BALTIC ELECTRICITY MARKET MINIFORA Riga 3 July 2006 Transmission and connection to the grids Dace Bite Public Utilities Commission

May 2005 Parliament adopted Electricity market Law PUC in accordance with the law accepted: –regulation on consumer and producer access to electricity system; –electricity transmission, distribution and supply tariff calculation methodologies; –regulations on publication of financial information –regulations on minimal requirements to TSO independence –regulations about information of electricity consummers

Methodologies for tariff setting The duration of the tariff review cycle is three years. The regulator may adopt a decision on the extension of the tariff review cycle if the tariff of the next tariff review cycle has not been approved at the end of the tariff review cycle. When setting the base tariff the regulator shall perform cost and profit analysis and assessment. Two interrelated activities included in this methodology constitute the basis of tariff setting: –setting economically justified base tariffs for the base year of the tariff review cycle, –setting tariff ceiling for each year of the tariff review cycle oThe regulated enterprise shall apply the cost allocation model, following approval of its basic principles, specification and introduction by the regulator. The cost allocation model shall be comprehensive.

Cost allocation principles Costs are divided into two groups: costs related to electricity transmission costs related to system maintenance and development and are necessary to provide functioning and safety of the system and supply of certain capacity to users regardless of quantity of transmitted electricity

System operator’s costs (I P ) Service: Electricity transmission (I eelk ) Service: Capacity supply and maintenance (I jaud ) Cost division using operational capacity coefficients Costs related to electricity transmission Costs related to network capacity maintenance Costs related to fulfillment of both services

Connection rules for consumers 40% of costs of new connection - consumer 60% of costs of new connection - system operator, costs are included in tariff calculations Costs of connection to the 110 kV and higher voltages grid is fully covered by the consumer The assets of new connection belongs to system operator The special connection to the transmission grid: – MWh in a year or capacity not less then 50MW - 66% of costs are covered by consumer –The special connection to the transmission grid: – MWh in a year or capacity not less then 75MW - 33% of costs are covered by consumer –The special connection to the transmission grid: – MWh in a year or capacity not less then 100MW - all the costs are covered by TSO

Connection rules for electricity producers All the costs are covered by producer If the building is done by SO the tender should be realized 45 days before connection the producer informs SO about the readiness to start the inspection The costs of inspection is covered by system operator After the inspection is successfully compleated the next day electricity producer should be connected to the system

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