Lithuanian PX Giedrius Radvila AB “LIETUVOS ENERGIJA” 2009-09-16 Minifora Vilnius

Is there a need for a change? APX UK OMEL Powernext Opcom GME NORD POOL PX Gielda Energi EEX APX Belpx OTE EXAA South Pool PXE NORD POOL PX ? There are a lot of PX across the Europe. The biggest and more advanced PX is Nordpool Spot. Andrius Šimkevičius

Issues that need to be addressed Closure of second unit of Ignalina NPP Exporting system becomes importing Diversification of fuel for electricity production in Baltic states Projects of new interconnections

Background for changes 2008 Cooperation agreement between NPS and Lietuvos energija – Planning of establishment of Estlink price area. Joint declaration of the prime ministers council of the Baltic (27th April 2009) Memorandum of understanding of the Baltic energy market interconnection plan (17th June 2009) Baltic energy market interconnection plan (17th June 2009) LV, LT, SW memorandum of understanding (9th July 2009) Lithuanian electricity expansion plan (8th of July 2009)

Lithuanian electricity market expansion plan http://www3.lrs.lt/pls/inter3/dokpaieska.showdoc_l?p_id=349252&p_query=&p_tr2=

Goals of market development To improve conditions for consumers to choose or change supplier without any barriers; To stipulate competition among generators, importers and suppliers; To remove barriers for the trade with parties from EU; To set transparent conditions for the trade of electricity imported from non EU countries; To develop transparent electricity market organization and surveillance based on Nord Pool Spot principles.

Changes PX, Wholesale market Generators Suppliers Transmission grid Support of effective co-generation and renewable energy generation Unfettered bilateral trade with EU countries, transparently regulated trade with non EU countries The support of generators does not distort electricity price s and does not create barriers for electricity market operation. Organization of trade at PX based on Nord Pool Spot principles. Goal – determine market price of electricity Generators Transmission grid Distribution Consumers PX, Wholesale market Suppliers Source: Svenska Kraftnät Hourly trade and balance responsibility Transparent transportation of electricity. Regulated tariffs applicable only for household consumers and small commercial consumers. Ability to choose supplier, which offers best price and make an agreement for the electricity provision.

Changes of electricity market from 1st January 2010 Implementation of Nord Pool Spot (NPS) principles for wholesale trade organization. Price formation principle - marginal price setting. Trading platform for anonymously trading at auction until 2011. Hourly trading and balancing responsibility applied for all market participants. Unfettered trade with EU countries; Transparent and competition ensuring tariffs for electricity market and transmission grid entrance, clear regulation and control towards electricity produced and imported from non-EU countries. Implemented non discriminatory and transparent principles of electricity transportation. Securing independency of TSO according EU regulation.

Application of regulated tariffs Starting from 1st of January 2010, regulated tariffs is going to be abolished for the consumption totaling 35% of Lithuanian demand. Gradual increase of a share of consumers with non-regulated tariffs: Starting January 1st, 2011 - 45 % Starting January 1st, 2012 - 55 % Starting January 1st, 2013 – regulated tariffs are applied only for the household consumers. Starting January 1st, 2015 for all consumers (except the guaranteed tariffs for the consumer groups designated by EU regulations)

Changes Restructuring Lietuvos energija AB TSO functions Market operator functions Import/Export Operation of power production (KHPSPP, KHPP) Today Lietuvos energija AB Import/Export Operation of power production (KHPSPP, KHPP) Independent supplier AB Trade of electricity Until 2010 TSO AB TSO functions Market operator functions Lietuvos energija AB Import/Export, Holding company Independent supplier AB Trade of electricity TSO AB TSO functions Market operator functions 2010 Kruonis HPSPP and Kaunas HPP Power production Lietuvos energija AB Import/Export Holding company Kruonis HPSPP and Kaunas HPP Power production MO AB Market operator functions TSO AB (ISO) TSO functions 2011

Changes Auctioning PX Import/Export Producers LT Producers LT BP1 BP..N Suplaer1 Suplaer2 Suplaer3 Suplaer4 Consumers Consumers Consumers Consumers

Changes Price formation Price, €/MWh Demand Supply Marginal price for all transactions at auction, €/MWh Volume, MWh

Changes Gate closure Announcement of transmission capacities by TSO 13:00-16:00 submission of regulation power bids to TSO correction of regulation power bids volumes and prices Announcement of transmission capacities by TSO 1 hours before operation hour 10:00 13:00 gate closure balance settlement 10:00 Start of DAM trade Day ahead auction Operation hour Regulation/Balancing until 13:00 market participants must submit bids and offers Physical electricity market 1 day before operation day Operation day (physical delivery)

Changes Cooperation with Nord Pool Spot 2009-05-05 Prefeasibility study by Nord Pool Consulting. 2009-06-06 Seminar by NPC on proposals for Lithuanian DAM 2009-06-23 – 2009-08-28 Negotiations with Nord Pool Spot 2009-08-28 Letter of Intent was signed. Service Level Agreement TSO MO NPS No.73/2009 Nord Pool Spot will deliver the technical solution for new Lithuanian market place Nord Pool Spot AS and Lietuvos Energija AB today announced that they have signed a Letter of Intent to implement a new market model for the Lithuanian electricity market. In the future the Lithuanian market will be based on the same principles as the Nordic power market, where price and flow are calculated at the same time to increase market efficiency (implicit auction). The parties aim to establish a service contract where Nord Pool Spot will provide the systems and services from the Nordic market to the Lithuanian market place. The technical solution will be ready prior to 1 January 2010, when the new market model is scheduled to start operating in Lithuania.   Lysaker, 28 August 2009.

Towards an integrated market 2010-2013 Creation of common Baltic’s electricity market based on Nordic electricity market organization principles and gradual abolishment of regulated tariffs for consumers 2009 Isolated Baltic electricity market. Estlink II Estlink I Baltic electricity market integration Estlink I Swedish-Baltic link NORD POOL PX Common Baltic electricity market LitPol link Polish PX Gielda Energii Estlink I NORD POOL PX Polish PX Gielda Energii 2014 - 2015 Integration of Baltic electricity market into the Nordic and continental Europe electricity markets. Implementation of projects of new interconnections. Polish PX Gielda Energii

Thank you. Questions?