OHR/OECD Conference OHR/OECD Conference on Regulatory Governance and Network Industrieson Regulatory Governance and Network Industries

Sarajevo, April 19 2002

SESSION II: Economic Regulation and Network Industries

Policy and Regulation: Key Aspects of Energy Markets Reforms in

Transition Economies

Emmanuel Bergasse

International Energy Agency/OECD

Presentation MapPresentation Map

I. Energy Market Reforms in Central Europe:

a decade of experience

II. Southeast Europe perspectives

III. Conclusions

I.I. Energy Market Reforms in Central Energy Market Reforms in Central Europe: a decade of experienceEurope: a decade of experience

Goal: decentralised and market based energy system bringing overall economic benefits

Integrated approach: Separate State role on policy (Ministry), regulation

(regulator) and operation/ownership of energy companies

Sequencing of reforms & transition

Means: Policy/strategy, institutional and regulatory framework to support market based operation

Energy Policy Foundation

Goal: Policy definition and institutional set-up

Why? infrastructure need medium/long term

guidelines and overall co-ordination

How? Policy paper with objectives/priorities and

missions of state bodies

Who? Energy Department of

Economy/Industry, Parliament

Eg: Czech Energy Policy (2000)

Regulation: Market Basis

Goal: a regulated energy market

How? Energy Law sets market regulation

(licensing, pricing, control of services)

enforced by an independent regulator

Who? Government and Parliament

(energy Law), Ministry (secondary

regulation) and regulator

Eg.: Polish Energy Law (1997)

Operation of Energy Services

Goal: decentralised and efficient market operators

How? Restructuring: good governance, corporisation, customer orientated strategy; Privatisation to strategic investors when conditions for competition met

Who? Ministry of Econ./industry for reforms; Min. of Finance for privatisation

Eg.: Polish power sector

Energy Demand & Environment

Goals: integrated policy on energy & its impacts; reduce demand and pollution cost reduction

How? Demand side and environment strategy management

Who? Energy and environment agency

Eg.: Energy Centre Hungary

Performance of Reforms in CE

Energy policies consistent with EU & IEA standards

Regulation aligned with EU DirectivesEnergy companies at international level

and in part privatisedEnergy intensity and pollution reducedHungary and Czech Rep. IEA members,

1st wave of EU accession countries

Energy Intensity in the Czech Rep. & Hungary(Impacts of Policy Mix: price adjustment, investment, tax

incentives, closure of obsolete units)

1973-2010(Toe per thousand US$ at 1990 prices and purchasing power parities)

1975 1980 1985 1990 1995 2000 2005 20100.2

0.3

0.4

0.5

0.6

0.7

Czech Republic

IEA Europe Hungary

II.II. Southeast Europe Perspectives Southeast Europe Perspectives

Similarities/differences SEE & CE of early 90’s:

= Economic system transition, low energy efficiency, prices below cost, power overcapacity, high environmental impact

# post-war reconstruction, industry collapse, political instabilities

Reform Progress

Energy policy: limited advancement, Bulgaria-1998 & Croatia-1999

Regulation: some reforms (tariff adjustment) but no overall legal framework. Energy Law in Bulgaria-1999 & Croatia2001

Energy sector restructuring: first steps (corporatisation)

Demand management-environment: low progress

Regional Co-operation

Clear need for regional approach-convergence of energy policies:Supply complementarities

Networks interconnection

Transit projects

Effective Regional Energy Market (REM) if viable markets and legal compatibility between electric systems

III.III. Concluding remarks Concluding remarks

10 years experience in CE proved importance of:Policy foundation for objectives and

institutional responsibilities

Clear market rules enforced by an independent and competent regulator

Restructuring of energy companies to market conditions & international standards

IEA Contribution on Policy

Web site: http://www.iea.org/about/nmccee.htm

Contact: Emmanuel Bergasse, Administrator for Central and Southeast Europe

email: emmanuel.bergasse@iea.org

Fax: 33 1 40 57 65 79