Regulation on long-term capacity market 10th ERRA ENERGY INVESTMENT AND REGULATION CONFERENCE Regulation on long-term capacity market Denis Milyutin Deputy Director of the Department for regulation in electricity sector, FTS of Russia St-Petersburg May 17, 2011

New model of capacity market Law “On electric power”: Capacity is a special commodity Rules of the wholesale power and capacity market are set by a Decree of the Government of the Russian Federation 01.07.08 Transitional period 2011 Long-term model 2016 For 1 year period For 4 years ahead Price for capacity for generators according to the results of competitive capacity take-off (CCT) According to free agreements Regulated tariff = > Capacity price for generators according to the results of CCT the non-regulated contracts (NRC) capacity delivery contracts (CDC) prices regulated prices Scope of capacity supply at free prices - the share determined by the Government Scope of capacity supply at free prices (CCT + NRC) - all except households (at regulated prices) Payment for the entire capacity Only taken-off capacity payment 2

Zones without price-cap: Market map Non-price areas, geographically isolated systems Europe price zone– 22 free capacity transfer zones Zones without price-cap: Centre, the Urals Siberia price zone– 7 free capacity transfer zones 3

Types of Regulated Prices Government commission For supply to - household sector - consumers in the areas with specific pricing (until 2015) ≤ 35% of power and capacity generation scope Forced/most expensive 15 (10) % Most expensive Only for day-ahead market Not taken-off capacity Decommissioning CCT price When it is impossible: Not satisfied with technical requirements Government commission CDC, NPP and HPP Forced generator Demand Ministry of Energy NPP/HPP: security charge; investments charge; new plants 4

Liberalization and price regulation The structure of the physical scope of the capacity supplied by the generators 2011 Transitional period Long-term model 5% 10% 15% 25% 30% 50% 60% 80% From 1 Jan. 2007 From 1 Jul. 2007 From 1 Jan. 2008 From 1 Jan. 2009 From 1 Jul. 2009 2010 at free prices at regulated prices Others in zones with price-cap CDC Forced/ most expensive New NPP/HPP NPP/HPP charges Households sector supply power capacity 5

Regulating authorities Technological regulation Organization of CCT Designation of the zones Capacity certification Price regulation Submit the proposals on price-cap levels to the Government Setting price on capacity Scope of power and capacity supply at regulated prices Antimonopoly regulation Designation of the zones where the price-cap is being introduced (no competition) Determination of the conditions (constrains) for participation in CCT for those who hold dominating or exclusive position Determination of capacity price-gouging incidents - proposals on CCT results annulment in a zone Organization-focused regulation Market rules and procedures Standard contracts forms development Capacity pricing according to CDC Decision on cancellation of CCT results in a zone System Operator Ministry of Energy Development of wholesale market rules Normative support Determination of reserve ratio ≈ demand for capacity Decision on the correcting CCT FAS of Russia 6

Thank You for Your attention! FTS of Russia 7, Kitaigorodsky proezd 109074 Moscow Russia Tel. +7(495)710-61-97 Fax +7(495)710-65-29 www.fstrf.ru dmilyutin@fstrf.ru