4th Poverty Reduction Strategies Forum

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Regional Energy market in Southeast Europe
Prospects and challenges for the SEE
countries Michael Thomadakis Vice
President Greek Regulatory Authority for Energy,
4th Poverty Reduction Strategies Forum Athens,
June 27th, 2007
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Energy Community (former of SEE)

• The Energy Community Treaty is put into force
  since July 2006
• The aim is the establishment of a regional market
  in SEE both in electricity and gas
• Main tools will be the existing and the
  anticipated EU legislation mainly on energy and
  then on environment and competition
• A timetable for the implementation of the aquis
  communnautaire is established for the non-EU
  Parties
• The Institutional Framework established by the
  Treaty (Ministerial Council, PHLG, Regulatory
  Board, Secretariat and the Fora) provides the
  mechanisms for the regional political and
  technical cooperation necessary for the success
  of the Process

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SEE A dynamic energy market

• SEE countries economies are improving, leading
  to increased energy consumption and thus
  increased need for energy infrastructure
• International Financing Institutions and private
  investors are providing funds for an increasing
  number of energy infrastructure projects in many
  countries and are investigating further options
• Energy Traders are becoming increasingly active
  in many countries
• In parallel, most of the countries in the SEE
  region are EU members or candidate EU members
  (now or in the near future)
• The momentum is there

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Recent evolutions in EU

• The 7 EU-regions have been defined (Regulation
  1228/03)
• European Regulators (ERGEG) have launched their
  Regional Initiatives
• Impressive coordination of market approaches
  among the countries of these regions (and between
  the regions) is already happening (e.g. Northwest
  Europe)
• Energy Community is in the core of the External
  Energy Policy of the EU
• The European Commission is already considering
  the establishment of the SEE as the 8th European
  Region
• The 3rd EU legislative package is expected soon
  (for the implementation of the new European
  Energy Policy)

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The merging has started

• Two very important practical steps
• In 2007 a unified ITC mechanism exists throughout
  Europe including all countries of the Energy
  Community
• (ITC a mechanism where electricity is traded
  without any other payment for the traders except
  the tariffs for the use of the networks and the
  payments for the rights to use the
  Interconnectors)
• Coordinated Capacity Allocation in all borders of
  the SEE countries is currently under design and
  virtual implementation this will provide the
  opportunity for the trade of electricity
  throughout the region at a single step, without
  the need to go from border to border and from
  company to company and book capacity on an
  individual basis

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What SEE countries need to do

• Realize the changing environment and face the
  challenges ahead
• Believe that all of them are future EU-members
• Act as if they were already EU members
• Learn from the experience (and the mistakes) of
  EU members
• Realize that energy market liberalization is a
  non-reversible process (especially when linked to
  privatization)
• Exploit the existence of investment opportunities
  (and funds)
• Enhance Regional collaboration
• Eventually, be an integral part of the EU IEM
• These need to be addressed with determination by
  the Governments, the Industry, the decision
  makers and eventually- by the consumers

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Act as if they were already EU members

• the main and immediate action that is necessary
  is the full and complete and effective
  implementation of the secondElectricity
  Directivein spirit and not only in letter.
  (For Gas, things are different in the SEE)
• Unbundling (twofold value in SEE)
• Proper implementation of TPA, proper allocation
  of costs
• Establishment of more attractive entities for the
  privatization process
• Effective Regulation work in practice, enhance
  the competencies of national Regulatory
  authorities and support the ECRB a lot of work
  is required in this field by the SEE countries

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Regional collaboration

• Strike the balance between price regulation
  (affordability is an extremely important issue
  for the region) and competition
• Regulators and ECRB could have a very important
  role in this respect
• Transparency is an extremely important issue and
  SEE countries (and not only them) have to perform
  very bold steps towards this direction
• Market monitoring is also an essential issue
  which has to be addressed on top of monitoring
  compliance with legal obligations

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What others need to do

• Others are (mainly) the EC, the Donors and the EU
  Institutions
• Provide strong political support to the Process
• Maintain the financial support (and probably link
  it with targets arising from the Treaty)
• Enhance the coordination of their efforts
• Maintain leadership and provide guidance in a
  manner compatible with the specificities and the
  needs of the countries of the SEE region

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Conclusions

• The ECSEE Process is a unique and challenging
  approach
• It perfectly meets the needs of the International
  Community and the countries of the region,
  providing opportunities and enhancing security of
  energy supply
• However, strong efforts are required by all
  stakeholders, especially following the entry into
  force of the Treaty
• The sooner these opportunities are exploited, the
  better for the SEE people
• It will be a cumbersome and time consuming
  procedure
• Success will depend on the steps taken and
  interim results
• Strong political will and support is required,
  mainly from the countries of the region themselves