Press Clippings (v 7) World Forum on Energy Regulation (WFER IV) (Status as of 5 th November 2009)

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1 1 Press Clippings (v 7) World Forum on Energy Regulation (WFER IV) (Status as of 5 th November 2009)

2 2 Table of contents 1. Overview of WFER IV Communications Strategy Press Clippings... 5 International Confederation of Energy Regulators... 5 Regulators form global energy group... 5 Energy Regulators Start International Confederation in Athens... 6 Mogg chairs world forum... 7 Les régulateurs de l'énergie lancent leur confédération mondiale... 8 International energy regulator launched... 9 Piebalgs argues against large utility break-ups... 9 European association of energy regulators launched to encourage cooperation Powers of National Energy Regulators EU Energy regulators Struggle for Power European energy regulators look to harmonise national energy regulation Grant more power to independent regulators - EDF Terzic on Strategy - A World of Regulators Climate Change and sustainability Piebalgs: Energy efficiency a government issue Short-Term Greenhouse Gas Emissions Will Be Lower, Houssin Says EU Has No Reason to Boost Polish, Estonian CO2 Plans (Update1) EU Eyes Linking Its CO2 Market With Other States, Delbeke Says Carbon price volatility hampers investments" NAP ruling will not see more EUAs - EC Huge challenge to reach 2020 targets Negative prices a sign of market failure Energy regulators join fight against climate change Global energy regulators promise action on climate change Regulators claim role in combating climate change Power firms 'do not need the ETS to cut emissions' CCS no panacea - IEA Energy Regulators step up to the climate challenge Energy Regulators Climate Pledge New market trends, global energy issues taking center stage at regulators forum Investment Strategy Needed to cut emissions Regulators claim role in combating climate change emissions Gas IEA sees short-term gas glut as demand down 53 Bcm over H New EU gas security rules will depoliticise sector Piebalgs EU s Piebalgs Says Russia Gas Supply Better, Disruption Possible No reason for EU to fear Russian gas dependence - Gazprom Gas to oil link will persist due to illiquidity - players Gazprom rails against EU gas gas security rules Renewed gas crisis 'likely', says regulator Global Market Oversupply Until Consumer Issues Meglena Kuneva attends fourth sitting of the World Forum for Energy Regulation in Athens Electricity Global Gas, Electricity Demand Will Fall in 2009, IEA Says Electricity Prices Have Already Hit Bottom, Vattenfall CEO Says IFC finds connection constraints for commercial electricity consumers... 41

3 3 Smart grid could impact power trading, peak periods Financial Market/Transparency Issues German Regulator seeks protection for physical traders EU Energy Trades Need Transparency, Abuse Rules, Regulator Says "Banks, not derivatives, need tighter rules" Journalist Interviews on WFER IV Interview with Lord Mogg (CEER President) European Energy Review Interview with Gabor Szorenyi (ERRA Chair) - Euractiv 13/10/ Interview with George Koutzoukos (Greece) - Europolitics 16/09/ Interview with Lord Mogg, CEER Bloomberg 21/10/ Interview with Walter Boltz (Austria) - Europolitics 20/10/ Interview with Walter Boltz (Austria) - Euractiv 21/10/ Interview with Johannes Kindler (ERGEG) Montel Powernews 19/10/ Interview with Peter Styles (EFET) Montel Powernews 22/10/ Interview with Sergei Komlev, Gazprom Bloomberg 20/10/ Greek Press Clippings WFER IV Outcomes and Press Releases Energy Regulators go global in establishing the international confederation of Energy regulators (ICER) Energy regulators worldwide commit themselves to eight actions to meet the challenge of climate change Energy Regulators set up a global confederation and issue a joint statement on climate change Other Press releases on WFER IV World Forum on Energy Regulation IV (WFER) in Athens Annex A WFER IV Steering Committee, Sponsors, Media Partners and Promoters... 88

4 4 1. Overview of WFER IV Communications Strategy The fourth World Forum on Energy Regulation took place in Athens from October, Promoting the WFERIV an excellent example of regulatory cooperation There was no paid advertising. Steering Committee members i.e. both the regional associations and national/state energy regulators promoted it (e.g. blasts, newsletters, posting information on websites) Official Promoters and 9 media partners also promoted WFERIV for the 5 months leading up to it (e.g. full page adverts in magazines, online banner adverts etc.). Journalist Interviews: There were 3 curtain-raising interviews in advance of WFER IV to raise interest with Lord Mogg (CEER President), George Koutzoukos (WFER IV organiser); and Gabor Szorenyi (ERRA Chair) More than 20 journalist interviews had been pre-arranged in the margins of the event. Many of these will feed into articles, some published immediately and some later e.g. Gas Matters is a monthly publication. Result: 1,000 participants attended including 125 speakers and 35 journalists. Communicating the WFER IV Outcomes another example of regulatory cooperation: A Press Release issued on each of the 3 days, along with a concrete outcome for that day Inaugural Announcement of International Confederation of Energy Regulators Day 1 World Energy Regulators Statement on Climate Change Day 2 WFER IV Closing Statement Day 3 Steering Committee Members received and communicated the outcomes in different ways (e.g. their own press releases, or posting information on the website). Quotes by distinguished speakers were sought in advance. Quotes of the Day and photos were posted on the website daily for journalists covering the event remotely. October-2009/ Outcomes and press releases were posted on WFER IV and on the European Energy Regulators websites immediately. Outcomes/Forum-Outcomes/ Result: See the Press Clippings enclosed Excellent regulatory cooperation on the communications side helped in the success of WFER IV. A special word of thanks to Rob Thormeyer (NARUC) for his ever-helpful advice and active engagement. Una Shortall 26 October ; una.shortall@ceer.eu

