake is approximately 100 billion Hungarian Forints. Foreign generators are not directly represented on the Hungarian market, but Hungarian power plants are already seeking direct contact with the consumers.

Hungary: Ban on Electricity Exports to Austria has been Lifted
The Government of Austria decided in October 2001 to ban electricity imports from East European countries that operate power stations under environmental standards less stringent than those in Austria. As most countries in the region, Hungary appeared on this "black list." Differences between the actual environmental performances of the power sectors and regulatory standards in Austria and Hungary could hardly justify such restrictive measures. Hungary has harmonized its environmental regulations and successfully closed the environmental chapter of the Accession Negotiations in 2001. It means that environmental standards required by the Acquis concerning power stations in the EU member states have all been introduced and became effective for Hungarian power generators as well. Austria accepted such reasoning and lifted the ban on Hungarian electricity imports as of December 17, 2001. Although today not even 3.6 percent of the domestic energy consumption is based on renewable resources, this proportion will double by 2010. To reach this goal, Hungary plans to build power plants and facilities using wind, hydro, solar and geothermal energy, as well as power plant using biogas, biodiesel and biomass in the next nine years that would total over 400 billion Hungarian Forints.

Hungary: HEO Surveys Consumer Satisfaction
The Hungarian Energy Office has finished the 6th consumer-satisfaction survey in the electricity sector. The HEO surveyed 9630 residential and 3210 non-residential consumers based on a representative, casual sampling. The consumers countrywide are unsatisfied with the prices. Compared to 1996, the performance of the electricity suppliers all over the country has worsened and the administration of complaints has not improved. The expectations towards the supply are the highest on the South of Hungary and the lowest towards the Tisza Áramszolgáltató. (Electricity supplier on the territory east of the river Tisza). Considering the average of all the characteristic values during the last six years, the Budapesti Elektromos Muvek (Budapest Electricity Company) has reached the largest development and at the same time the Dél magyarországi Áramszolgáltató. ( South Hungarian Electricity supplier Ltd.) has deteriorated.

Kazakhstan
The Agency for Natural Monopoly Regulation, Competition Protection and Small Business Support
No materials were submitted

Kyrgyz Republic
State Energy Agency under the Government of the Kyrgyz Republic
No materials were submitted

Latvia
Public Utilities Commission
No materials were submitted

Lithuania: National Control Commission Has New Authority
The National Control Commission for Prices and Energy
The Lithuanian Government has requested that the National Control Commission for Prices and Energy (NCC) establish the method for combined heat and power producers' price calculation, as well as the method for calculating the prices of the renewable and waste energy. According to the Law on Electricity, the NCC will also approve the electricity grid connection charges for the new customers. Prior to this decision, the Ministry of Economy carried out this function.

In February 2002, the NCC should decide on price caps for the newly created Transmission (JSC "Lithuanian power") and two Distribution companies (JSC "West distribution company" and JSC "East distribution company"). The NCC will also work with new electricity market participants such as eligible consumers, independent and public suppliers, market operator and TSOs. The Commission also needs to revise certain secondary legislation acts such as the Method for the Selling Price of the PSO Calculation, the Rules of the Electricity Trade Quantities Calculation and others.

Moldova
National Energy Regulatory Agency
No materials were submitted

Poland
Energy Regulatory Authority
No materials were submitted

Romania
National Electricity and Heat Regulatory Authority
By the end of 2001, Romania 's energy market regulator ANRE has issued 28 electricity supply licenses, 17 supplier licenses and 19 eligible consumers licenses as it continues to move to open its power market to competition. For a 25% competitive market and an annual consumption over 100GWh, 22 new eligible consumers are expected to be accredited. The Romanian government decided to open 33% of the electricity market to competition in February 2002, up from 15%. The electricity transactions in 2001 under bilateral contracts with regulated prices and quantities were traded 87.7% on the wholesale market and 12.3% on the spot market.

Russia
Federal Energy Commission of the Russian Federation
No materials were submitted

Regulatory Office for Network Industries (URSO) was established in 2001 by the of the Government Act Act 276/2001. It is responsible for the business conditions and public administration in the energy sector, and is the central authority of the state administration.

Bajkalska 27, 821 01 Bratislava 2, Slovakia,
Tel.: (421 2) 58248316, Fax:: (421 2) 58248339
http://www.urso.gov.sk

Ukraine
National Electricity Regulatory Commission of Ukraine
No materials were submitted