Forum Energia Regulation of energy markets Klaus Gerdes Lisbon, October 19th 2006

Transcription

1 Klaus Gerdes Lisbon, October 19th 2006

2 Agenda I. European regulatory framework II. Regulatory challenges in the energy sector III. Opportunities for PwC EU&M

3 European regulatory framework

4 The European Regulators' Group for Electricity and Gas (ERGEG) Objectives Facilitate the completion of the European energy market Advising and assisting the Commission in consolidating the European market Ensure a consistent application of the Electricity and Gas directives as well as the regulation on cross border exchanges across all member states Structure ERGEG Electricity FG Gas FG Customer FG Electricity System Operation TF Gas market integration TF Customer protection TF Cross border Trade TF Transparency TF Customer Switching TF Regional Electricity Markets TF Gas balancing & storage TF South East Europe Customer TF LNG TF FG = Focus Group ; TF = Task Force Slide 4

5 The European Regulators' Group for Electricity and Gas Areas of work Focus Group Electricity Gas Task force Transparency LNG Electricity System Operation Cross Border Trade Regional Electricity Gas Market Integration Gas Balancing and Storage Areas of work Security & reliability Guidelines and Good practices for Electricity balancing markets integration Congestion Management Guidelines and mini for a firm transmission access rights Co-ordination between TSOs Transmission tariff harmonization Guidelines for the longer term Inter-TSO Compensation (ITC) mechanism Electricity Regional Initiative (ERI) Monitoring and reporting of ERGEG s work programme Public consultation Public consultation on a roadmap for a competitive single gas market in Europe Launch Gas Regional Initiative (GRI) Ensure transparency of information in all terms (management, provision, regulatory oversight and publication) Monitor implementation of ERGEG s gas balancing principles Monitor storage and other access regulations Monitor implementation of the Guidelines for Good TPA Practice for Storage System Operators Regulation and forcing of LNG growth to the EU market Slide 5

6 The European Regulators' Group for Electricity and Gas Areas of work Focus Group Customer Task force Customer protection Areas of work End-user energy price regulation Ensure availability of pre-contractual information Customer Switching Enforce Implementation of Automatic meter reading (AMR) and Automated Meter Management (AMM) Identification of obstacles for supplier switching in the gas retail market and guidance for removing those barriers South East Europe Customer Focus on South East Europe customer energy Low income customer protection Ensure affordability of electricity and gas Slide 6

7 ELECTRICITY REGIONAL INITIATIVE Structure Goals REM s Seven electricity Regional Energy Market (REM) projects Lead Regulator chairs and co-ordinates work within the region Bring together regulators, companies, Member States, the European Commission and other interested parties (consultation opportunities) Monitor overall process of similar aims (ERGEG), but use grouping into REM s to focus on regional concerns and progressing capabilities Baltic Central-East Central-South Central-West Northern South-West UK & Ireland Portugal Spain France Slide 7

8 ELECTRICITY REGIONAL INITIATIVE Overview Baltic Region Members Estonia Latvia Lithuania Leader Latvia Interconnections Transparency Availability and control of information Regional priorities Balancing Regulation Access to the grids, balancing rules in national legislation Congestion Management Co-operation between network operators (including cross border and availability of transmission capacity) Other (region specific) Market developments and compatibility with national legislation Central- East Central- South Austria Czech Republic Germany Hungary Poland Slovakia Slovenia Austria France Germany Greece Italy Slovenia Austria Italy Inter TSO coordination: harmonisation of operational and security standards (SP). Development of new interconnector infrastructure (SP). Transparency and information management (S) Cross border transparency (FP). Allocation mechanisms (FP). Transparency and wholesale market data publication (SP). Balancing markets integration (M) Intra-day and balancing markets (FP). markets integration (M) Assessment of compatibility of national legal frameworks and regulatory competences (SP). Regulators' responsibilities for cross-border and regulatory gap (S) Relevant market design (M) Improvement and harmonisation of CBT congestion management methods (FP) Coordination of calculation of cross border capacity (FP) (L). Barriers to entry: traders (S) generators (M) Market arrangements (FP). Abbr.: Short term: (S) Medium term: (M) Long term: (L) First Priority: (FP) Second Priority: (SP) Slide 8