5 5 2. Press Clippings International Confederation of Energy Regulators Regulators form global energy group Platts European Power Daily 21/10/2009 Energy regulators from six continents have formed an International Confederation of Energy Regulators and made a commitment to help coordinate regulatory activities related to energy efficiency, renewable energy resources and climate change. The ICER group was formed at the World Forum on Energy Regulation in Athens on Monday, and it released a statement with eight actions it intends to carry out associated with meeting the challenge of climate change and reducing greenhouse gas emissions. The eight actions include: preparing a report for the G8 countries on best regulatory practices to promote energy efficiency; conducting a review of renewable resources and producing a report on the integration of renewable and distributed generation into power markets; and sharing best practices on regulatory issues tied to meeting GHG emission targets. They also include participating in the international climate change process including as observers to the United Nations upcoming convention on climate change in Copenhagen; and promoting reliable energy supplies and reasonable costs to all consumers. ICER is chaired by Lord Mogg, president of the Council of European Energy Regulators, for a three-year term, and it will have four working groups on reliability and energy security, climate change, competition and affordability, and best practices and training of regulators. This is much more than simply adding our voice in supporting a global agreement on climate change in Copenhagen, Mogg said. We have committed ourselves, within our areas of responsibility, to eight specific actions to help meet the climate change challenge, and I particularly welcome the Chinese commitment to consider positively their participation in ICER, Mogg said. The energy regulators in the ICER group are looking forward to the Copenhagen conference and playing our part in contributing to the achievement of climate change objectives through efficient and competitive energy markets, the group said in a statement. The 11 regions represented in ICER are the African Forum for Utility Regulators, the Council of European Energy Regulators, the Canadian Association of Members of Public Utility Tribunals, the National Association of Regulatory Utility Commissioners (US), the East Asia and Pacific Infrastructure Regulatory Forum, the South Asian Forum for Infrastructure Regulation, the Organization of Caribbean Utility Regulators, the Regional Electricity Regulators Association of Southern Africa, the Mediterranean Gas and Energy Regulators Assembly, the Energy Regulators Regional Association in central Europe and the Asociacion Iberoamericana de Entidades Reguladoras de la Energia in Latin America. Source: Platts European Power Daily (subscription required)

6 6 Energy Regulators Start International Confederation in Athens Bloomberg - 19/10/2009 Energy regulators agreed to start an international confederation representing more than 200 regulatory bodies worldwide. The International Confederation of Energy Regulators, or ICER, will launch four virtual working groups, focusing on security of supply, competitiveness, powers of regulators and their role in responding to climate change, John Mogg, president of the Council of European Energy Regulators told a forum in Athens today. Our aim is to improve public and policy-maker awareness and understanding of energy regulation and its role in addressing a wide spectrum of socio-economic, environmental and market issues, the Council of European Energy Regulators said in a statement published today. Our collaboration may take multiple forms, benchmarking or surveys, position papers and studies, exchange programs and professional training courses. Mogg, the first ICER chairman, will take part as an observer in the United Nations climate change talks in Copenhagen in December, according to the statement

7 Mogg chairs world forum Europolitics - 19/10/2009 John Mogg, president of the Council of European Energy Regulators (CEER), has been nominated head of the new International Confederation of Energy Regulators (ICER). The ICER was created by energy regulators worldwide at the World Forum on Energy Regulation in Athens. It brings together 11 regional associations of regulators, representing more than 200 regulatory authorities and spanning six continents. As ICER chair, Mogg will also attend, as an observer, the United Nations Framework Convention on Climate Change (UNFCCC) in Copenhagen, in December European regulators note the growing number of global issues affecting energy markets. ICER will establish virtual working groups on: 1. reliability and security of supply; 2. regulators role in responding to climate change; 3. competitiveness and affordability; and 4. independence, powers, responsibilities, best practices and training of regulators. 7

8 Les régulateurs de l'énergie lancent leur confédération mondiale Enerpresse 20/10/2009 8

9 9 International energy regulator launched AGI, Italy 19/10/2009 Strengthening collaboration, coordination, and international cooperation in the energy sector to better protect consumers, continually improving the safety, quality, and price of services also with respect for the environment. The International Confederation of Energy Regulation (ICER) was created with these objectives during the fourth World Forum of Energy Regulators and according to the commitments made with the "G8+ Regulators' Assembly" in May, which for the first time ever, gathered all of the energy regulation bodies in the world in Rome. The creation of this new body for international collaboration among regulators intends to promote increasingly harmonised and efficient initiatives and regulatory frameworks on a global level to proactively meet emerging global challenges and problems with solutions of a global nature. The creation of the new federation rewarded of the promotional efforts made by European regulatory bodies: Lord Mogg, who was the President of the Council of European Energy Regulators (CEER) was elected president of ICER, and Italy's President Ortis was elected president of the International Energy Regulation Network (IERN), which will set up the operational base of the global federation in Italy. In its first act, the ICER approved a unified statement (with eight concrete proposals of action) on "sustainable development", as a contribution for the imminent UN climate change conference which will be held in December in Copenhagen. "Cooperation between energy regulators should be intensified in order to offer more transparent, reliable, and internationally harmonised regulatory frameworks," said the President of the Energy Authority, Alessandro Ortis, "this will make it possible to better promote investments for sustainable infrastructure (especially valuable in increasing efforts to overcome the current international economic crisis), market efficiency, competitiveness, and the sustainability of energy systems and services, in order to benefit customers." The ICER joins 11 regulatory associations: AFUR (Africa), ARIAE (Latin America), CAMPUT (Canada), CEER (The Council of European Energy Regulators), EAPIRF (East Asia and the Pacific, ERRA (Central and Eastern Europe), MEDREG (The Mediterranean Regulators' Association, NARUC (The United States), OOCUR (the Caribbean), RERA (Southern Africa), and SAFIR (Southern Asia). energy_energy_regulation_authority_federation_created Piebalgs argues against large utility break-ups ICIS Heren European Spot Gas Markets - 19/10/2009

