Update of legal and institutional situation in Countries
1. Estonia. Four sets of Market Laws for Electricity, Natural Gas and Heat, Oil&Products and Solid Fuels had been drafted and now are collected in Ministry of Economy for consolidation or elimination. Negotiations between Eesti Energia and NRG are going heavy and till conclusion of negotiations no decision on Electricity market model is expected.
2. Lithuania. All corporate decisions for transformation of Lietuvos Energija to Transmission, two Distribution and two Generation Companies had been taken and 01.01.2002 is starting day.
3. Latvia. Government of Latvia decided to establish Transmission System Operator as Legal Entity inside integrated Latvenergo. Deadline to register new Legal Company - "High Voltage Network" is 20th of December. Combine Expert Group from Latvian Development Agency and Latvenergo is developing the Electricity Market Model consistent with positions of Electricity Sector policy had been approved at 11th of September.

Physical balancing of National Systems:
a) Load forecasting and generation adequacy.
DSOs are the major demand side information settlers for adequacy assessment of power systems. They must get information from Traders, Market Customers and Local generation.

b) Role of Transmission System Operator.
TSOs are physically pooling power, balancing Systems, Managing Generation Adequacy and Transmission Congestions. Whether they are managing national Power Pool or just running Balance Market depends on chosen National Market Model. In Lithuania Transmission System Operator and Market Operator is suggested in one legal entity - Lietuvos Energija. System operations and commercial activities will be separated in one corporate structure. The proposed model is proved as transitional.
In Estonia and Latvia final decision on configuration of TSOs and role of MO is not made yet.

c) Short-term and long-term load planning.
Those are the combined responsibilities of TSOs and DSOs.

d) Short-term and long-term generation planning.
Short-term planning is organized in configuration DC Baltija and National DC. Long-term responsibilities are defined in National Energy Laws and lie on TSOs and National Energy Administrations - Ministries of Economies and Regulators.

Balancing responsibilities of Transmission System Operators, Market Operators, DSO, Traders and Customers.
As long National Market models and Trading Arrangements are not published all responsibility of National Balance according energy laws lies on TSOs. If trading activities of Qualified Customers intensifies there is big need to state balancing responsibilities of Market participants, Balancing parties and Balance providers. From one hand price of balancing power must not avoid trade and on other hand not to give incentives to some traders to gamble on imbalances and create unnecessary deviations between planed and actual generation. Active participation of National regulators is anticipated.

Who is allowed to trade electricity and in which manner:
a) Generators. There is broad interpretation on role of generators in national markets of Baltic States. Most likely all three Countries will introduce interim solutions before liberating wholesale markets. Till now no any experience trade directly energy from power plants hade been observed. National interest of Countries is export power to any market participant in neighbouring Country by all possible means, including intermediates - Traders.
b) DSO needs transitional period to come market participants. This is not mater of laws, but question of confidence of personnel and organisation structure of Utilities.
c) Centralised Trading Authority most likely will introduced in all three countries to supply demand of captive Markets.
d) Customers or End Users might become market participants via status of Qualified Customers. Executions of balancing arrangements are crucial for market opening.
e) Authorisation (if any) of market participants could be done by TSOs, DSOs and Regulators.
f) Settlement process of trading transactions.
Databases of TSOs are inputs in settlement process of bilateral deals between Market participants in any kind of Market Model.
g) Payment transfers between Market Participants
No need for any intervention of TSOs, DSOs or Centralised Trading Authorities in bilateral market.

Conditions Market Participants have to meet to access Baltic Trading Area.
a) Estonia - import licence for DSOs or End-users, but no consumption threshold;
b) Lithuania - Consumption threshold from January 2002 and reciprocity conditions;
c) Latvia - consumption threshold, no reciprocity requirements till now.
F. Public service obligations of System Operators to feed-in Prioritised Power - CHP, renewable, indigenous resources or similar.
a) Latvia's electricity sector policy and proposed regulations envisage promotion electricity from renewable sources and CHP cycle in District Heating schemes. National target to produce electricity from renewable sources (excluding large hydro) - small hydro, wind, biomass and biogases is 6 % from net inland consumption in 2006.
Public Service obligation of TSOs and DSOs is to buy all feed- in power from renewable production and CHP cycle on set price. See Attachment "Latvian Electricity Policy"

Remarks, conclusions, recommendations.
a) Activities on setting Trading Arrangements in Baltic States are still in process, therefore it useful to continue exchange of information and ideas between TSOs and Regulators in next meeting.
b) Energy Committee, Common Baltic Electricity Market, Project Director Annelie Gabrielson suggests Training Session for Organizers and participants of CBEM in March or April 2002. Session will be held in one of Baltic State and run by specialist from Nordpool and other industries.
c) Next meeting will be held in Lithuania at 30th of January 2002.