Slide Set 5 ERO Ali Hamiti

INTERNATIONAL INVESTORS' CONFERENCE Pristina, 20 - 21 January 2010

An Overview of the Energy Regulatory Office (ERO) Dr. Ali Hamiti Chairman of ERO

www.ero-ks.org

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Mandate of ERO: Economic Regulation Energy Regulatory Office (ERO) is an Independent Agency established in accordance with Constitution of the Republic of Kosovo. (Articles 119, 142 stipulate the establishment of Independent Agencies and guarantee their independence.

In particular, Law on Energy Regulator establishes the independent Energy Regulator and defines powers, duties and functions of the ERO:  Protect Customers while Ensuring Investors’ Interests;  Ensure non-discriminatory access for all transmission or distribution network users at

access prices reflecting true economic costs;

 Promote economic efficiency of energy use by providing short and long term true

economic prices;

 Promote economic efficiency of the customers/users’s consumption by providing

short and long term price signals.

www.ero-ks.org

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Legislation Affecting Regulation of the Energy Sector in Kosovo Primary legislation:  Law on Energy;  Law on Energy Regulatory Office;  Law on Electricity;  Law on District Heating;  Law on Natural Gas;

Secondary legislation:  Rules, Codes, Regulations, Administrative Instructions, Procedures, Methodologies

etc;

- Issued by ERO and/or the Government; - Prepared by Licensees and approved by ERO. The energy legislation is harmonized and in compliance with the ECSEE Treaty acquis communautaire. www.ero-ks.org

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Participation of Kosovo on ECSEE Treaty

 Kosovo is a signatory Party of ECSEE Treaty  ERO is a member of Energy Community Regulatory

Board of ECSEE Treaty

 ERO staff participates on Working Groups established

by ECRB:

- Electricity Working Group (EWG) - Customer Working Group (CWG) - Gas Working (GWG) - SEE Coordinated Auction Office Implementation

Group (SEE CAO IG)

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Principal Statutory Powers of ERO  Issues Licenses for Energy Enterprises;  Issues/Approves Secondary Legislation (Rules, Codes, Decrees, Ordinances,

Guidelines);

 Approves Tariffs for regulated activities and customers;  Approves PPA s for Power Supply to Public Supplier;  Monitors License Compliance, Abuse of Market Power. Impose Fines,

Withdraw Licenses for abuse;

 Issues Authorizations for Construction of new Generating Capacity, and

Transmission Lines;

 Resolves disputes between licensees and customers;

www.ero-ks.org

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Rules developed and adopted by ERO  The Statute of ERO  Code of Ethic and Conduct  Rule on Pricing  Tariff Methodology  Rule on Licensing of Energy Activities in Kosova  Schedule of Fee  Rule on Dispute Settlement Procedure  Rule on Disconnection and Reconnection  Rule on General Conditions for Energy Supply  Rule on Confidentiality of Information  Rule on Public Register  Rule on Administrative Measures and Fines  Rule on Authorization Procedure  Governance Procedures for Technical /Operational Codes (OCGC)

www.ero-ks.org

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Rules currently under development

 RES Support Scheme (Feed-in Tariff)  Rule on Certificate of Origin  Rule on Pricing for District Heating  Tariff Methodology for District Heating  Rule on Eligible Customers  Rule on Public Participation

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Relationship with government agencies Cooperation and coordination with other government agencies on:  Energy strategy  Sector Policies  Compliance with ECSEE Treaty  Energy efficiency and renewables  Structuring of the sector

www.ero-ks.org

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Summary of Privatization Regulatory Issues

 Most ERO secondary legislation required for privatization of energy

enterprises are already in place;  ERO’s published tariff methodology allows regulated enterprises to

recover their reasonable actual costs and profit;  ERO has conducted three tariff reviews in the past, and is currently

conducting its fourth electricity tariff review for the regulated companies;

www.ero-ks.org

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ERO Duties Referring to Privatization Relevant Duties (assigned by law) include:  Assure buyer meets legal requirements to become a licensee  Assure the general system of codes, rules and regulations meet

international standards (most of this system of documents already exists)  Assure proper principles apply to any calculation of regulated

tariffs (an ongoing duty of ERO done currently by annual costbased tariff review proceedings)  Assure that quality of services are met by licensee  Assure that transitional market rules are implemented

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Tariff Design Criteria

 Based on well-established & understood economic principles;  Ensure no discrimination or cross subsidy between customer groups;  Tariffs should provide cost reflective price signals;  Unbundled accounts for mining, generation, distribution and supply;  Minimize complexity & associated costs, including cost of metering and

billing;  Enable protection of vulnerable customers

www.ero-ks.org

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Basis of Tariff Calculation The tariff structure is based on:  Generation Availability  Demand Forecast  Generation & Mining Costs  Imports  Transmission Costs (Unbundled from KEK)  Distribution Costs  Supply Costs  Allowed Losses  Depreciation  Allowed Return on commercially-financed investments  Subsidies, Exports and Costs of serving unregulated customers are deducted

from the allowed revenues

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Energy Market Restructuring and Design

Transitional market rules in place: Promote competition;  Define market players including eligible customers;  Market Monitoring;  Transparent and non-discriminatory third parties Access;

www.ero-ks.org

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Thank you!

Dr. Ali Hamiti Chairman of the Board Address: Tel: Fax: E-mail: Web:

Energy Regulatory Office 1 Hamdi Mramori Str. 10000 Prishtina, Kosovo + 381 38 247 615 + 381 38 247 620 ali.hamiti@ero-ks.org www.ero-ks.org

www.ero-ks.org

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