10 10 European association of energy regulators launched to encourage cooperation Gas Matters - 19/10/2009 Regulatory associations around the globe have jointly established the International Confederation of Energy Regulators (ICER) as a decisive platform for national regulators to exchange information and harmonise proceedings. (subscription required)

11 11 Powers of National Energy Regulators EU Energy regulators Struggle for Power European Energy review 09/2009

12 12 European energy regulators look to harmonise national energy regulation Gas Matters 19/10/2009 Andris Piebalgs, European Union Commissioner for Energy, used his keynote speech at the World Forum on Energy Regulations in Athens today to pledge for a quick harmonisation of national energy regulation: To date, energy regulation still has a national focus, but this is not appropriate any longer, he said. (subscription required) Grant more power to independent regulators - EDF Montel Powernews 19/10/2009 Energy regulators need to be given more power and independence from central governments in order to provide industry with greater investment security, Brumo Lescoeur, vice president of EDF said on Monday. We are working in an industry where the timeframe is longer than the political cycle, and we need the visibility to take a decision, he told Montel Powernews at sidelines of the World Energy Regulators Forum in Athens. One solution is to entrust regulators in the energy sector with real power and real independence to take decisions, Lescoeur said. Politicians should provide regulators with a policy mission, but should not change the way they act, or interfere, especially after a potential change of government or energy minister, he added. Building a power plant takes 10 years to get the authority to build and it will last at least 60 years, the executive from the French power company said. You cannot invest in an unstable environment. Lescoeur likened the strengthening of regulatory oversight to developments in monetary policy. Granting more independence to central banks is not undemocratic but a question of balance. Regulators confederation launched Meanwhile, the International Confederation of Energy Regulators (ICER) was launched at the forum, which brings together 11 regional associations of regulators, representing more than 200 regulatory authorities and spanning six continents. The ICER would establish four working groups on - reliability and security of supply; the role of regulators in responding to climate change; competitiveness and affordability; and, the independence, powers, responsibilities, best practices and training of regulators, it said. By Richard Sverrisson in Athens. Additional reporting Robin Newbold Montel Powernews newsdesk@montelpowernews.com Oslo, Monday, 19 October 2009

13 Terzic on Strategy - A World of Regulators Energy Metro Desk 26/10/2009 By Branco Terzic, Deloitte Services and former FERC Commissioner 13

14 14 Climate Change and sustainability Piebalgs: Energy efficiency a government issue Europolitics - 19/10/2009 Speaking at the World Energy Regulators Forum in Athens, on 19 October, Energy Commissioner Andris Piebalgs said there was little role for regulators in terms of boosting actions for end-user efficiency by energy companies. Piebalgs appeared to be taking a step back from the European Commission s original ideas expressed in drafts of a forthcoming communication on energy efficiency (see Europolitics3836). The commissioner was opening the conference, which brings together global energy regulators every three years. This year, the forum is organised by the Council of European Energy Regulators (CEER). Regulators should care about energy efficiency, but they are not the main driver. It is really governments, insisted Piebalgs. If regulators do everything, then there is the question what governments will do, the commissioner added. He sees two main issues to concentrate upon in tackling energy efficiency: buildings and transport. Regulators have no competence in these two fields. It is governments. We should also not overburden them. The main focus in this energy efficiency action plan is on buildings, transport and education. This is really on the governments table, continued the commissioner. There is also the questionable issue, from a lot of people s point of view, as to whether we need binding energy efficiency targets. That again is a government issue, Piebalgs added. Despite the commissioner s words, the EU executive s forthcoming communication on energy efficiency proposes that national regulatory authorities (NRAs) be given a clear specific legal obligation to take due regard of energy efficiency in their decisions and monitoring of the management and operation of the infrastructure. This would include ensuring that all possibilities for cost-effective improvements of the grid, through smart grids in particular, are implemented, reads the document. Officials also promise appropriate proposals to this effect following further studies and consultation.the draft document notes that NRAs now face a difficult task in promoting improvement of energy efficiency in gas and electricity networks. Energy efficiency gains may lead to increased transmission or distribution tariffs, although the effect in terms of reducing losses more than compensates for these increases over time, reads the draft. The 2009 gas and electricity directives merely provide for a general NRA objective to promote energy efficiency. The Commission details how the third energy liberalisation package gives no specific tasks or powers to NRAs to implement this general objective. Regulators are not the main driver.

15 15 Short-Term Greenhouse Gas Emissions Will Be Lower, Houssin Says Bloomberg - 19/10/2009 Emissions of greenhouse gases will be lower in the short term as they are curbed by reduced consumption of natural gas and electricity, Didier Houssin, director of the International Energy Agency s Directorate of Energy Markets and Security, said at the World Forum on Energy Regulation in Athens. EU Has No Reason to Boost Polish, Estonian CO2 Plans (Update1) Bloomberg - 19/10/2009 The European Union doesn't see any reason to allocate more pollution permits to Poland and Estonia and is in talks with the two countries, said Jos Delbeke, deputy director general for environment at the European Commission. The commission, the EU regulatory arm, is now preparing a decision following a court ruling that overturned its limits on the two countries, Delbeke said in Athens today. The European Court of First Instance last month struck down commission decisions to award 73 percent of the carbon dioxide permits sought by Poland and 52 percent of those Estonia requested for the five years through The court said the commission has ``very restricted'' authority to review national plans for allocating CO2 allowances. Emission prices fell. ``The court has also said that the commission must use the most recent information and the most recent information includes recession,'' Delbeke said at the World Forum on Energy Regulation. ``We're preparing a decision and we're talking to the Polish and Estonian authorities.'' The commission hasn't yet decided whether it will appeal the ruling, he said. Concerns that the court ruling may lead to an oversupply of emission allowances pushed the price of December 2009 carbon- dioxide permits to a three-month low of euros on Sept. 24. They gained 0.4 percent to euros a metric ton as of 3:13 p.m. on the European Climate Exchange in London. Challenges to Limits The EU signaled last month that any new curbs on Poland and Estonia would probably be the same as decided before because the recession pulled down industrial discharges. It also said it was ``fully committed'' to ensuring the stability of the bloc's emissions-trading market. Cases challenging the commission's decisions on national allocation plans are also pending from Hungary, Bulgaria, the Czech Republic, Latvia, Lithuania and Romania, which are among 10 former Soviet countries that joined the EU since 2004.

