1. EgyptEra 1 Market Reform By: H. Waheed

2. 2 Objectives Of Regulatory Agency  Regulates and supervises all electricity generation, transmission, and distribution.  Ensures availability of supply to users at the most equitable prices and considers environmental issues.  Considers interests of customers, producers, transmitters, and distributors  Prepares for fair competition in the field of electricity including generation and distribution

3. EgyptEra 3 Cont ’ d: Objectives of Regulatory Agency  Prevents monopoly within the electricity market.  Issuing licenses for the construction, management, operation and maintenance of the electric power generation, transmission, distribution, and sale projects.

4. EgyptEra 4 Present Egyptian Electricity Sector Structure  Egyptian Electricity Holding Company (EEHC) owns: About 90% of generation, 100% of transmission over 99% of distribution  Private sector participation is manifested in three long term (20 years) BOOT contracts with the Egyptian Electricity Transmission Company  Six private electricity producers are licensed  Seven private electricity distributors are licensed

5. Exports & Imports Dis Co(s) MV & LV Customers EEHC Gov. IPP BOOT(s) Generation Co.(s) Transco(s) 51 4 2 9 One5 3 2 21621 Data for the Year 2005/ 2006 the Year 2005/ 2006 HV Customers 19 UHV Customers MV Customers 1 4 LV customers IPP 6 Gen Co. 7 Dis Co.

6. EgyptEra 6 The Need to Restructure  Egypt has successfully managed to secure electricity supply to 99% of its population  Egypt is pressed between maintaining its success story and its quest to restructure  Egypt has opted to restructure to: (i) Attract funds (ii) Improve the sector efficiency (iii) Achieve wider economic benefits

7. EgyptEra 7 Introduction to Market Reform  The objective to “establish a fully competitive electricity market, where electricity generation, transmission and distribution activities are fully unbundled”.  The proposed market will adopt bilateral contracts with a balancing and settlement mechanism.  efficiency increase and service enhancement are sought by virtue of introducing competition, freedom of electricity supplier choice, and third party access.

8. Present Status of Electricity Market PHYSICAL FLOW OF POWER Large customers Connected to the Transmission network Customers Imports Exports Egyptian Electricity Transmission Company EETC Traders 3 BOOTS Distributors 9 Distribution Companies Public Generator 6 Gen companies MONEY FLOW

9. The Proposed Electricity Market Structure ELIGIBLE customers Connected to the Transmission network Customers Imports Exports Egyptian Electricity Transmission Company EETC Traders 3 BOOTS Distributors 9 Distribution Companies Public Generator 6 Gen companies PHYSICAL FLOW OF POWERMONEY FLOW Bilateral Contracts

10. EgyptEra 10 The competitive market  Eligible consumers have the right to conclude direct bilateral contracts with present/future generation companies.  The Transmission System Operator (TSO) is responsible for fulfilling those contracts for a unified transmission access charge proposed by the TSO and approved by “the Agency”.  The TSO purchases the required balancing energy to the account of consumers or generators in the case of any deviation from the concluded contracts.

11. EgyptEra 11 The regulated market  Non-eligible consumers purchase their electricity needs against a regulated tariff  Government owned companies are the ones responsible for satisfying the needs of this customer class at a regulated price  It is allowed to satisfy a part of the market needs from private generation entities

12. EgyptEra 12 Competitive Market Transition Constraints  The present tariff is less than the economic cost of service  Collections  The need to establish an attractive environment for investors

13. EgyptEra 13 Proposed Transitional market Stages First stage  The TSO is established based upon the present infrastructure.  EHV and HV consumers are phased into the competitive market.  Eligible consumers contract their energy needs either by themselves or through energy traders.  Balancing energy and ancillary services are purchased from government owned entities at regulated prices through contracts concluded among the TSO and those companies.

14. EgyptEra 14 Proposed Transitional market Stages First stage cont’d  EEHC/TSO shall carry out the following duties as long as there exist non-eligible consumers in the market:  Furnish the energy needs for distribution companies from government/privately owned entities  Conclude power purchase agreements with generation companies and sell the energy to distribution companies  Concluded contracts cash management

15. EgyptEra 15 Proposed Transitional market Stages i. The present tariff for EHV and HV consumers shall reach an economic level. ii. Performance enhancement for electricity companies. iii. Revisit the subsidies question. iv. Issuance of necessary rules, codes, …etc.  In alleviating the first phase constraints:

16. EgyptEra 16 Next Stages i. TSO is fully operational with a state of the art infrastructure. ii. Gradual transform of non-eligible consumers inti eligible consumers. iii. Privately owned companies are allowed into the competitive balancing system.  The salient features of this stage are:

17. EgyptEra 17 Tariff Increase  At present the new tariff schedule covers the cost of service at the large customers level.  The present plan for tariff change is already being implemented.  The new law provides more transparent procedure for tariff change.

18. EgyptEra 18 The status of the draft electricity law  The law is now out of the ministry.  A reasonable estimate of this law to see the light is by the middle of 2009.

19. EgyptEra 19 Conclusions  Adoption of the wholesale competitive market.  The postage stamp method is the most suitable method for estimating the transmission access fees.  A consensus has been build to establish the TSO as an independent entity separated from the holding company.

20. EgyptEra 20 Thank You