1. Gary Stuggins, The World Bank Strategic Oversight Efficiency Improvements Good internal mix of Supply – Low cost natural gas, hydro – Oil Shale, nuclear – Windturbines, CHP Move to EU/UCTE Standards Increase Trade Common Baltic Market: Challenges

2. Gary Stuggins, The World Bank Current Issues Market Size Speed of Reforms Kaliningrad/Russian Supply Stranded Costs Spot/Bilateral Markets Monopoly Controls

3. Gary Stuggins, The World Bank Market Size Size of Market Limits Competition Potential for Manipulation Need to Expand Market – Both Supply and Demand Transmission Tie to Nordpool, Poland Expand Market to Kaliningrad, Russia, Belarus (?)

4. Gary Stuggins, The World Bank Speed of Reforms Need to Meet EU Requirements Avoid California, Ukraine, etc. Problems Technical Requirements – Metering – Dispatch – Publishing of Information Transmission Links

5. Gary Stuggins, The World Bank Russia Issues Problems with Frequency Control Potential problems due to under investment Potential Source of Low Cost Supply Ability to Provide Auxiliary Services Ability to Increase Competition Potential New Markets

6. Gary Stuggins, The World Bank Kaliningrad Issue Technical Problem of Russian Access – Frequency Considerations – Potential Market Collapse Impact of adopting UCTE standards Potential Source of Supply Potential New Market Include into CBEM Part II

7. Gary Stuggins, The World Bank Stranded Costs Excess Capacity in Lithuania and Estonia Transmission/Distribution Sizing Impact on Balance Sheets – Low Capital Costs – Limited Need for new Investments Impact of Ignalina NPP Closure

8. Gary Stuggins, The World Bank Spot/Bilateral Markets Gradually move to spot markets Gradually open markets using Qualified Customers approach Keep the Market Simple Carefully adopt Ancillary Services Strong Regulatory Function is key

9. Gary Stuggins, The World Bank Monopoly Controls Three Regional Monopolies – Limited Access to Latvian market – Limited Access to Estonian Market Monopoly Power of Ignalina – 2,600 MW of Capacity in 4,000 MW market Fuel Monopolies – Gazprom, Russian Oil, Single Refinery

10. Gary Stuggins, The World Bank Next Steps Finalize Structural Reform: Legal Entities, then Privatize Agree on Common Regulatory Principles Establish Transmission Access Rules/Prices Adopt UCTE/EU Principles Extend Markets to Nordpool/Poland Engage Russia in Dialogue Include Kaliningrad in Market