- GDP 2011 versus 2010 – increase by 5.5% KEY DATA - GDP  2011 versus 2010 – increase by 5.5% Electricity final consumption: 2011 versus 2010 – decrease by 0.4% Gas consumption * 2010 versus 2009 – increase by 19.3% 2011 versus 2010 – decrease by 11.9% * impact of cold winter

The registration took effect from January 1, 2012 Latest changes – Law’s The Electricity Market Law was amended in July 2011; the Energy law was amended in October 2011 – amendments simplifies start up of trade and production activities in heat and electricity sectors The licensing of power and heat generation and sales activities is substituted by registration The registration took effect from January 1, 2012 All companies, which held licenses prior to January 1, 2012 were registered automatically The Regulator elaborated a document setting provisions to be fulfilled by applicants.

Latest changes – legal acts At the end of 2011, the Regulator adopted a set of new legal acts on: 10 year development plans and planning procedure TSO certification requirements and procedure At the beginning of 2012: The requirement to traders on disclosure of information in their bills issued to customers

Regulatory independence The law on Regulators of Public Utilities, which determines status of Regulator, has been amended to be fully in line with the requirements of the Third energy legislative package After the Parliament adopted this law, it entered into force in August 11, 2011 Some adjustments still to be done

Market opening -1 Market opening: All customers are free to choose their supplier from 2007 Real market opening took place in June 2007 when big consumers entered market. From April 1, 2012 additional 5000 electricity customers became market participants. Further market opening expected from November 1, 2012 and will reach ~ 75% of market (consumption)

Market opening -2 Practical arrangements: The Regulator adopted standard agreements for licensees of distribution services in March 2012 Revised standard contract for captive customers Informative event for new market customers spring 2012 Stake in Market board

TSO unbundling / certification Latvia has chosen the unbundling model of independent system operator (IS0) New company - owner of transmission assets - has been established in February 10, 2011. The final decision about transfer of ownership rights of ISO - JSC “Augstsprieguma tīkls” - has been taken in January 2012. At present the owner of ISO is the Ministry of Finance of Republic of Latvia. In May 2012, ISO has submitted the application to Regulator for certification

TSO certification / 10 years plan In August 2012, the Regulator has adopted TSO’s 10 Year Development plan with conditionality Intensive process of consultations about certification were carried out during the summer: ISO, LET, ministry, EC The Regulator is in a position to finalize a draft opinion on certification and send it to the EC for feedback Final decision still to be taken in autumn 2012 ISO certification to be finalized at the end of 2012/ beginning 2013

Tariff set up From April 1, 2012 new transmission tariffs are in force with average increase of ~ 7,5% Gas tariffs adjust in line with prices of oil/ oil products in the world markets The set up of heat tariffs depends on the fluctuation of price of gas or wood chips Energy arrears are becoming an important issue, particularly in the heating sector

Future activities and challenges Follow up of the implementation of TSO’s 10 Year Development Plan Finalize Certification of TSO Opening of Nord Pool Spot price area in Latvia Expected changes in the Grid Code as the outcome of ENTSO-E and ACER activities A lack of clarity regarding the assessment of the EU energy projects of common interests

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