16 16 The EU emissions-trading system, or ETS, was started in 2005 and is the world's biggest cap-and-trade program for greenhouse gas. It imposes carbon-dioxide quotas on utilities and factories and requires those exceeding their limits to buy or borrow credits. EU Eyes Linking Its CO2 Market With Other States, Delbeke Says Bloomberg - 19/10/2009 Oct. 19 (Bloomberg) -- Jos Delbeke, deputy director general for environment at the European Commission, comments on the European Union's plans to link its carbon market, the emissions- trading system or ETS, with cap-and-trade programs in other countries. Delbeke spoke at the World Forum on Energy Regulation in Athens. On carbon markets: ``We wanted to globalize the ETS and we hope very much that by 2015 we'll have an OECD-wide carbon market, of which we hope the backbone to be the transatlantic carbon market. ``Linking the EU ETS to a possible American system or an Australian system or a Japanese system or a Canadian system is very high on our agenda and we have very intensive talks with the authorities of the countries I mentioned. ``Linking doesn't imply that we'll have two identical systems. What we have to have is compatible systems.'' On taxation: ``The talk about taxation is also coming back in Europe, but I think that where we're going is that outside the ETS we may see the emergence of carbon taxes, but inside the ETS I think we're going to stick to the caps. ``In Europe we have a system that works, that delivers gradually the reduction of emissions.''

17 17 Carbon price volatility hampers investments" Montel Powernews 19/10/2009 Unpredictable carbon prices are hampering investments in technologies that can reduce CO2 emissions, Plutarchos Sakellaris, vice president at the European Investment Bank said on Monday. Price volatility is making things very difficult for investors. When you have too much uncertainty about what the price of carbon emissions reduction is, then you do not really know whether your incentives to invest in new technologies are good enough, Sakellaris told Montel Powernews on the sidelines of the World Energy Regulators Forum in Athens. However, he did not want to enter a debate about the need for a price floor on emissions, which has been advocated by several players over the past year. We have to work with what we have. Currently we have two systems. One is a carbon tax system and the other one is cap and trade. We won t come up with a third solution, he said. There are positive and negative sides to both systems. A carbon tax would remove the problem of price volatility but has other drawbacks, he added. What was more crucial, he said, was to get a global agreement on battling climate change in Copenhagen in December, which he hoped would pave the way for a global carbon price. Copenhagen will be crucial. I prefer not to think about the alternatives to an agreement, he said. By Olav Vilnes in Athens NAP ruling will not see more EUAs - EC Montel Powernews 19/10/2009 The carbon market should not expect a higher number of EUAs allocated as a result of the European Court of First Instance s ruling in favour of Estonia and Poland over their national allocation plans (NAPs), Jos Delbeke of the European Commission (EC) said on Monday. While the court ruled that the commission had overstepped its powers there is no reason for higher EUAs, Delbeke, deputy director general of the EC's directorate general of environment, told Montel Powernews on the sidelines of the World Energy Regulators Forum in Athens. The ruling said that we could use the latest emissions figures, and in a recession emissions are much lower, he said, hinting that a new NAP would cut the allocation of EUAs to Poland and Estonia. Delbeke said the EC would come to a decision on the new NAPs for the two countries very soon and that it was also looking at lodging an appeal with the European Court of Justice. The EC has two months in which to decide whether to appeal September s ruling by the court, which upheld the claims made in 2007 by Poland and Estonia against a proposed cut to their NAPs for the second phase ( ) of the EU emissions trading scheme. By Richard Sverrisson in Athensnewsdesk@montelpowernews.com

18 18 Huge challenge to reach 2020 targets Montel Powernews 19/10/2009 A lack of public acceptance for big grid projects could derail the EU target of 20% renewables by 2020, the chairman of the European grid association Entso-E warned on Monday. I think perhaps the greatest threat is that many [grid] projects are not publically accepted. Unless there is an acceptance for major grid developments we can not only forget the 2020 targets, but also the targets for 2030 and beyond, Graeme Steele, who is also a director at the UK s National Grid, told the World Forum on Energy Regulation in Athens. He said the 2020 targets would be very difficult to reach, but that it was too early to give up. I don t think it would be the right thing to say it is too late yet. Having the incentives is likely to drive the right kind of behaviour and ensure that if we miss the targets, we only miss them by a little, he elaborated to Montel Powernews. Bold investments Looking forward he urged for bolder decisions on investments in infrastructure. A lot of money is invested in generation. I think it is more a case of whether you believe that infrastructure should try to play catch-up with generation, or whether we make some bold investments in infrastructure that give options on where to place the generation. I am probably in favour of the second of those, he said. Steele also criticised the preferential treatment given to renewables in some countries grids, arguing for common rules across Europe. This is something that has to be looked at when the European grid codes are developed. We have to have rules that work for all types of generation, he said. Are the schemes so difficult from neighbour to neighbour that people end up investing where the best incentive regime is rather than where investments are needed? System for all generation Asked how Entso-E could contribute to solve this problem, he said: When we start looking at the EU level grid codes I think it is going to be a key issue to get a system that works for all types of generation and enables the network operator to keep the system secure at the same time as allowing all types of generation to come online. We re starting to look at it now, but can t do anything legally until March We have to make the most of the next 18 months to get things started, he added. By Olav Vilnes in Athens Monday, 19 October 2009