9 Overview (2) Central- West Northern Region UK & Ireland Region Region Members Belgium France Germany Luxembourg Netherlands Denmark Finland Germany Norway Poland Sweden France Republic of Ireland United Kingdom Leader Belgium Denmark UK Interconnections 'Road maps' - maximise use of and increase transmission capacity (S) Common cross-border capacity calculation (M) Single auction office (L) Optimizing use of interconnectors (S). Cooperation on investments in new interconnectors (M). Interconnecto rs (Compliance with CM Guidelines, co-ordination) (S, M). Transparency Increased transparency across entire region (S) Harmonization and improvement of data exchange (M) Transparency and information to market actors (S). Wholesale markets and interconnectors (M). Regional priorities Balancing Regulation 'Road maps' - crossborder intraday and balancing trade (S) Joint intraday and balancing markets (M). Market integration and imbalance pricing (M,L). 'Road maps' -monitoring by and cooperation between regulators (S) Enhanced regional market monitoring (M) Congestion Management 'Road maps' - facilitate functioning of explicit auctions (S) Flow-based allocation (M) Cross-border redispatching (L). Compliance with CM Guidelines, TSO to TSO coordination (S). Other (region specific) Trilateral market coupling (BE- FR-NL) Implementation and progress monitoring of common road map for integration of the electricity wholesale markets (BE- FR-NL and FR-GY) Cooperation on dealing with major shares of wind-energy in the systems (S). Abbr.: Short term: (S) Medium term: (M) Long term: (L) First Priority: (FP) Second Priority: (SP) Slide 9

10 Overview (3) South- West Region Members France Portugal Spain Leader Spain Interconnections Availability of transmission capacity. Transparency Transparency Regional priorities Balancing Regulation Crossborder balancing of traded volumes. Cross-border balancing of traded volumes. Congestion Management The congestion management mechanism is also identified as a priority that will be handled by existing initiatives. Other (region specific) Analysis of measures adopted in the participating member-states to improve security of supply. Abbr.: Short term: (S) Medium term: (M) Long term: (L) First Priority: (FP) Second Priority: (SP) Slide 10

11 GAS REGIONAL INITIATIVE Structure Goals REM s Four Regional Energy Market (REM) projects for Gas Lead Regulator chairs and co-ordinates work within the region Succeed on a practical level on the development of regional markets in collaboration with industry, Member States, the European Commission and other stakeholders Support ERGEG on the response to the problems highlighted in the European Commission s 2005 Benchmarking report and the preliminary findings of the DG Competition s energy sector inquiry. North West North South South South East Spain Portugal Southern France Slide 11

12 GAS REGIONAL INITIATIVE Overview Region Members Leader Regional priorities / Comments North- West Netherlands Belgium France Ireland United Kingdom Netherlands North Germany Denmark Netherlands Sweden 1st Phase (Netherlands) 2nd Phase (Germany) Comment: Initially the North and North-West REMs will be run jointly, i.e. under the lead of DTe (The Netherlands). Once the first phase of the REMs has been completed it is intended that the North REM will revert to the leadership of BNetzA (Germany) and will be separated from the North West REM. South Spain Portugal Southern France Spain Slide 12

13 GAS REGIONAL INITIATIVE Overview (2) Region Members Leader Regional priorities / Comments South- South East Austria Czech Republic Greece Hungary Italy Poland Slovakia Slovenia Italy/Austria (Co-Chair) 1. Monitoring of regulatory implementation in the countries, with particular reference to: Implementation of Directive 2003/55, shortcomings and infringement procedures Steps undertaken to ensure compliance with the Regulation 1775/2205 Scope and guidelines of Regulatory Authority powers and actions 2. Survey and analysis of the regional market and its problems, particularly: Current development of hubs and other trading activities in the region Development of the main physical and commercial gas flows Current and expected infrastructure development and its regulatory framework Practical case studies of gas transportation through the region for specific profiles by a fictive shipper: RUS-SK-CZ-GER (Velke Kapusany - Waidhaus or Hora Svate Kateriny) RUS-SK-A-SI-I (Velke Kapusany - Goricia) RUS-SK-A-I (Velke Kapusany - Tarvisio) RUS-SK-A-GER (Velke Kapusany - Oberkappel) RUS-PL-GER-CZ (Bobrowniki or Kondratki * Mallnow - Hora Svate Kateriny) 3. Transparency requirements covering: Access to Storage Services Hub Service 4. Interoperability : Gas quality Infrastructure interconnection agreements Operational balancing Slide 13

14 Regulatory challenges in the energy sector

15 Main regulatory challenges in the energy sector for Regulators and Market Participants Organisational Financial Technical Organisation Regulatory Management the regulatory process - Org.Unbundling Pricing and Benchmarking -X gen Factor -X ind Factor - regression analysis Costing - Fully allocated - Incremental Accounting Separation sep. accounting -Ownership unbundling Network access - Electricity -Gas - LNG - Water Slide 15

16 Regulatory challenges Implementation of the regulatory process & Unbundling Organisational Organisation Regulatory Management the reg. process - Org.Unbundl ing Pricing and Benchmarking -X gen Factor -X ind Factor - regression analysis Financial Costing - Fully allocated - Incremental Accounting Separation sep. accounting -Ownership unbundling Technical Network access - Electricity - Gas - LNG - Water Organisational implementation of Regulatory Management Development of a regulatory strategy Development of a milestone plan and time schedule Identification of Regulation related data Organisation of regulatory data preparation and collection Implementation of quality assurance for documentations Collection and evaluation of regulatory data for the identification of efficiency potential Slide 16

