Industrial Energy Consumers Forum (IEF) Hungary

Industrial Energy Consumers Forum (IEF) Hungary

Electricity Market Liberalizationin Hungary

10 September 2003, Prague

2AEM/SVSE – Česká energetika ve Sjednocené Evropě

IEF – Industrial Energy Consumers’ Forum

IEF: a not-for-profit NGODate of establishment: March 2000Legal form: association (of public interest)„Scope of authority”: network energy (natural gas, heat & electricity)Target group: non-household sector


Leading Members


The Approach

1. The Market Background

2. The Electricity Act No. CX of 2001

3. New Market Structure & Mechanism


1-1 Electricity flows (GWh in 2002)

GROSSPRODUCTION

35 976

NETWORKLOSSES

4 328

EXPORT3 367

IMPORT7 624

ESCsRETAIL SALES

32 621

HOUSEHOLDS10 560

COMMUNAL6 884

PRODUCTIVE16 018

MVM

Public34 256

IPPs1 720


1-2 Physical Flows (GWh in 2002)


1-3 Ownership Structure

RWE

MOL

MVM

ATELAES SummitCroesus

Suez-Lyonnaise

(Electrabel)Electricité de

France

Gaz de France

E.ON

ENISNAM/Italgas

Trans-elektro

DÉGÁZ

DDGÁZ

ÉGÁZ

KÖGÁZ

TIGÁZ

FÕGÁZ

GM/ÁPV

Hungarian State

Ruhrgas

TITÁSz

DÉMÁSz

DÉDÁSz

ÉMÁSz ELMÜ

ÉDÁSz

Bakony

VértesPaksDuna-menti

Budapesti Pécs Tisza Csepel

Mátra

Debrecen

Ownership structure of Hungarian Energy Industry

Transmission

Sales

Storage

MAVIRISO

OVITTrans-

mission

EnBW


1-4 Consumers’ Expectations

IEF – Accenture market survey conducted in early 2001

51 large electricity and/or natural gas consumerSectors: metallurgy, metall processing, chemical/pharma industry, food industry, transportation, packaging, building material, power plants, utilities, etc.

(charts: electricity on the left, NG on the right)


1-4 Survey (1) Starting dateConsumers would like to see the earliest possible date, which allows a well-based market opening up.

• 1 January 2002 for electricity (with no reservation)

• the earliest date to achieve price advanteges and quality improvement

• 1 January 2002 for natural gas too (but following accelerated preparation)

• the earliest date to achieve improved quality and eventual price advanteges

10%

67%

8%

15%

1 July 2001

1 January 2002

Other date

EU-accession date

10%

52%

16%

19%

3%

• year beginning date, anyway


1-4 Survey (2) Short-term electricity pricesMajority prognosticates price decrease between 0-15% on short-term.

• in real terms, incl. inflation, price rises for primary energy sources, and network fees

• more pessimistic, than the preliminary modelling suggested (15-40%)

53%

26%

3%

5%

10%3%

Between 0-10%

Between 10-15%

Between 15-20%

Above 20%

0%, or no decrease

No reply


1-4 Survey (3) Long-term energy pricesUncertainty regarding the long-term prices.

• primary energy source prices and inflation in the background of increased price prognoses

• competitive market forces in the background of price decrease prognoses

• world market price trends in the background of increased price prognoses

• competitive market forces in the background of price decrease prognoses

44%

38%

18%

Increase

Decrease

No change

45%

29%

26%


1-5 Industrial Electricity Prices (USD/MWh)

Source: OECD-IEA, RAO UES

Country 1998 1999 2000 2001 2002

Austria 78 57 38 n/a

France 47 44 36 n/a

Germany 67 57 41 n/a

UK 65 64 55 48

Russia 25 12 14 n/a

USA 45 39 40 42

Czech Republic

52 48 43 43

Hungary 56 55 49 51 60


2-1 Hungarian prelude to liberalization…

July 1999 Governmental Resolution No. 2199/1999 (Basics of Energy Policy & Market Model – MEA document)

March 2000 Government submits the draft Act on Electricity (>100 GWh/yr » 2001. I.1.)

May 2000 Draft Act debate halted in the Parliament

October 2000 MEA/HEO information on the market opening up(>19 GWh/yr » 2002. I.1.)