19 19 Negative prices a sign of market failure Montel Powernews 20/10/2009 Negative power prices following a massive influx of wind production were a sign that markets were not working, players said on Tuesday. Negative prices are not a sustainable trend, Claes Hedenström, president of Renewable Energy Certificate System International said at the World Energy Regulators Forum. They are a signal that markets aren t working. On 4 October 2009, hour 3 prices hit EUR /MWh on the EEX. Prices would also have been negative in the Nord Pool price area on the same day had the Nordic exchange allowed for negative prices, the Danish TSO energinet.dk said on the following day. It is 100% certain that we will see a repeat of negative prices going forward, said Terry Boston, president and CEO of US based PJM Interconnection, responding to a question from Montel Powernews. Boston said prices in Texas had recently hit USD -85/MWh, and USD -35/MWh in other parts of the US. As long as we have investment tax cuts paying producers to generate we will continue to see negative prices, Boston said. Send a signal Negative prices send a signal to consumers to use more power, which is not what we want going forward [in terms of climate change commitments], he added. Demand side responses were the answer to the market distortions created by negative prices the panelists said. Storage, including storing power in batteries and electric transportation such as electric cars were one solution, said Boston. Using the power for heating purposes and in combined heat and power (CHP) plants were another, said Hedenström. Transporting the power to demand centres was also an additional possibility, but required greater investment into grid and interconnector infrastructure, he added. Nord Pool will introduce negative prices in November. By Snjolfur Richard Sverrisson in Athens Snjolfur Richard Sverrisson richard@montelpowernews.com London, Tuesday, 20 October 2009

20 20 Energy regulators body presents climate action plans Montel Powernews 20/10/2009 The newly convened International Confederation of Energy Regulators (ICER) has set out an eight-point plan to meet the challenge posed by global climate change, it said on Tuesday. As part of the plans, the group would support the delivery of energy in all developing markets within the context of rising energy costs and environmental constraints, it said. ICER would also promote energy efficiency and conduct a review of renewable energy and distributed generation, including case studies on how best to integrate renewable energies into the overall energy supply and their impact on the grid and competition, it added. Reducing carbon emissions and controlling energy demand requires upgraded and smarter electricity grids in Europe and energy efficiency measures, said the chairman of ICER Lord Mogg. Best practice The regulators also planned to share best practice examples for meeting greenhouse gas emissions targets through a global network and vowed to promote reliable energy supply and reasonable energy costs to all consumers, said the organisation. The group called on participants of December s UN climate convention in Copenhagen to reach a comprehensive agreement that would provide a clear framework for delivering greenhouse gas emissions. The ICER, which was launched on Monday, brings together 11 regional associations of regulators, representing more than 200 regulatory authorities and spanning six continents. Nora Kamprath Buli nora@montelpowernews.com Oslo, Tuesday, 20 October 2009

21 21 Energy regulators join fight against climate change ENDS Europe 20/10/2009 Eleven regional associations representing more than 200 energy regulators worldwide committed to help drive the transition to a low-carbon economy and combat climate change at the Fourth World Forum on Energy Regulation (WFER) in Athens on Tuesday. Their commitment is the first initiative of a new International Confederation of Energy Regulators (ICER) announced at the Forum on Monday. One of four working groups set up under the ICER will be dedicated to defining energy regulators' role in tackling climate change. "For the first time, energy regulators from across the globe have jointly committed to play their role in overseeing efficient and climate responsible markets," said Lord Mogg, chair of the new organisation and president of the Council of European Energy Regulators (CEER). One of eight climate pledges made by the regulators on Tuesday is to present best regulatory practices to promote energy efficiency to G8 energy ministers in Tuesday's announcement came in response to a G8 request for a regulators' position on climate change. Energy regulators have a key role to play in this area because of their influence on basic market design. They can also encourage network operators to make the largescale, long-term investments needed to upgrade ageing networks, and promote the use of smart meters. Global energy regulators promise action on climate change Energy Risk 20/10/2009 Energy regulators from around the world attending the World Forum on Energy Regulation in Athens this week made a strong commitment to tackling climate change by promising action to better integrate renewable energy and distributed generation. They also promised action on stronger network interconnection and compatibility of regulatory frameworks. "We are on the eve of Copenhagen and the International Confederation of Energy Regulators (ICER) is seeking to contribute to the debate through this joint commitment to overseeing efficient and climate responsible energy markets," John Mogg, chairman of ICER, said speaking at the Forum. ICER promised eight actions to help meet the climate change challenge in the World Energy Regulators' Statement on Climate Change. These include a report by ICER's working group on climate change examining the integration of renewable and distributed generation into the overall energy supply and their effect on the grid and competition. It also promises co-operation to foster stronger network interconnection and compatibility of regulatory frameworks. ICER is made up of 11 regional associations of energy regulators worldwide, representing 200 regulatory authorities. Mogg said Australia and China have also been approached to join discussions and have been positive in their reactions. The European International Bank and the International Energy Agency have also been discussing making financial contributions to the four working groups of ICER, of which climate change is one, Mogg said.

