1. 1 An Autonomous Energy Regulatory System to Enhance Economic Development Jean Constantinescu THIRD ANNUAL ENERGY REGULATORY CONFERENCE FOR CENTRAL/EASTERN EUROPE AND EURASIA BUDAPEST December 7 – 9 ANRE NATIONAL ELECTRICITY AND HEAT REGULATORY AUTHORITY

2. 2 The Romanian Electricity and Heat Law issued as the Government Emergency Ordinance GEO 63/98 sets out: – Operation of companies in a competitive environment – Creation of the autonomous electricity and heat regulatory authority ANRE NATIONAL ELECTRICITY AND HEAT REGULATORY AUTHORITY

3. 3 ANRE as an autonomous regulatory body Established through GEO No. 29/98, enhanced through GEO 63/98 Entirely financed from resources outside the state budget Part of the secondary legislation already issued making thus possible the shifting to a new stage in energy sector restructuring including the preparation of its privatisation ANRE NATIONAL ELECTRICITY AND HEAT REGULATORY AUTHORITY

4. 4 Ensuring an efficient, transparent and sustainable electricity and heat markets Issue and withdraw authorisations and licences –New capacity; rehabilitation; commissioning; operating authorisations – Licences for the commercial operation  ANRE has already granted licences for electricity supply, transmission, distribution, system operation and for hydropower and nuclear generation ANRE NATIONAL ELECTRICITY AND HEAT REGULATORY AUTHORITY

5. 5 Ensuring an efficient, transparent and sustainable electricity and heat markets (cont) In close correlation to the Government policy, regulate part of the wholesale market (Fig. 1) –Interim portfolio (vesting) contracts (IPC); observing constraints in the operation of co-gens, PPs on coal and, some hydro facilities – PPA contracts; accepting full output from NPP – T & D services ANRE NATIONAL ELECTRICITY AND HEAT REGULATORY AUTHORITY

6. 6 Ensuring an efficient, transparent and sustainable electricity and heat markets (cont) Establish rules for the competitive wholesale market -negotiated bilateral contracts -spot market ANRE NATIONAL ELECTRICITY AND HEAT REGULATORY AUTHORITY

7. 7 Ensuring an efficient, transparent and sustainable electricity and heat markets (cont) Making sure that CONEL does not favour certain producers, suppliers or consumers -CONEL = transmission, system and market function -TO, SO and MO not allowed to trade energy on their own account -regulated transmission service (TPA) -regulated merit order procedure for the EPS scheduling and despatch -non - discriminatory grid codes, metering codes, and other mandatory norms for the EPS ANRE NATIONAL ELECTRICITY AND HEAT REGULATORY AUTHORITY

8. 8 Ensuring an efficient, transparent and sustainable electricity and heat markets (cont) Qualify contestable customers - An electricity consumption threshold (100 GWh/year) - Additional requirement: financial creditworthiness, including absence of debts with the electricity bills. ANRE NATIONAL ELECTRICITY AND HEAT REGULATORY AUTHORITY

9. 9 Accomodate precontractual and other disputes Levy penalties for breaking the regulations ANRE NATIONAL ELECTRICITY AND HEAT REGULATORY AUTHORITY

10. 10 Set up pricing methodology and prices for the monopoly part of the supply in consent with the Office for Competition T & D tariffs -RoR method to establish T&D costs (a “price cap” formula would be used in the years to come) -Transmission: tariffs laid down for 14 zones (major nodes) -Distribution: conventional - network -element depending tariff; it would differ from DisCo to DisCo ANRE NATIONAL ELECTRICITY AND HEAT REGULATORY AUTHORITY

11. 11 Set up pricing methodology and prices for the monopoly part of the supply in consensus with the Office for Competition (cont) Tariffs for captive end-users –Models with fixed (capacity) and variable (energy) components –Tariffs organized on three voltage levels, time zones and load factors (Fig.2) –Cross-subsidies gradually reduced (Fig. 3); strong political support (Minister of Industry and Trade) – Subsidies basically removed in October 1999 ANRE NATIONAL ELECTRICITY AND HEAT REGULATORY AUTHORITY

12. 12 Protecting the legitimate interests of energy end-users, regarding the quality and efficiency of services -detailed performance conditions accompanying the supply license - electricity/heat performance standards (already issued) -a regulatory framework for an efficient use of electricity and heat ANRE NATIONAL ELECTRICITY AND HEAT REGULATORY AUTHORITY