September 2001

New draft submitted

18 Dec. 2001 New Electricity Act (>30%? » 2003.I.1.)


2-2 Act No. CX of 2001 on Electricity

A framework lawRTPA, ISO, HEO, dual market, balance groups, import limits

Detailed rules in:Eligible consumersImporting rulesStranded (transitional) costsCommercial Code & ISO Code

Gov’t & ministry orders


2-3 Double Market Structure

Protected/captive consumers

Import

Eligible consumers

Traders

Power Plants

MVM as Public Wholesaler

Regional Public Electricity Suppliers

MarketableBinded for Public Purposes


3-1 Traders & Their Backgrounds/ClientsMagyar Áramszolgáltató

(RWE)

System Consulting

D-Energia(EdF)

Entrade(ATEL)

Áramkereskedelmi Kft(E.on Hungária)

MVM Partner(MVM)

Ukrainian Contracts

Paks NP, Vértes PlantPPAs + imports

Budapesti Power Plant+ imports

Debrecen CCGT+ imports

Mátra Power Plant

Csepel Power Plant+ imports

MAL Rt, MOL Rt

???

???

GE Lighting

BorsodChem

MVM


3-2 Import ATC (Q1-Q2 2003)150 MW

150 MW

450 MW


3-3 Domestic CapacitiesLimits to market opening:

Regulated generation prices till 2004 Gridlocked PPA portfolio Import limitation (50%) till EU-accession Potential import refusal + ATC issues

Fair competition rules and network access, without real supply choice ?Actually available: 300 MW (from which competitive: 200 MW)


3-4 (Future) Capacities

Import ATC auctions (by MAVIR ISO) Domestic capacities:

already marketable (partially competitive) renegotiated PPAs (hardly) MVM auction sales of unnecessary (for public purposes) power

Capacities should catch-up with demand


3-5 Demand Side

Eligible consumers:

> 6,5 GWh/year = cca. 300 companies

(33%)

> 100 GWh/year 20 companies (20%)

> 10 GWh/year 140 companies (10%)


3-6 Contracts Power (commodity) contracts

non-scheduled full supply non-scheduled partial supplies schedule based

Balance Group contract Network access & usage contracts

Switching: 30 days termination notice until 1 July 2003, then 6 months – co-operative former suppliers


3-7 Hungarian Co. considerations (1)1/ Price Sensitivity 2/ Damage/risk Sensitivity

Maintaining Environmental issues competitiveness Own plants

EquipmentsSupply/sales to customers

Price level Quality

3/ Client Service


3-7 Hungarian Co. considerations (2)

Dependence & Rigid Prices

Flexibility & Risk Management

Trading freedom

direct market access: OTC, PX

portfolio management

structured purchase of partial quantities

partial supply contract

full supply contract Price uncertainties


3-8 Current Power Contracts (1) BorsodChem (700 GWh)

IPP (40 MW) + partial supply contracts with Entrade in February

Hungarian Aluminium (750 GWh) two plants – two contracts with E.on from March

GE Lighting (180 GWh) full supply for 6 plants with MVM Partner from April

Ózd Metallurgy (300 GWh) imports on its own

51 consumers, representing 5,7 TWh (18%) on the market


3-8 Current Power Contracts (2)Hungarian Co. Prices (HUF/kWh)

6789

101112

Q4

1998

Q1-

2 19

99

Q3-

4 19

99

2000

2001

2002

Q1-

2 20

03

Q3

2003

Public SupplyMarket

Free market prices are 5-15 % below the monopol prices (HUF 11-12)


3-8 Summary

Electricity Market in September 2003:

After the market opening up, but before the real competition yet


Ipari Energiafogyasztók Fóruma - 1137 Budapest, Jászai Mari tér 6.

Telephone: (+36-1) 237 1380 Telefax: (+36-1) 359 6440

Ipari Energiafogyasztók Fóruma - 1137 Budapest, Jászai Mari tér 6.

Telephone: (+36-1) 237 1380 Telefax: (+36-1) 359 6440

Thanks for your kind attention !

Visit our homepage: www.ief.hu +www.energia.lap.hu

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Industrial Energy Consumers Forum (IEF) Hungary

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