22 22 Regulators claim role in combating climate change Euractiv: Tuesday 20 October 2009 The climate change imperative has radically changed the energy regulation environment, shooting up the priority list alongside energy security and fuel poverty, EurActiv heard yesterday (19 October) at the fourth World Forum on Energy Regulation in Athens. While regulation was previously aimed at securing competitive markets, the challenge now is to cut emissions from the power sector cost-effectively in anticipation of climate legislation, participants in the three-day conference said. "Originally, liberalised energy markets were seeking competition, efficiency and reliability. Now they have a very different focus, which is to lower carbon emissions with efficiency and energy security," said John Tamblyn, chair of the Australian Energy Market Commission. The EU is the first region to set up a cap-and-trade system as the basis of its transition to a low-carbon future (see EurActiv LinksDossier on the EU's emissions trading scheme). By obliging power utilities to buy pollution permits, it hopes to force the largest emitting sector into cutting greenhouse gases drastically by investing in efficiency and alternative sources of energy. A similar scheme is now in the making in the US Congress, and several other countries are considering their options. The EU is eyeing a link-up of national schemes to form an OECD-wide carbon market by However, a poorly-regulated transition could lead to an increase in consumer prices that is much greater than the actual cost of avoiding emissions, several participants warned. This would give rise to concerns that vulnerable consumers might fall into fuel poverty. "When the cost of abatement is relatively small and customers are asked to pay a lot, we are entering a system which raises equity questions and it also raises serious political risks that the system is not sustainable," said Richard Cowart, director of the Regulatory Assistance Project (RAP) and former chair of the Vermont Public Service Board. "So we need to design a system where the consumer cost is a lot closer to the cost of abatement," Cowart added. Energy regulators see an important role for themselves in designing market rules that will make the transition as painless as possible. "How the energy market adapts will significantly influence the total cost of reducing global emissions. Changes to the design of energy markets can help minimise transition costs and this should be a key focus for energy market rulemakers and regulators," Tamblyn stated. Energy efficiency in demand Exactly how energy markets should be restructured remains a matter of debate. Many ideas where put on the table, but particular consensus formed around the idea of complementing cap-and trade schemes with efficiency and renewable energy standards. Considering the great volatility of carbon prices in the past, many regulators pointed out that carbon prices have only triggered a limited amount of cost-effective investment in energy efficiency. They argued that this needs to be addressed with a portfolio of government measures to increase energy efficiency and promote renewable energies. According to Cowart, the American experience of the Regional Greenhouse Gas Initiative (RGGI) shows that the cost of cutting emissions will be significantly higher if the efforts rely solely on carbon trading. He argued that the most cost-effective option would be to channel a sizeable share of carbon revenues towards efficiency and renewables programmes. "National governments and regulators alike will need to coordinate that suit of policies and market mechanisms to advance those policies," he

23 23 added. The EU has adopted a binding target to increase the share of renewables in its energy mix to 20% by 2020, but its energy efficiency goal is merely aspirational. This might be changing now, however, as a Commission plan proposes to make this a binding obligation (EurActiv 13/10/09). At the conference, world regulators pledged to step up cooperation on defining their role in responding to climate change. They announced the creation of the International Confederation of Energy Regulators (ICER), a voluntary forum for exchanging information and developing the role of energy regulation in addressing "a wide spectrum of socio-economic, environmental and market issues". Power firms 'do not need the ETS to cut emissions' ENDS Europe 20/10/2009 The European electricity sector could meet the EU's 20% emissions reduction target for 2020 through energy efficiency and renewables alone, according to a study presented at the Fourth World Forum on Energy Regulation (WFER) on Monday. Power companies do not need Europe's Emissions Trading Scheme (ETS) to achieve this target, Alberto Pototschnig from consultancy Mercados Energy Markets International told delegates in Athens. The ETS may end up playing "a marginal role" in reducing emissions, he predicted. Under ETS rules, the power sector must cut its emissions by 21% relative to 2005 levels. It could achieve this through a 20% improvement in energy efficiency and a 30% increase in renewables production, said Mr Pototschnig. Mr Pototschnig's analysis appears to add weight to calls for an EU binding target on energy efficiency. The European Commission is considering the idea. But it is not at all certain the commission will put forward such a proposal, according to senior official Jos Delbeke. "It was a wise decision not to add a third hard target [to the climate and energy package] otherwise the system would have been overburdened," Mr Delbeke said in Athens. "If there is a decent carbon price, then energy efficiencies across the system will be produced," he added. Eurelectric's head Hans ten Berge questioned the cost of relying on energy efficiency and renewables to deliver emission reductions. Renewables are "a bit of a luxury" if they are only aimed at reducing emissions, Mr Pototschnig admitted. But they bring cobenefits such as energy security and jobs, he added. The commission should explicitly extend energy regulators' mandate to efficiency as part of a revised EU energy efficiency action plan, Martin Crouch from UK regulator Ofgem told ENDS in Athens. Ofgem already administers an energy efficiency scheme for the UK government, but many national regulators do not.

24 24 CCS no panacea - IEA Montel Powernews 22/10/09 Carbon capture and storage (CCS) is not a panacea in terms of a unique solution to the climate change problem, said Didier Houssin of the International Energy Agency (IEA). But it s certainly an essential tool in meeting the challenge [of climate change], Houssin, director of energy markets and security at the IEA, told Montel Powernews earlier this week on the sidelines of the World Energy Regulators Forum in Athens. You have a lot of countries, including China and India, that will have coal-based power production for quite a considerable period in the future and if they want to maintain this type of generation then carbon capture and storage is indispensable, he said. The technology to capture carbon already existed, but the costs were still prohibitively high, especially of capture, where considerable research was still required, said Houssin. Public acceptance needed On the other hand transportation pipelines and storage is not critical in terms of costs but are more critical in terms of [public] acceptance, he added. But still the question of liabilities and the shape of a future regulatory regime in the long term would have to be solved before the industry invested in CCS technology, Houssin said. In addition, the time constraints in establishing such technology were critical, Houssin said. If you start in 10 years time you won t reach the kind of framework we need. Business is sceptical of the commercial feasibility [of CCS] in the short term, so we at the IEA believe you need to build a high number of prototypes covering the whole spectrum form capture to storage and see how coal-based power plants can work with CCS, and how we can lower the costs. A carbon price of USD 50/t by 2020 and USD 110/t by 2030 was needed to reach the IEA s 450ppm scenario, Houssin said. This is higher than today, but not unfeasible. The IEA 450ppm scenario sees the use of fossil fuels peak before 2020, and energyrelated CO2 emissions just 6% higher in 2020 than in Snjolfur Richard Sverrisson richard@montelpowernews.com London, Thursday, 22 October 2009

