Forum Energia Regulation of energy markets Klaus Gerdes Lisbon, … · 2015-06-03 · Forum Energia...

Forum EnergiaRegulation of energy marketsKlaus GerdesLisbon, October 19th 2006

Agenda

I. European regulatory framework

II. Regulatory challenges in the energy sector

III. Opportunities for PwC EU&M

European regulatory framework

Regulation of energy marketsPricewaterhouseCoopers

October 2006

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 TFFG = Focus Group ; TF = Task Force

Forum Energia


October 2006

The European Regulators' Group for Electricity and Gas┌

Areas of work ┘

• Regulation and forcing of LNG growth to the EU market LNG

• 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

Gas Balancing and Storage

• Ensure transparency of information in all terms (management, provision,

regulatory oversight and publication)

Transparency

• Public consultation on a roadmap for a competitive single gas market in

Europe

• Launch Gas Regional Initiative (GRI)

Gas Market Integration Gas

• Electricity Regional Initiative (ERI)• Monitoring and reporting of ERGEG’s work programme• Public consultation

Regional Electricity

• Transmission tariff harmonization

• Guidelines for the longer term Inter-TSO Compensation (ITC) mechanism

Cross Border Trade

• Security & reliability issues • Guidelines and Good practices for Electricity balancing markets integration • Congestion Management Guidelines and mini – for a firm transmission

access rights • Co-ordination between TSOs

Electricity System Operation

Electricity

Areas of workTask forceFocus Group

Forum Energia


October 2006

The European Regulators' Group for Electricity and Gas┌

Areas of work ┘

• Focus on South East Europe customer energy issues

• Low income customer protection

• Ensure affordability of electricity and gas

South East Europe Customer

• 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

Customer Switching

• End-user energy price regulation

• Ensure availability of pre-contractual information

Customer protectionCustomer

Areas of workTask forceFocus Group

Forum Energia


October 2006

ELECTRICITY REGIONAL INITIATIVE┌ Structure ┘

• Seven electricity Regional Energy Market (REM) projects

• Lead Regulator chairs and co-ordinates work within the region┌ Goals ┘

• 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

┌ REM’s ┘

• Baltic

• Central-East

• Central-South

• Central-West

• Northern

• South-West

• UK & Ireland

Forum Energia

Portugal

Spain

France


October 2006

ELECTRICITY REGIONAL INITIATIVE – Overview –Regional priorities

Austria France Germany Greece Italy Slovenia

Austria Czech Republic Germany Hungary Poland Slovakia Slovenia

EstoniaLatvia Lithuania

Members

Market arrangements (FP).

Improvement and harmonisation of CBT congestion management methods (FP) Coordination of calculation of cross border capacity (FP) (L).

Assessment of compatibility of national legal frameworks and regulatory competences (SP).

Intra-day and balancing markets (FP).

Cross border transparency (FP).

Allocation mechanisms (FP).

Transparency and wholesale market data publication (SP).

Inter TSO coordination: harmonisation of operational and security standards (SP).

Development of new interconnector infrastructure (SP).

ItalyCentral-South

Barriers to entry: traders (S) generators (M)

Regulators' responsibilities for cross-border issues and regulatory gap (S)

Relevant market design issues (M)

markets integration (M)

Balancing markets integration (M)

Transparency and information management (S)

AustriaCentral-East

Market developments and compatibility with national legislation

Co-operation between network operators (including cross border issues and availability of transmission capacity)

Access to the grids, balancing rules in national legislation

Availability and control of information

LatviaBaltic

Other (region specific)

Congestion Management

RegulationBalancingTransparencyInter-connections

LeaderRegion

Abbr.: Short term: (S) Medium term: (M) Long term: (L) First Priority: (FP) Second Priority: (SP)

Forum Energia


October 2006

– Overview – (2)

Compliance with CM Guidelines, TSO to TSO co-ordination (S).

Market integration and imbalance pricing (M,L).

Wholesale markets and interconnectors (M).

Interconnectors (Compliance with CM Guidelines, co-ordination) (S, M).

UKFrance Republic of Ireland United Kingdom

UK & Ireland Region

Regional priorities

Denmark Finland Germany Norway Poland Sweden

Belgium France Germany Luxembourg Netherlands

Members

Cooperation on dealing with major shares of wind-energy in the systems (S).

Joint intra-day and balancing markets (M).

Transparency and information to market actors (S).

Optimizing use of intercon-nectors (S).

Cooperation on invest-ments in new intercon-nectors (M).

Denmark Northern Region

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)

'Road maps' -facilitate functioning of explicit auctions (S)

Flow-based allocation (M)

Cross-border re-dispatching (L).

'Road maps' -monitoring by and co-operation between regulators (S) Enhanced regional market monitoring (M)

'Road maps' -cross-border intraday and balancing trade (S)

Increased transparency across entire region (S)

Harmonization and improve-ment of data exchange (M)

'Road maps' -maximise use of and increase transmission capacity (S)Common cross-border capacity calculation (M)Single auction office (L)

BelgiumCentral-West




LeaderRegion


Forum Energia


October 2006

Regional priorities

France

Portugal

Spain

Members

Analysis of measures adopted in the participating member-states to improve security of supply.

