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UPDATE ON REGULATION
Prof. Inna Šteinbuka, Chair
Public Utilities Commission of Latvia
Meeting of Nordic –Baltic Energy Regulators
November 10, 2003
Vilnius, Lithuania
HIGHLIGHTS
• Public Utilities Commission – multi-sector regulator
• Key indicators and trends • Gas Market structure• Electricity Market structure• Main achievements• Gas tariffs• Electricity tariffs• Future challenges and activities
PUBLIC UTILITIES COMMISSION - MULTI - SECTOR REGULATOR
• Established in July, 2001
• Independent authority:
- 5 Commissioners appointed by the Parliament for a 5 year period
- decisions can be challenged only by the court
- funding: duty on the net turnover of regulated services
PUBLIC UTILITIES COMMISSION - MULTI - SECTOR REGULATOR
Regulated public utilities in the energy sector:
- electricity generation, transmission, distribution and sales- cogeneration (above 1MW) - gas (natural and liquified) transmission, distribution, storage, filling and sales
PUBLIC UTILITIES COMMISSION - MULTI - SECTOR REGULATOR
• Commission positioned itself as a strong stakeholder in the energy sector
• Staff recruiting and organizational optimization completed
• During this year institution has significantly strengthened its capacity by intensive training activities and applied cases
KEY INDICATORS AND TRENDS
Year 2002
Increase of GDP - 6.1%
Increase of electricity demand - 3.5%
Increase of natural gas demand - 0.4%
Gross natural gas consumption in Latvia (mln m³)
16091564
1356
124512991326
1088
0
200
400
600
800
1000
1200
1400
1600
1800
1996 1997 1998 1999 2000 2001 2002
Structure of natural gas consumption in 2002
Other consumers
5.5%
Transport0.1%
Heat and electricity generation
64.5%
Construction0.3%Agriculture,
forestry, hunting, fishing
1.2%
Industry22.1%
Households6.3%
Gross electricity consumption in Latvia (mln kWh)
4882458344774461450541884132
0
1000
2000
3000
4000
5000
6000
1996 1997 1998 1999 2000 2001 2002
Structure of electricity consumption in 2002
Other consumers
35.6%
Industry29.8%
Construction1.5%
Transport2.9% Households
27.0%Agriculture,
forestry, hunting, fishing
3.2%
GAS MARKET STRUCTURE
• Vertically integrated private company “Latvijas Gāze” is the only actor in natural gas transmission, storage, distribution and supply
• Shareholders of “Latvijas Gāze”:- Ruhrgas Energie Beteiligungs AG“ 28.18%- JSC "Gazprom“ 25.0%- LLC "Itera-Latvija“ 25.0%- "E.ON Energie AG“ 18.79%
GAS MARKET STRUCTURE
• Latvia could be considered as a non-connected market in the meaning of Article 28(1) of Directive 2003/55/EC having only one main external supplier (market share more than 75%)
• Possible derogation from Articles 4, 9, 23, 24 of the Directive
• No legal eligibility criteria of gas customers yet adopted
• Amendments to the Energy Law are under discussion (introduction of third party access in gas industry)
ELECTRICITY MARKET STRUCTURE
• Vertically integrated state-owned company “Latvenergo” dominates the sector
• The few privatization attempts failed, in year 2000 the Parliament decided not to sell any parts of the company
• Government’s decision on legal separation of TSO has been put on hold
• Elaboration of the new Electricity Market Act is on the agenda of the Government
ELECTRICITY MARKET STRUCTURE
ELIGIBLE CUSTOMERS
• Threshold of 20 GWh annual consumption with 20 consumers eligible (market opening – 18% in 2003)
• Concept of eligible electricity consumers introduced from January 1st 2001
• Each year the Regulator publishes a list of eligible consumers
• No actual deals reported by now• No legal obstacles to open market for all non-
household customers from July 1st 2004
MAIN ACHIEVEMENTS
New principles of tariff design adopted:• Separation of generation, transmission, distribution
and sales • Price cap• Clear cost allocation• Economic depreciation• Rate of return (7.6% for Latvenergo; 8.4% for Latvijas
Gāze)• Elimination of cross-subsidies
New gas and electricity tariffs adopted
Average natural gas tariffs from July 1, 2003 in LVL/ 1000m³ (at HSFO FOB ARA above 140 USD/t)
increase
Up to 0.5 thousand m3 83.65 25.3%0.5 – 25 thousand m3 79.56 19.2%25 –126 thousand m3 78.60 18.4%126 – 1260 thousand m3 77.40 16.6%1260 – 12600 thousand m3 76.20 19.1%12600 – 20 000 thousand m3 73.79 17.1%20 000 – 126 000 thousand m3 66.58 12.3%Above 126 000 thousand m3 61.17 10.4%
Fixed monthly payment – 0.65 LVL per month1 LVL = 1.55 EURO
GAS TARIFFS
ELECTRICITY TARIFFS
• New tariffs take effect on 1 January 2004
• Extensive consultations organized with customers and society prior to the adoption of the new tariffs
• Reduced cross subsidies among customers groups
• Service tariffs differentiated depending on the connection point in the grid
Average electricity sales prices for captive customers * (LVL/KWh)
present new change110 KV line 0.0246 0.01914 -22%6-20KV bus bar 0.0246 0.02376 -3.4%6-20KV line 0.0291 0.02915 0.2%
* Excluding VAT and including load component
1 LVL = 1.55 EURO
ELECTRICITY TARIFFS
ELECTRICITY TARIFFS
Average electricity sales prices for captive customers * (LVL/KWh)
present new change
0.4 KV bus bar 0.0291 0.03237 11%0.4 KV line 0.0344 0.446 28%households 0.033051 0.38136 15%
* Excluding VAT and including load component
1 LVL = 1.55 EURO
ELECTRICITY TARIFFS
Comparison of electricity prices for households (VAT included )
0.0648
0.08400.0698
0.0605
0
0.02
0.04
0.06
0.08
0.1
Latvia2003
Latvia2004
Lithuania Estonia
EU
R
FUTURE CHALLENGES AND ACTIVITIES
Further elimination of cross-subsidies
Enforcement of quality related measures
New tasks of the Regulator resulting from the new electricity and gas directives– reconsideration of public service obligations in
the light of universal services– market facilitation and supervision
Thank you for attention!
www.sprk.gov.lvThe home page of Regulator