1 Meeting the Regional Electricity Market Opportunities South East Europe Energy Week “Athens Forum” Meeting Rome, March 2003

2 The 92/1996 E.U.Directive established the main conditions for launching the liberalization process and its minimal timetable. The Romanian Electricity Sector Initial Structure Social Protection Policy Electricity Supply Public Service Quality Maintenance Primary legislation: The GUO 63/1998 and GD 627/2000 adapts the E.U. Directive 96/92 provisions to Romanian specific conditions Secondary legislation: ANRE regulations for the Romanian Electricity Sector The Beginning The Key Issues The Actions MAIN ISSUES & MILESTONES MAIN ISSUES & MILESTONES OPCOM the Romanian Electricity Market Administrator Primary legislation last issues: GD1342/2001 and GD1524/2002 has modified the market structure, stimulating the competition

3 opcom  STATE OWNED  FULLY REGULATED  REGULATED THIRD PARTY ACCESS TO THE TRANSMISSION NETWORK TRANSMISSION TRANSMISSION

4 Electricity Market 67 % REGULATED 33 % COMPETITIVE OPCOM Electricity Market Operator (APEx & EuroPEX Member) 36 Generators 49 Eligible Consumers 1 System Operator 1 Transmission Operator 8 Distribution Operators 48 Suppliers Market Participants (licensed agents)

5 MARKET DEVELOPMENT Market Development 2000–2003 and … beyond CONTRACTS MARKET PARTICIPANTS OPENING DEGREE : : * Pending of the approval of amendments of EU Directive

6 Compulsory day-ahead market participation Unilateral bidding (production bids vs. consumption forecast) Regulated market :  portfolio contracts (firm quantities and regulated prices)  contracts for energy in cogeneration (quantities and regulated prices)  PPA contracts (long term contracts with regulated prices) for SN Nuclearelectrica SA Competitive market :  bilateral contracts between producers and suppliers, for the eligible consumers  import/export contracts of the producers or suppliers  supplier’s contracts, except the ones with the eligible consumers on regulated tariffs  negotiated contracts concluded by independent producers and self-producers, others than owners of portfolio contracts  transaction on spot market at the System Marginal Price ANRE will prepare the new secondary regulatory framework Hourly metering launch Integrated trading platform for OPCOM based on the new trading regime ( supplier: Alstom ) MARKET STRUCTURE short term( ) Present Market Structure ( )

7 Romanian Market Administrator Vision The targets, on mid and long term horizon. Institutional undertaking. To provide a stable,reliable, equidistant, transparent and neutral trading environment for all the participants to the Romanian power market. opcom PHYSICAL POWER MARKET FINANCIAR POWER MARKET opcom “Day-Ahead” Market “Intra-Daily” Market “Real Time” Market BALANCING MARKET SYSTEM OPERATOR

8 Vesting contracts to replace portfolio contracts; Hydro generation regulated; Compulsory day-ahead market participation through bids and offers Self-scheduling and physical notifications submitted to the System Operator Day ahead balancing market; OPCOM entrusted with settlement obligation; Financial markets for derivatives (futures, options and swap) Medium Term Market Structure ( )

9 Voluntary day-ahead market Continuous trading Balancing market Ancillary services market Bilateral contracts Financial market for derivatives Two issues for the Power Exchange : - the physical market - the financial market Long Term Market Structure ( )

10 Power Exchange : - will provide for TSO, based on the day ahead bids/offers matching and day ahead balancing market running: - the energy amount traded by generators - the priced willingness to increment and/or decrement the generation of units Medium Term PX – TSO relation ( ) TSO : - will dispatch on the day the generation units, based on : - commercial tools provided by PX and - technical tools for real time operation by power flows and network constraints analyzing, fully sustained by software tools based on power system modeling - will submit to the PX all needed data to settlement

11 9 Integration of the Romanian Power System in the UCTE structures Regional Electricity Market Integration of internal market in the regional market

12 The project is a solution for the problems the Power Systems operating in the area are confronting with. Can be implemented regardless the heterogeneous structure of the energy sector in the area. Can be implemented in a very short period of time and without major investments. Allows the operation of the market in the conditions of ongoing restructuring process of the energy sector in the region. Could stand the nucleus of the future Regional Electricity Market. Temporary disequilibria of the energy balance in some power systems generate unscheduled and undesired natural exchanges. Based on its market administration experience, OPCOM has launched a regional reserve capacity market proposal, possible regional electricity market core. Why a Reserve Capacity Market ?

13 ESM NEK EPS Transelectrica HTSO ERS REM Participants EPCG KESH REM Participants TEAS REM

14 Time base interval for auctions: one hour Reserve capacity trading: limited by the available network transfer capacity of the tie-lines Auctions: - day-ahead session: in D-1 day for the D day (24 hours); - intra-daily session: in D day for the D day (12 hours). The intra-daily transactions don’t cancel the day-ahead transactions; D day: Buyers request(or not) the reserve capacity activation Market Operator settles in D+1 the traded reserve capacity and the activated energy. A physical market with two sessions: a day-ahead session; an intra-daily session. The Trading of Reserve Capacity

15 1. Market Participants send bids (offers/requests) to Market Operator. 2. Market Operator establishes, using a dedicated algorithm, the traded reserve capacity and Market Price. 3. Market Operator communicates to each participant the results of the reserve capacity transactions he was involved in and publishes information regarding the market: Market Price, non- allocated offers and requests and others. Day ahead session and intra-daily session

16 The bids ordering : by price (in descending order); by time (for the requests with the same price). The offers ordering : by price (in ascending order); by time (for the offers with the same price). Quantities Price Bids Offers Market Price The Algorithm

17 1. The activation of the transacted reserve capacity shall be done by the System Operator of the buyer to the System Operator of the seller.. 3. The System Operators of the seller and buyer shall actualize the exchange schedule for the corresponding hourly interval the new value of the power exchange. Physical Running of Traded Reserve Capacity (D day)

18 The buyer of the reserve capacity pays to the seller: - the value of the traded reserve capacity; - the value of the energy activated within the transacted reserve capacity. 1. Market Participants submit to the Market Operator the data regarding the energy delivered on the D day. 2. Market Operator establishes the financial obligations of the Market Participants issued from the capacity traded on the D-1 day and from the energy delivered in the D day. Settlement (D+1 day) The seller of the reserve capacity pays a penalty to the buyer if he refuses to activate the day ahead traded capacity.