The congestion management mechanism is also identified as a priority that will be handled by existing initiatives.

Cross-border balancing of traded volumes.

Cross-border balancing of traded volumes.

Transparency Availability of transmission capacity.

SpainSouth-West




LeaderRegion


Forum Energia

– Overview – (3)


October 2006

GAS REGIONAL INITIATIVE┌ Structure ┘

• Four Regional Energy Market (REM) projects for Gas

• Lead Regulator chairs and co-ordinates work within the region┌ Goals ┘

• 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.

┌ REM’s ┘

• North – West

• North

• South

• South – South East

Forum Energia

Spain

Portugal

Southern France


October 2006

GAS REGIONAL INITIATIVE – Overview –

Spain Portugal Southern France

Germany Denmark Netherlands Sweden

Netherlands Belgium France Ireland United Kingdom

Members

SpainSouth

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.

1st Phase (Netherlands)

2nd Phase (Germany)

North

NetherlandsNorth-West

Regional priorities / CommentsLeaderRegion

Forum Energia


October 2006

GAS REGIONAL INITIATIVE – Overview – (2)

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 issues: Gas quality issues

Infrastructure interconnection agreements

Operational balancing

Italy/Austria

(Co-Chair)

Austria Czech Republic Greece Hungary Italy Poland Slovakia Slovenia

South-South East

Members Regional priorities / CommentsLeaderRegion

Forum Energia

Regulatory challenges in the energy sector


October 2006

Main regulatory challenges in the energy sectorfor Regulators and Market Participants

Financial issues

Technical issues

- Xgen Factor- Xind Factor- regression analysis

Pricing and Benchmarking

- Fully allocated cost approach

- Incremental cost approach

Costing

- Implementing sep. accounting

- Ownership unbundling

Accounting Separation

- Electricity- Gas- LNG- Water

Network access

Organisationalissues

- Implementing the regulatory process

- Org.Unbundling

Organisation Regulatory

Management

Forum Energia


October 2006

Regulatory challenges

Implementation of the regulatoryprocess & Unbundling


Costing Accounting Separation

Network access


Management

- Xgen Factor- Xind Factor- regression

analysis

- Fully al-located cost approach





- Implementing the reg. process

- Org.Unbundling

Financial issues

Technical issues


• 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

Forum Energia


October 2006

Regulatory challenges Pricing and Benchmarking


Network access


Management


analysis






- Implementing the reg. process

- Org.Unbundling

Financial issues

Technical issues


• 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)

Forum Energia

Implementation of the regulatoryprocess & Unbundling


October 2006



Network access


Management


analysis







- Org.Unbundling

Financial issues

Technical issues



• Determination of methods to calculate general and individual X-Factors

• Comparison of one-dimensional approaches 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 cost relevant issues

Forum Energia

Pricing & Benchmarking


October 2006



Network access


Management


analysis







- Org.Unbundling

Financial issues

Technical issues


Regulatory challenges Forum Energia

OverviewBenchmarking approaches

Perfor-mance

Indicator

Benchmarking

one-dimensional methods

multi-dimensional methods

„Frontier“methods

„Average“methods

Non-parametric Parametric

Data Envelopment

Analysis (DEA)

Effo-meter

Stochastic Frontier

Analysis (SFA)

Corrected Ordinary Least Square (COLS)

Parametric Indicated method

Ordinary Least Square

(OLS)

Total Factor Productivity

(TFP)


October 2006



Network access


Management


analysis







- Org.Unbundling

Financial issues

Technical issues



• Analysis of different cost 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 cost calculation models

• Preparation and realisation of cost calculations

• Quality assurance of calculations

Forum Energia

Costing


October 2006



Network access


Management


analysis







- Org.Unbundling

Financial issues

Technical issues

OrganisationalissuesRegulatory challenges

• Accounting separation for different value chains, especially for the electricity and gas sector

• Calculation of the transfer prices for shared services

• Allocation of overhead costs

• Balance adjustments

Forum Energia

Accounting separation


October 2006



Network access


Management


analysis







- Org.Unbundling

Financial issues

Technical issues

OrganisationalissuesRegulatory challenges

• 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

Forum Energia

Network access

Opportunities for PwC


October 2006

Opportunities for PwCAdvantages 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

Forum Energia


October 2006

Opportunities for PwCAdvantages 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 issues in other sectors (e.g. telecommunications)

Forum Energia

Thank you!

Klaus GerdesRegulatory Management

+49 211 981 [email protected]

© 2006 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the German firm PricewaterhouseCoopers AG WPG and the other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

Forum Energia Regulation of energy markets Klaus Gerdes Lisbon, … · 2015-06-03 · Forum Energia...

Documents

Transcript of Forum Energia Regulation of energy markets Klaus Gerdes Lisbon, … · 2015-06-03 · Forum Energia...