1. 1 Licensing in the Energy Sector Georgian National Energy And Water Supply Regulation Commission Nugzar Beridze June 27 – July 3, 2008

2. 2 Laws of Georgia : - - ` On Licenses and Permits” - - ` On Energy and Natural Gas” - ` On State Support to Investments” Acting sub-laws: - - Resolution of the Georgian Government of October 17, 2007, # 232: - - on Approval of the Charter “On Deadlines and Rules for Issuance of Preliminary Licenses/Permits”; - - -Resolution of the commission # 3 of August 23, 1999: - - “Licensing Rules in the Energy and Natural Gas Areas” Legal Framework Legal Framework

3. 3 a) a) Production of energy; b) b) Dispatching; c) c) Transmission; d) d) Distribution of energy Licenses shall be issued based on the decision of the Regulatory Commission; such decisions are made in the public sitting of the commission The Commission Issues Lifetime Licenses in following Areas: The Commission Issues Lifetime Licenses in following Areas:

4. 4 A person, producing electricity for only personal consumption who is not indicated in the transmitting or distributing networks ; A small station, the planned production capacity of which does not exceed 13 megawatts. The following person may represent an exception:

5. 5 Name of the company ; Legal Address ; Organizational and legal status ; Bank information ; The authorized representative The License Application

6. 6 Certificate proving the right to ownership of the means of production (their use) : Opinion on compliance of the technical conditions of the means of production with the established standards; List of fixed assets and audit opinion of the enterprise evaluation; Opinion on environmental impact; Technical specification on switching into the electricity network (except dispatching license); Drawing (scheme) of the electricity network in accordance with the requested license (except dispatching license); Technical project of activities, for which the license is requested (in case of issuance of the preliminary license); Following documents shall be attached to the license application: Following documents shall be attached to the license application:

7. 7 Administrative procedures shall commence following registration of the application: Documents received by the commission shall be verified (examined) within 3 days. If documents are incomplete, the applicant is given time to submit additional documents; the time amounts to not less than 5 days and not more than 15 days. Until submission of documents the application review process is suspended. The application review process shall be renewed immediately upon submission relevant documentation. Failure to submit additional documentation may lead to a decision of the commission on rejection of the application review. The commission shall take a decision of issuance of the license or its rejection within one month after the filing of the application. Procedures for Obtaining License:

8. 8 Type of activity (service) ; Location of the service facilities and territory to which the license applies; Date of the license issuance; Terms for amending or terminating the license; The license is accompanied by the following: Annex 1: “Area of activities and technical specification” Annex 2: “General Terms and Rules of the Licensed Activities” The License shall indicate the following: The License shall indicate the following:

9. 9 License Form

10. 10 Without prior consent of the commission the license holder shall not be authorized to do the following: Terminate, reduce or increase volume of services defined under the license (except in case of failure by the consumers to pay the cost of consumed electricity and/ or for technical or safety reasons); Expand area of licensed activities. License Terms License Terms

11. 11 - Account in its means the volume of the transferred electricity ; - present the commission with the: annual progress report for the previous year; annual work plan for the coming year ; other information, deemed necessary by the commission. The license holder shall: The license holder shall:

12. 12 production– 14; distribution– 3; transmission– 2; dispatch– 1 Following licenses are issued in the area of energy by data for July 1, 2008

13. 13 35 small power stations with the production capacity not exceeding 35 megawatts were regulated (electricity licenses and tariff were abolished); these stations produce 1.2% of the total electricity production of the country; Electricity distribution license was abolished for about 30 small distribution companies; Based on latest amendments introduced to the law of Georgia “On Energy and Natural Gas” in 2006

14. 14

15. 15

16. 16

17. 17 Analysis of materials submitted by holders of the license on an annual basis; Examination of activities of the license holder – based on allegations regarding violation of license terms and complaints received from various sources; Sample audit of activities – via site visits of employees of relevant qualification. The following is used for conducting monitoring of activities of license holders by the commission staff

18. 18 Written recommendation, a decision of the commission on correction indicating specific dates; Fines for failure to observe decisions and resolutions of the commission The response forms are developed based on analysis of materials submitted by license holders The response forms are developed based on analysis of materials submitted by license holders

19. 19 Thank You For Attention