1. ERRA Workshop on Regulatory Monitoring of the Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 20061 Improvement of market relations in the power sector of the Republic of Kazakhstan

2. ERRA Workshop on Regulatory Monitoring of the Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 2 Regulatory basis for development of market relations in the Republic of Kazakhstan Concept of further development of market relations in the power sector of the Republic of Kazakhstan - approved by Decree of the Government of the Republic of Kazakhstan # 190 of February 18, 2004 Law of the Republic of Kazakhstan «On Electricity» # 588-II of July 9, 2004 Main legal acts, adopted for the purpose of implementing provisions of the new law: Rules of organization and functioning of the wholesale electricity market of the Republic of Kazakhstan; Rules of providing services by the System Operator, organization and functioning of the system services and ancillary services market; Electric Network rules of the Republic of Kazakhstan (making changes and amendments; Rules of organization and functioning of centralized electricity trades in the Republic of Kazakhstan. Rules of organization and functioning of retail electricity market, as well as access and provision of services at that market.

3. ERRA Workshop on Regulatory Monitoring of the Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 3 Market of bilateral transactions of sale and purchase of electricity; Centralized electricity trade market, including day ahead spot trades; Balancing market in real time; Market of system and ancillary services. System of parallel electricity markets

4. ERRA Workshop on Regulatory Monitoring of the Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 4 Centralized electricity trade market Day ahead spot trades Wholesale buyer Generating company System operator Operator of the centralized electricity trade market Concluded contracts Direct contract Offer Demand Purchased/sold electricity

5. ERRA Workshop on Regulatory Monitoring of the Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 5 Balancing market of electricity in real time Maintenance of set electricity reliability and quality standards in the unified grid of Kazakhstan Physical settlement of electricity imbalances in real time Financial settlement of actually accounted for imbalances of electricity Consumption Generation KEGOC

6. ERRA Workshop on Regulatory Monitoring of the Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 6 Capacity 1357911131517192123 Hour Centralized spot trades in electricity day ahead Balancing market in the structure of the wholesale electricity market Real time balancing market Real load Decentralized market of direct bilateral contracts

7. ERRA Workshop on Regulatory Monitoring of the Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 7 Formation of capacity reserves in the market of system and ancillary services Capacity reserves for primary and secondary regulation Cold capacity reserve Energy systems of CIS countries System operator

8. ERRA Workshop on Regulatory Monitoring of the Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 8 Functions of the system operator of the UES of Kazakhstan Organization and management: Of the balancing market in real time Of the market of system and ancillary services Providing system services on: Transmission of electricity through national power grid; Technical dispatch; Capacity regulation; Organization of balancing between generation and consumption of electricity in the UES of Kazakhstan Purchase of ancillary services from market participants Formation of volumes, structure and allocation of operational capacity reserves Interaction with energy systems of neighboring states

9. ERRA Workshop on Regulatory Monitoring of the Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 9 Information-technological basis for development of the wholesale electricity market Creation of central automated power supply monitoring and control system (ASKUE) of the system operator and sub- systems of ASKUE of subjects of the wholesale market Creation of a computerized system of dispatch control (SCADA/EMS) over modes of UES of Kazakhstan Introduction of modern telecommunication systems: satellite data transfer system, radio-relay communication and high frequency communication systems Creation of electronic trading system for electricity

10. ERRA Workshop on Regulatory Monitoring of the Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 10 Retail Electricity Market Reforms Regional electricity network company (REC) Wholesale market Retail market Energy supply organizations (ESO) transmission sale purchase transmission

11. ERRA Workshop on Regulatory Monitoring of the Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 11 International cooperation Formation of a common electricity market – work in the framework of the CIS Electricity Council and EurAsEC Integration Committee Participation in the work on project TEO of synchronization of energy systems of CIS and the Baltic states with UCTE and in the work of the commission on operational technological coordination (COTC). Bilateral cooperation in the framework of the Memorandum signed by Russia and Kazakhstan. Participation in the work of coordination Electricity Council of UES of Central Asia.