Albanian power market Sokol RAMADANI Chairman ERE- Albania 1 FEBRUARY 2012 Electricity market design and regulatory issues in Albania and South East Europe Workshop E R E

E R E 208:04:50 Introduction o Legal framework o Market aim o Market structure o Market model Implementation o Future development

E R E 308:04:50 Legal framework Legal acts designing of the power market in Albania Law nr date “On power sector ” defines: o the principle of the activities in the power sector o responsibilities of the actors performing in the market o responsible body for the design of the electricity market in Albania. Government decision 338 date On the power market model in Albania. This document provides: o a framework on the government reform in the electricity sector including the privatization of the distribution sector, o sett clear rules for carrying out transaction in the markets that are transparent and non-discriminatory.

E R E 408:04:50 Market aim Capture the full value of the Albanian hydro resources for the benefit of Albanian tariff customers Capture the full value of the Albanian hydro resources for the benefit of Albanian tariff customers To move from a vertically integrated entity to a structure with functionally, legally and financially separate entities.(generation, distribution transmission To move from a vertically integrated entity to a structure with functionally, legally and financially separate entities.(generation, distribution transmission Provide bilateral contracts with simple regulated balancing market for energy transactions, which will improve transparency and avoid unnecessary “layering” of transactions. Provide bilateral contracts with simple regulated balancing market for energy transactions, which will improve transparency and avoid unnecessary “layering” of transactions. Move toward consistency with EU Directives and the Energy Community Treaty Move toward consistency with EU Directives and the Energy Community Treaty

E R E 5 Market structure Relations among market participants Flow of Funds Energy Flow

E R E 6 Relations among market participants Regulated Market (price and other terms and conditions of the contract approved by ERE) Between KESH Gen and Wholesale Public Supplier (at least for purpose of making transparent of the price charged by KESH Gen to Wholesale Public Supplier); Between Wholesale Public Supplier and Retail Public Supplier; Between OST and other market participants for transmission- related services, including ancillary services; Between DSO and other market participants for distribution-related services; Between SPPs or IPPs and the Wholesale Public Supplier; Between Retail Public Supplier and its tariff customers; Between KESH Gen and Traders, including import contracts for the exchanges of power, which are subject to ERE scrutiny or procurement rules; Between OST and KESH Gen, SPPs, IPPs and Traders for the transmission losses and Ancillary Services.

E R E 7 Relations among market participants Unregulated market Between Qualified Suppliers and Eligible Customers; Between and among SPPs, IPPs, Qualified Suppliers and Traders; Between Wholesale Public Supplier and IPPs, SPPs, Qualified Suppliers and Traders; and Between DSO and Traders, Qualified Suppliers, IPPs and SPPs for energy needed to cover losses in the distribution system.

E R E 5/11/20158 Distribution Company KESH Gen SPPs; IPPS; and Qualified Suppliers Eligible Customers Electricity Supply Agreement* Economy Energy Purchases Regulated Tariffs and Service Agreements with Tariff Customers* Tariff Customers Export Markets Electricity Supply Agreements for Licensed Exports* ( Electricity Supply Agreements Energy Supply Agreements Market Structure Electricity Supply Agreements * Regulated by ERE Traders OST Wholesale Supplier Public Supplier (Retail) To cover losses Appendix C

E R E 5/11/20159 KESH Gen OST: Transmission System Distribution Company (Disco) Tariff Customers Eligible Customers Export Markets Eligible Customers Directly Connected to Transmission Grid Eligible Customers In Distribution Areas Electricity Flow Market Structure SPP IPPS Imports Appendix A

E R E 5/11/ Market model implementation Market Opening Market Opening - liberalization of the retail supply market - upgrade of the transmission and distribution system (reduce of technical and nontechnical losses) - Improvement of inter- -connection lines and functioning of the new dispatch center Adoption of the secondary legislation Adoption of the secondary legislation - Market rules - Grid Codes – - Tariff methodology - Approval of model agreements - Approval of model agreements

E R E Future development Approval of the new law in accordance with the EU requirements especially for the security of supply and market opening Design of a new market model which will reflect the government policy to continue the reform in the electricity sector taking into consideration : o Distribution and Retail Public Supply functionally financially and legally unbundled, o Possible privatization of the public generation o TSO and Market operator functionally financially and legally unbundled, o Enhance efficiency and transparency in the market operation and functioning. o After adoption of the new law and new Market Model by the GOA, the ERE need to reflect the changes in the Market Rules and other secondary legislation related to the market functioning 1108:04:50

E R E Future development Enhance efficiency and transparency -Administrative capacity necessary for the implementation 1208:04:50

E R E 1308:04:50 Thank you for the attention