1. Trading rules in Lithuania Giedrius Radvila Lietuvos energija AB 3 July 2006, Riga II MINI-FORA

2. II MINI-FORA, 3 July 2006, Riga LEGAL REGULATION OF ELECTRICITY MARKET SEIMAS GOVERNMENT MINISTER OF ECONOMY NATIONAL CONTROL COMMISSION FOR PRICES AND ENERGY 1.LAW ON ELECTRICITY 1.RULES OF PUBLIC SERVICE OBLIGATIONS 2.LICENSING RULES FOR OPERATIONS IN ELECTRICITY SECTOR 3. CONDITIONS OF ELECTRICITY IMPORT 1.TRADING RULES OF ELECTRICITY 2.TRADING RULES OF ELECTRICITY AT AUCTIONS 3.GRID CODE 4. ELECTRICITY SUPPLY AND CONSUMPTION RULES 1.PROCEDURE FOR GRANTING THE STATUS OF ELIGIBLE CUSTOMER 2.METHODOLOGY FOR SETTING PRICE CAPS OF PUBLIC ELECTRICITY TARIFFS; 3.METHODOLOGY FOR SETTING PRICE CAPS OF TRANSMISSION AND DISTRIBUTION SERVICES; 4.PRICE REGULATION FOR MARKET PLAYERS COVERING MORE THAN 25 PERCENT OF MARKET 5.PRICE REGULATION PRINCIPLES FOR BALANCING ENERGY 6.RESOLUTIONS ON PRICE CHARGED FOR PUBLIC SERVICE OBLIGATIONS

3. II MINI-FORA, 3 July 2006, Riga  TRADING RULES OF ELECTRICITY First edition – 18 of December 2001 Second edition – 25 of February 2005 Proposals for improvements are submitted to The Ministry of economy 2006.  TRADING RULES AT AUCTIONS Firs edition – 18 of April 2003 Second edition – 25 of February 2005 The final fulfillment of all provisions of the rules will be performed after implementation of complete hourly trading framework. CHRONOLOGY

4. II MINI-FORA, 3 July 2006, Riga Content: Common provisions Granting of market player status Market operator PTO Planning of the trade The balance settlement Accounting Final provisions TRADING RULES OF ELECTRICITY

5. II MINI-FORA, 3 July 2006, Riga Common provisions: Terms of reference Main principals of the trading: fair competition independence reliability, fairness settlement supervision equality in rights of market participants TRADING RULES OF ELECTRICITY

6. II MINI-FORA, 3 July 2006, Riga Granting of market player status: Required legal documentation for trading Agreements with TSO and Market operator Registration procedures by Market operator TRADING RULES OF ELECTRICITY

7. II MINI-FORA, 3 July 2006, Riga Market operator: Functions: Registration Settlement Organization of the trade TRADING RULES OF ELECTRICITY

8. II MINI-FORA, 3 July 2006, Riga TSO: Functions: Obligations to buy or sell electricity for – covering technological losses regulation and balancing public service obligation Information exchange TRADING RULES OF ELECTRICITY

9. II MINI-FORA, 3 July 2006, Riga Planning of the trade: Market players responsibilities regarding information submission Weekly planning TRADING RULES OF ELECTRICITY 12 00 Bilateral trade information 14 00 Wednesday before operational week 8 00 TSO receives bilateral trade information from market participants Market participants have right to correct transactions and make confirmations for TSO Week before operational week Operational week form Sunday 00 00 till Friday 24 00 TSO confirmations Tuesday before operational week Bilateral market information

10. II MINI-FORA, 3 July 2006, Riga The balance settlement: TSO provides commercial accounting data for Market operator until 2 days after the trading day MO provides regulation and balancing information until 3 days after the trading day MO performs balance settlement until 7 days after the trading month TRADING RULES OF ELECTRICITY

11. II MINI-FORA, 3 July 2006, Riga Accounting: Procedures Accounting information Accounting terms TRADING RULES OF ELECTRICITY

12. II MINI-FORA, 3 July 2006, Riga Final provisions: Exemptions before full implementation of hourly trading in the consumption side 70% of consumption trade under a bilateral manner obligations for suppliers to buy “public service obligation” electricity The principal of the balancing electricity price setting TRADING RULES OF ELECTRICITY

13. II MINI-FORA, 3 July 2006, Riga TRADING RULES AT AUCTIONS

14. II MINI-FORA, 3 July 2006, Riga Content: Common provisions The organization of the uninterruptible trade session The regulation auction Final provisions TRADING RULES AT AUCTIONS

15. II MINI-FORA, 3 july 2006, Riga 1. Internal regulation of electricity market players actions 2. Intentions: development of market players relations attraction investments to the energy sector regulation of the electricity market activities introduction of commercial accounting system 3. Definitions of terms 4. Preconditions of the participating at auctions TRADING RULES AT AUCTIONS - TRADING RULES AT AUCTIONS - Common provisions

16. II MINI-FORA, 3 July 2006, Riga 1. Timing TRADING RULES AT AUCTIONS - TRADING RULES AT AUCTIONS - The organization of the uninterruptible trade session Bilateral trade Two month – 1 day before 14 00 Uninterruptible trade Operation day 16 00 Operation hour 2 hours Balance settlement 8 00 1 day before operational day 8 00 16 00 2 day before operational day Regulation energy and reserve capacity information Correction of regulation energy and reserve capacity bids information

17. II MINI-FORA, 3 July 2006, Riga TRADING RULES AT AUCTIONS - TRADING RULES AT AUCTIONS - The organization of the uninterruptible trade session 2. Market information 3. System price formation mechanism Auction System price System price x 1,2 = balancing energy (+) price ct/kWh kWh Average weighted price of transactions (System price) System price x 0,8 =balancing energy (-) price Offers to buy Bids to sell Bids not accepted by the auction !!! because offer prices exceed bid prices !!! !!! Bids accepted by the auction !!! Regulation energy auction Average weighted price of regulation energy transactions UPWARD DOWNWARD

18. II MINI-FORA, 3 July 2006, Riga TRADING RULES AT AUCTIONS - TRADING RULES AT AUCTIONS - The regulation auction 1. Requirements for participating at the regulation auction 2. The regulation auction information 3. The realization of the regulation bids 4. Delegation of TSO regarding regulation MW Upward-regulation bids. Increase in generation/reduction in consumption Price Lt/MWh Downward-regulation bids. Reduction in generation/increase in consumption TSO will take the most expensive down-regulation for the certain amount of power

19. II MINI-FORA, 3 July 2006, Riga Thank You for attention...