25 Energy Regulators step up to the climate challenge Ends Europe Report November 2009/ Issue 43 25

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29 29 New market trends, global energy issues taking center stage at regulators forum Manila Bulletin - 19/10/2009 In this historical city widely known as the cradle of Western civilization, energy regulators from all over the world will once again convene to discuss pressing issues and new trends in energy regulation those that shall define the sector s pathway into the future. As most energy markets trail competitive set-up, the bid for security and reliability of supply is also facing changeover processes. Hence, this has been set among the primary topics to be fleshed out at the Fourth World Forum on Energy Regulation which shall run October here. Participants in the global forum shall be apprised as well on the best practices that regulators must learn from, chiefly those dealing with pricing decisions. The necessary adjustments that evolving markets must adhere to will also be tackled, with the endgoal of ensuring balance between regulatory processes and the noble cause of protecting public interest. Given the intensifying debates on climate change risks, the regulators will also wage market response toward the reduction of carbon dioxide (CO2) emissions. In this, technological innovations as well as green alternatives are seen playing a central part. The energy leaders shall similarly assess the efficiency of CO2 emissions reduction mechanism; such as carbon caps and carbon trading arrangements. The interplay of climate change policies and the advent of competitive markets have long been established, and regulators see the importance of revisiting measures to ensure that these are attuned to the needs of the times and the changing structures in the energy sector. In many countries, including the Philippines, the turn of the decade is considered a crucial turning point for governments to woo fresh round of investments to ensure noninterruptible power supply to their end-users. With the global economic slowdown, needs for additional capacity for most markets have been pushed back a bit. Yet, energy policymakers consider this a critical transition to re-assess policies and investment conditions. Given the near-term call for new round of capital for projects, the regulators will also investigate the energy sector and the financial markets interdependency issues. Additionally, renewable energy regulation in developing countries shall be examined in terms of market efficiency, system security, reliability and primarily as a key factor in the transition to low carbon energy systems. As consumers are the most important factor at the end of the chain, discussions will also revolve around concerns on competitiveness and affordability of the gas or electricity being distributed into homes or businesses. On the technology front, innovations on smart grids, advanced metering and real-time pricing will be amplified and the intended benefits explored and how these will eventually trickle down to the end-users. Investment Strategy Needed to cut emissions Euractiv- 27/10/2009 Regulators claim role in combating climate change emissions Euractiv- 20/10/2009

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34 34 Gas IEA sees short-term gas glut as demand down 53 Bcm over H Gas Matters - 19/10/2009 The International Energy Agency (IEA) sees a short-term gas glut, but Didier Houssin, director energy markets and security at the IEA, encouraged regulators to focus on medium-term demand. %E2%80%9Cgas-glut%E2%80%9D-demand-down-53-bcm-over-h (subscription required) New EU gas security rules will depoliticise sector Piebalgs ICIS Heren European Spot Gas Markets - 19/10/2009

35 35 EU s Piebalgs Says Russia Gas Supply Better, Disruption Possible Bloomberg - 19/10/2009 European Union Energy Commissioner Andris Piebalgs said today that the supply of Russian natural gas via Ukraine has improved, while he cannot rule out a disruption this winter. Piebalgs, speaking to reporters in Athens, said the Russian supplies via Ukraine retain a risk.

36 36 No reason for EU to fear Russian gas dependence - Gazprom Montel Powernews 20/10/2009 The EU has no reason to fear dependency on Russian gas, Sergei Komlev, head of structuring and price formation at the country s Gazprom Export, said on Tuesday. There was no economic reason to fear dependence on Russian gas, since the oil indexation of gas contracts removed any concern over Russian price control, Komlev told Montel Powernews on the sidelines of the World Energy Regulators Forum in Athens. The oil index gives the EU immunity to any kind of market manipulation. The price of oil is decided in a global market, he said. Earlier on in the conference, he had said the EU should focus more on gas as a means of reducing CO2 reductions. Cleanest fossil fuel We are concerned over the prospected market replacement of gas. It will not provide for energy security and it will not be cost effective. Natural gas is the cleanest fossil fuel. It will not be possible to reach the [EU 2020] emissions targets without extensive use of natural gas in power production, he said. If gas-powered plants removed half of the coal-fired units in the EU by 2020, annual gas consumption would rise by 60bcm, while greenhouse gas emissions would be reduced by 185m tones, he said. By Olav Vilnes in Athens Montel Powernews newsdesk@montelpowernews.com

37 37 Gas to oil link will persist due to illiquidity - players Montel Powernews 20/10/2009 Long-term gas supply contracts to Europe will continue to be indexed to oil due to the lack of liquid trading hubs, market players said on Tuesday. Oil indexation resulted from the fact that the gas market was not efficient enough. The European gas market is still dominated by oligopolistic groups both on the producer and consumer side. I therefore don t believe in a switch to gas indexation, said Sergey Komlev, head of the contract structure and price formation directorate at Russia s Gazprom Export. Thin volumes If we look at the most important gas hub in Germany, volumes were only 15bcm last year. Total consumption in Europe was about 600bcm, he added at the World Energy Regulators Forum in Athens. The reality is that most long-term contracts are structured in a way which makes them responsive to market developments on competing fuels and where price developments are outside the control of the buyer or seller, said Simon Blakey, senior director of Cambridge Energy Research Associates. If there is sufficiently high liquidity in a hub so that both parties are confident that neither of them can manipulate that market, then there could be a gas indexation. But there is no reason to go from the one to the other for some abstract or ideological reason, he added. Integration needed The issue was also linked to the integration of the European gas markets, said Walter Boltz, chairman of the Austrian regulator E-Control. A better linkage of gas hubs in Europe will eventually also lead to a fair balance between long-term alternative fuel-based pricing versus gas indexed pricing. With more liquid hubs, buyers and sellers will become more confident in using the gas indexed prices, he said. Long-term gas contracts indexed to oil are currently much more expensive than market prices on gas hubs, due to the sharp fall in gas prices over the past year. This situation was partly linked to the increased supply of LNG, as gas hubs with access to LNG deliveries now had the lowest gas prices in Europe, Boltz said. LNG spot prices are currently traded at roughly half the price of long-term oil indexed contracts. This is an unprecedented situation. The lesson we learn is that markets with most access to LNG are benefiting from lower prices, while markets with limited transport capacity are suffering from significantly higher prices, he added. By Olav Vilnes in Athens Montel Powernews

