Frankfurt (Germany), 6-9 June 2011 EUROPEAN REGULATORS’ VIEWS ON REGULATING SMART DISTRIBUTION NETWORKS Authors - Gareth Evans (Ofgem), Riccardo Vailati(AEEG), Karstein Brekke(NVE), Werner Friedl(E-Control), Hugo Schotman(Energiekamer NMa), Matthias Steiner(E-Control), Math Bollen(EI), Tahir Kapetanovic(E-Control), Ferruccio Villa(AEEG) Presented by Gareth Evans, Head of Profession - Engineering, Ofgem

Frankfurt (Germany), 6-9 June 2011  Consultation objectives  Role of the Regulator  Regulatory priorities  Conclusions and recommendations  Further work Gareth Evans – GB – Session 6 – Paper ID 0978 Presentation – Key Issues

Frankfurt (Germany), 6-9 June 2011  Collect the views of all stakeholders to assist regulators in understanding how smart grids can benefit network users  Explore ways in which smart grids deployment, where cost effective, can be encouraged Gareth Evans – GB – Session 6 – Paper ID 0978 Consultation objectives ERGEG “Position Paper on Smart Grids” published 10 June 2010

Frankfurt (Germany), 6-9 June 2011  Technology neutral  Smart grids are a means to an end not an end in themselves  Better value for customers, including indirect benefits  Key facilitator, identifying and removing barriers – finding solutions that balance all stakeholders’ positions Gareth Evans – GB – Session 6 – Paper ID 0978 Role of the Regulator

Frankfurt (Germany), 6-9 June Focus on the performance of network companies in terms of the outputs delivered; 2. Encourage innovation while protecting consumers’ interests; and 3. Encourage co-operation amongst stakeholders, with special care to standardisation and to identify possible barriers to smart grid deployment. Gareth Evans – GB – Session 6 – Paper ID 0978 Regulatory priorities Three main priorities identified

Frankfurt (Germany), 6-9 June 2011 Conclusions from the Position Paper*  Significant challenge  Better understanding of smart grids needed  Clarity of stakeholder roles/responsibilities  Significant number of stakeholders want a step change in activity  Attention to encouragement of innovation  Focus on regulation of outputs/performance  Development of cost/benefit analysis vital  Stakeholders co-operate to address barriers * Summarised text

Frankfurt (Germany), 6-9 June 2011 Recommendations* (1) R-1: Ensure regulatory stability and reasonable rate of return for grid investments R-2: Consider decoupling between grid operators’ profits and volumes of electricity they deliver R-3: Pursue regulation of outputs as a mechanism to ensure value for money paid by network users R-4: Promote improved awareness of consumers about their electricity use and market opportunities and an improved engagement of network operators with their network users R-5: Encourage deployment of smart grid solutions, where they are cost- efficient and find ways of incentivising innovative network solutions where beneficial * Summarised text

Frankfurt (Germany), 6-9 June 2011 Recommendations* (2) R-6: Evaluate costs and benefits of demonstration projects and to take decisions/provide advice based on societal cost-benefit assessment R-7: Ensure public dissemination of results/lessons learned from demonstration projects (co-)financed by grid tariffs or from public funds R-8: Participate in ‘smart grids’ discussions and cooperation activities among stakeholders and especially to achieve interoperability of smart grid devices and systems R-9: Clarify the difference between regulated grid activities and market opportunities for new services under a competitive regime R-10: NRAs to continue to exchange expertise at European level, in order to learn as soon as possible from best regulatory practices. * Summarised text

Frankfurt (Germany), 6-9 June 2011  Work is currently underway to collect more detailed views and information from Regulators relating to smart grids  A report summarising this process is planned to be published later this year. Gareth Evans – GB – Session 6 – Paper ID 0978 Further work

Frankfurt (Germany), 6-9 June 2011 Gareth Evans – GB – Session 6 – Paper ID 0978 Thank you for your attention