1. Commission For Energy Regulation Padraig Fleming Manager, Distribution & Retail 22 nd July 2004

2. Structure of Presentation Role of CER Licencing Network Access & Charges Electricity & Gas Market Environment Support Mechanisms Electricity Prices

3. CER’s Functions & Duties Establish Trading Mechanism Licencing 3 rd Party Access to Networks Promote Competition Promote Renewable/Alternative Energy Encourage Efficient Use of Energy

4. Licencing Authorise the construction of Generators Licence Generators/Suppliers/Shippers & Network Operators Seeking a deminimus level for Licence Review Technical, Financial and Business Plan

5. Network Access Connections from ESB Networks/Eirgird & Bord Gas Connection Charges Contestable Connection to Electricity Transmission system & Gas System

6. Network Charges Review Revenue Requirements & Investment Plans Charges Depend on Contracted Capacity & Usage Review of Tariff Structures Promote Efficient use of Energy

7. Markets Electricity - Bilateral Contracts Best New Entrant / Top-Up / Spill VIPP Auctions Gas – UK Market Bilateral Contracts Balancing Market – UK NBP Annual Entry/Exit Charging at Present with Point to Point Capacity Moving to Entry/Exit Capacity and Charging

8. Support Mechanism The Commission favours supports outside of the trading/market arrangements in order to: allow true market signals to be seen; minimise market distortion; minimise system and market operation costs to the final customer; afford greater transparency.

9. Types of Support €17m - PSO Generators - AER 1 – 6 €75m - PSO Generators – Peat Stations €30m- Networks – Cluster Program €60m - Consumers - Free Electricity Allowance

10. Environmental Issues Energy Efficiency Passive Approach - Cost Reflectivity Active Approach – Winter Peak Demand Reduction Scheme & Winter Demand Reduction Incentive Loss Reduction Incentives Carbon Trading 23% Not Allocated – Valued @ €10/Tonne Recycling Scheme – Pass-through 100% CO2 Impact on Overall Market

11. Tariff Approval Process 5- Year Revenue Review Incentive Regulation –Generation – Market Based Price –Supply – Profit Margin –Networks – Cash Flow PSO – Set by Government

12. Cost Drivers Generation –Fuel & Carbon Costs –Capital Investment –Operations Costs Networks –Capex Program – Largest Non-Government Investment –Growth 5% over 10 Years –90,000 New Connections PSO –Increase in AER 6 and New Peat Plants ESB Submission for 12.5% Price Increase

13. Future Trends Fuel Prices? Capital Investment in Generation Operating Cost of Generation Network Investment – Growth Levels PSO – AER under Carbon Trading

14. Questions / Comments