1. Power Exchanges in the extended EU The experience in Czech Republic APEx Conference 2004 October 11 th, 2004 - Leipzig Miroslav Marvan Operator trhu s elektrinou, a.s.

2. Page 2 Czech Power Industry in 2003 Total Consumption55 TWh Export16 TWh Import 4 TWh Net Generation 83 TWh incl. Thermal PPs 53 TWh Nuclear PPs 26 TWh Maximum Peak Load 11 163 MW

3. Page 3 Main Market Participants Share of generationShare of electricity supply (distribution) ČEZ 70 %66 % EON24 % PRE10 % There exists one dominant generator with crucial share of generation and distribution as well.

4. Page 4 Opening the Electricity Market in the Czech Republic  Wholesale electricity market completely opened  At present retail market is opening step by step  Today the electricity market is opened for all generators, traders and end consumers with continuous measurement and remote data transport  From 1.1.2005 the market is opened for all end consumers with exception of residential sector – implementation of load profiles

5. Page 5 Model of Czech Electricity Market *DSO can become a subject of settlement * *

6. Page 6 Model of Czech Electricity Market A subject of settlement (BRE) - at present 30 in the Czech Republic - is a market participant with responsibility (financial) for a deviation Deviation is a difference between actual (measured) and contracted (traded) volume of electricity

7. Page 7 Deviation of a subject of settlement BRE BRE Deviations Contracted volumes Actual volumes OTE OTE TSO/DSO TSO/DSO

8. Page 8 Electricity Market Operator  Evaluates and settles deviations - every day for separate trading hours  Receives contracted (traded) hourly volumes from subjects of settlement in a day D – 1 (by 16:00) and real (measured) volumes for every hour in a day D + 1 (by 11:00) from TSO and DSOs  Deviations are evaluated by financial costs necessary for activation of ancillary services (reserve power)  Deviations are debeted to these subjects of settlement that caused deviations in separate trading hours

9. Page 9 Further Activities of Electricity Market Operator  Organizes day – ahead market – by very traditional way  Organizes intra – day market; for separate trading hours; at present trading ends 3 hours before real time  Organizes balancing market – with single buyer only – TSO  Risk management of electricity market  Administration of changes of suppliers  In preparation: registration and settlement of „green electricity“ and CO 2 emissions

10. Page 10 Reconciliation curves 29 September 2004 – 23:00 – 24:00

11. Page 11 Evaluation of Czech Electricity Market  The electricity market in the Czech Republic started in 2002 without notable problems  Trades of dominant generator ČEZ, a.s. have crucial importance for price – fixing process  Low liquidity of organized electricity market - day – ahead and intra – day markets about 1 %  Bilateral contracts represent predominated way of trading

12. Page 12 What next?  It is impossible to increase liquidity of organized market and competition under existing conditions  Strategy for improvement of electricity market with existence of dominant players: - creation of a regional market - first step – preparation of infrastructure of the market

13. Page 13 Regional Electricity Market  At present very popular idea  Solution is concentrating on solution of cross – boarder flows which is insufficient  The problem is more serious –the same rules for trading –the same rules for regulation –provision of reliability of electricity supply  Primarily it is a political problem

14. Page 14 Infrastructure of Electricity Market  There have to exist an infrastructure independent on market players and dominant players especially - measurement and access to its results - settlement of deviations and their prices - administration of supplier (consumer) changes - trades in ancillary services - additional conditions that depend how the market was started (e.g. in the Czech Republic obligation for EMO to organize day – ahead market)

15. Page 15 Conclusion More information about the Czech electricity market – even in English - is available on web sites of OTE www.ote-cr.cz including results of day - ahead market, intra – day market and balancing market and statistical data