1 ERGEG Customer Focus Group Workshop October 11, 2005, Helsinki CEDEC Gert De Block Secretary General

ERGEG CFG 11/10/ CEDEC2 OVERVIEW 1.Influence of market structure 2.Conditions for switching 3.General problems related to switching 4.Particularities for local Distribution System Operators (DSOs) 5.Customer switching - Case of Belgium 6.Customer protection 7.Conclusions

ERGEG CFG 11/10/ CEDEC3 1. Influence of market structure Final date for complete market opening fixed and approaching, but still wide variety in eligibility Nationally chosen market model determines processes to be supported Essential role for distribution system operators controlling customer and metering data Dominance of historic market player(s) and degree of unbundling determines urgency of need for performant switching mechanism Role and impact of regulators varies

ERGEG CFG 11/10/ CEDEC4 2. Conditions for switching Energy market is functioning : (1)Only a market - with benefits for all customers in terms of price & service quality - if there is real competition  between suppliers : considerable number of players on national markets - but historical player(s) still dominant  between producers : still limited number of players – virtual monopoly behaviour on regional / national markets (2)Only a market – with non-discriminatory access to grids – if grid companies and their personnel and IT-systems behave neutrally

ERGEG CFG 11/10/ CEDEC5 2. Conditions for switching Customers are eligible Change of supplier process supported by effective and efficient data exchange mechanisms between DSO and all market parties  Need for : - clear rules of the game agreed between parties - use of a same language - use of a safe medium - involvement of all market parties - exchange within reasonable timeframe - efficient information technology

ERGEG CFG 11/10/ CEDEC6 3. General problems related to switching Diverse legislation  different market models  diverse technical rules  even if EDIEL (common structures & codes) : diverse processes Risk of market data pollution  Need for DSO to clean customer data before start-up of data clearing between market parties Location of customer data clearing : in each DSO or DSO-group or single national platform ? “Switch management” still to be developped after official market opening …

ERGEG CFG 11/10/ CEDEC7 4. Particularities for local DSOs Unbundling leads to relative growth of fixed costs New regulatory environment leads to higher complexity  Problem of scale for smaller DSO New needs in field of IT (switching)  High cost in terms of investments and human resources (development of internal know how + external consultants)  Problem of scale for smaller DSO with limited human resources capacities and financial constraints Risk of concentration between national / european players  dominating lobbying power ? role of the regulators ?

ERGEG CFG 11/10/ CEDEC8 5. Customer switching - Case of Belgium Regions responsable for legislation on distribution  (minor) differences between regions in market structure and technical rules Municipal distribution companies have completely unbundled  seperate companies for DSO and supply  complete separation of personnel and IT-systems (for some distribution companies) Pro-active development of a common EDI platform (“Publiclear”) for 5 DSOs (20% of regional market) in Flanders  fully operational on date of full market opening (1/7/2003) Other EDI-platforms of DSOs : “Indexis” (for mixed distribution companies in 80% of market); “Walclear” for 5 DSOs in Wallonia (20% of regional market) – Performance to be upgraded

ERGEG CFG 11/10/ CEDEC9 5. Case of Belgium – Current status EDI platforms with inspiration from Scandinavian market  Exchange of data in EDIEL (for electricity and gas) Message structure (UMIG = Utility Market Implementation Guide) inspired on international handbook for EDIEL Legislation + regulatory framework + technical codes  processes  translation into messages  UMIG Several UMIG-versions already implemented : UMIG 1.0 (1/1/2003)  …  UMIG 3.5 (1/7/2006)

ERGEG CFG 11/10/ CEDEC10 5. Case of Belgium – Current status UMIX structure : formal cooperation between all parties involved EDI platforms should perform following tasks : - management of access register (EAN-codes + data on supplier & network user + technical characteristics) - SLP for non-AMR customers - allocation + reconciliation Medium to communicate : - VAN (high cost !) and FTP : between larger market parties - for smaller players - web portal of DSO : for smaller parties (only limited number of processes – only if no EDIEL infrastructure available)

ERGEG CFG 11/10/ CEDEC11 5. Case of Belgium – Problems to be solved 3 regions  3 non-identical technical codes  processes not 100% compatible 3 regions  different market opening date  implementation of UMIG not synchronized yet Some players refuse use of EDIEL (TSOs) Initial UMIG-versions : too much room for interpretation / not all scenarios defined / no rectification of processes  manual interventions : expensive and laborintensive Risk of “Pollution” of access register : due to suppliers data & DSO systems SLP : sufficient number (4 E / 3G) ? lacking accuracy ?

ERGEG CFG 11/10/ CEDEC12 6. Customer protection Code of good conduct for suppliers Harmonisation of supply contract conditions and billing presentation (mainly for residential customers) Harmonisation of DSO contracts & regulations regarding connection to the grid Solutions for “dropped customers” ? Prepayment meters  High investments and operational costs PSOs imposed on DSO : supplier of last resort / social tariffs

ERGEG CFG 11/10/ CEDEC13 Conclusions Real competition between producers / suppliers is prerequisite, EDI platform can only contribute to smooth market functioning Development and operation of EDI platform is expensive (investments / internal or external expertise / operational costs)  cost of software (development)? cooperation between DSOs? Timely preparation within DSO and between all parties is crucial Different market models  diverse technical rules  “tailormade” processes  problem for regionalisation of markets