17 Regulatory challenges Implementation of the regulatory process & Unbundling Organisational Organisation Regulatory Management the reg. process - Org.Unbundl ing Pricing and Benchmarking -X gen Factor -X ind Factor - regression analysis Financial Costing - Fully allocated - Incremental Accounting Separation sep. accounting -Ownership unbundling Technical Network access - Electricity - Gas - LNG - Water Proactive analysis of developments within regulated industries across Europe Identification of country-specific unbundling requirements (legal, informational, organisational, accounting related unbundling) Identification and transfer of established unbundling models (e.g. leasing model, slender network operator) Slide 17

18 Regulatory challenges Pricing & Benchmarking Organisational Organisation Regulatory Management the regulatory process - Org.Unbundl ing Pricing and Benchmarking -X gen Factor -X ind Factor - regression analysis Financial Costing - Fully allocated - Incremental Accounting Separation sep. accounting -Ownership unbundling Technical Network access - Electricity -Gas - LNG - Water Determination of methods to calculate general and individual X-Factors Comparison of one-dimensional es vs. multi-dimensional methods [Indicators vs. Data Envelopment Analysis (DEA) / Stochastic Frontier Analysis (SFA)] Consideration of - market specific structural classes - country-specific requirements - customer group specific differences - transport relevant Slide 18

19 Regulatory challenges Overview Benchmarking es Organisational Organisation Regulatory Management the regulatory process - Org.Unbundl ing Pricing and Benchmarking -X gen Factor -X ind Factor - regression analysis Financial Costing - Fully allocated - Incremental Accounting Separation sep. accounting -Ownership unbundling Technical Network access - Electricity -Gas - LNG - Water Benchmarking one-dimensional methods Frontier methods multi-dimensional methods Average methods Non-parametric Parametric Parametric Indicated method Performance Indicator Data Envelopment Analysis (DEA) Effometer Stochastic Frontier Analysis (SFA) Corrected Ordinary Least Square (COLS) Ordinary Least Square (OLS) Total Factor Productivity (TFP) Slide 19

20 Regulatory challenges Costing Organisational Organisation Regulatory Management the regulatory process - Org.Unbundl ing Pricing and Benchmarking -X gen Factor -X ind Factor - regression analysis Financial Costing - Fully allocated - Incremental Accounting Separation sep. accounting -Ownership unbundling Technical Network access - Electricity -Gas - LNG - Water Analysis of different regulation models and their implications Identification and development of methods for the calculation of network fees (e.g. network s participation model) Identification and realisation of potentials for efficiency improvements Development of calculation models Preparation and realisation of calculations Quality assurance of calculations Slide 20

21 Regulatory challenges Organisational Financial Technical Accounting separation Organisation Regulatory Management the regulatory process - Org.Unbundl ing Pricing and Benchmarking -X gen Factor -X ind Factor - regression analysis Costing - Fully allocated - Incremental Accounting Separation sep. accounting -Ownership unbundling Network access - Electricity -Gas - LNG - Water Accounting separation for different value chains, especially for the electricity and gas sector Calculation of the transfer prices for shared services Allocation of overhead s Balance adjustments Slide 21

22 Regulatory challenges Organisational Financial Technical Network access Organisation Regulatory Management the regulatory process - Org.Unbundl ing Pricing and Benchmarking -X gen Factor -X ind Factor - regression analysis Costing - Fully allocated - Incremental Accounting Separation sep. accounting -Ownership unbundling Network access - Electricity -Gas - LNG - Water Implementation of network access models Consideration of country specific aspects Development of network access models for a singular Europe wide market out of the current country specific models Optimisation of capacities at cross border grid connection points (Possible) development of a Europe wide Clearing Organisation for capacities and prices Slide 22

23 Opportunities for PwC

24 Opportunities for PwC Advantages of PwC in the regulated energy sector PwC has major Advisory offices in all relevant European countries with special knowledge, e.g. Lead Additional for Regulatory Process Germany Austria for Functional Unbundling Austria Sweden for Benchmarking Netherlands Germany for Costing United Kingdom Germany for Accounting Separation Sweden United Kingdom for Network access Germany France Slide 24

25 Opportunities for PwC Advantages of PwC in the regulated energy sector PwC has high expertise through established business relationships with all major energy companies in Europe PwC has interdisciplinary teams with specialists for all relevant topics PwC has vast knowledge on regulation in other sectors (e.g. telecommunications) Slide 25

26 Thank you! Klaus Gerdes Regulatory Management All rights reserved. refers to the German firm AG WPG and the other member firms of International Limited, each of which is a separate and independent legal entity.