38 38 Gazprom rails against EU gas gas security rules ICIS Heren European Daily Electricity Markets - 20/10/2009 Renewed gas crisis 'likely', says regulator Euractiv - 21/10/2009 The likelihood of renewed gas supply disruptions in Europe this winter has serious implications for the image of gas in the long run, Walter Boltz, chair of Austrian energy regulator E-Control, told EurActiv in an interview. Europe should work on the assumption that it will be hit by a similar gas supply crisis this winter to that of last January, when Russia halted supplies to Ukraine over a payment dispute, said Boltz. "The basic situation between Ukraine and Russia has not improved a lot [...] and the payment problem comes up every month," he argued, pointing to the tight financial situation of Ukraine's Naftogaz and next January's elections in Ukraine, which make the political situation unpredictable. "I would say there is a fair chance that something similar might happen," Boltz concluded. A fundamental problem remains, according to the Austrian: the Ukrainian gas transport system built by the Soviet Union was not meant to transport gas from Russia and transit it through Ukraine to Europe. Rather, it was built to pump gas from the North into storage facilities closer to Europe so that come winter, Eastern Ukraine could be supplied from Russia and this gas could then be pumped further to Western Europe, he explained. "So if Ukraine doesn't have sufficient storage levels, it will not be able to supply Europe in winter," Boltz summarised. The amount of storage is a state secret in Ukraine, but the Russians for one claim that it is insufficient, he said. The regulatory chief added that this time around people are aware of the negative consequences and might be less inclined to let the situation perpetuate. He warned that another crisis would deal a huge blow to the gas industry from which it may take several years to recover.

39 39 "What gas companies are telling us is that it's very difficult to sell gas applications to new customers nowadays. Very few people want to switch to gas because they still have this lingering memory that gas could be cut off," Blotz said. "That of course is very bad because gas has been living off its reliable supply image and environmental friendliness," he added. A renewed crisis could lead to a big move away from gas at a time when climate considerations dictate that it should be increasing its share of power generation instead, he explained. Nevertheless, Boltz argued that the EU would probably be able to respond better this time around, as investment has already started to flow into projects to build counterflow capacity in Central and Eastern Europe. Moreover, the European Commission's proposed Regulation on Security of Gas Supply provides a good response by obliging countries to put in place emergency plans and avoid unilateral action, the regulatory chief argued. But he warned the European Parliament and the Council against giving in to the demands of certain member states, which want to turn the directly applicable regulation into a directive that each country could transpose into national law. "Since the member states have very often not done a very good job at doing so, I think there is a good case to have this as a regulation," Blotz argued, "given the urgency and the natural delay that a directive would result in". In the longer term, volatile demand for gas has demonstrated that industry will have to rethink the long-term contracts it has struck with supplier countries like Algeria, Russia and Norway, Blotz warned. He pointed out that as these contract prices are now twice the spot market prices, supply and shrinking demand are competely off balance with one another. The regulatory chief predicted that many companies would this year have difficulty offloading contracted supplies when storage facilities are already full. "It remains to be seen how flexible the various producers are in [stretching] the delivery of the gas volumes or to what extent they say, 'we need the cash and we want it now, we don't care what you do with the gas'," he said. Global Market Oversupply Until 2011 Platts European gas Daily 21/10/2009 The global gas market has been hit by a triple whammy - recession, the growth of unconventional gas output in the US, and a surge in LNG production, according to Simon Blakey, senior director for consultancy Cambridge Energy Research Associates. Speaking at the World Forum on Regulation in Athens Tuesday, Blakey said that Europe is contractually oversupplied by a cumulative total of 70 billion cubic meters of natural gas in the period Jacques de Jong, a senior fellow of the Clingendael International Energy Programme estimated that in the short-term, Europe had seen its expected demand for natural gas reduced by 90 Bcm up to 2013, compared with estimates made a year ago. This, he concluded, meant that Europe could not offer security of demand to sellers. That figure, 90 Bcm/year, is equivalent to the annual consumption of the UK, Europe s biggest gas market. The impact of lower demand and the growth in LNG output can already be seen in prices for spot LNG cargoes, which are now about half those of oilindexed pipeline gas on the European continent, speakers at the Athens conference said. Platts assessed day-ahead Dutch gas at Eur11.60/MWh Monday. The Platts Northwest Europe Gas Contract Indicator for October, which shows the price of oil-indexed gas, is Eur17.31/MWh. However, LNG s price impact was being limited by infrastructural constraints. Walter Boltz, chairman of the Austrian energy

40 40 regulator E-Control said congestion between hubs in the European market was persistent, leading to wide variations in prices. It was also evident that hubs closer to LNG landing points were subject to downward pressure on prices, while those further removed were not. Those without transport flexibility were suffering from high prices, he said. This was the result of both a lack of transmission infrastructure and because much of the existing infrastructure was contractually congested. Despite the new powers granted to regulators under the EU s Third energy package, he described enforcement as still weak and said that he expected price differentials between European hubs to persist. With OECD gas demand in the doldrums and unlikely to recover significantly in the next year, expectations are rising of a glut of LNG cargoes on the market in LNG output is expected to surge as new liquefaction capacity in Indonesia, Russia, Qatar and Yemen ramps up to full capacity. LNG plants have to run near full capacity. According to Wilson Crook of ExxonMobil Gas & Power Marketing Co, liquefaction plants have the flexibility to cut back output by about 5%, but not much more. Crook suggested that LNG suppliers might see marginal economics, but would still have to produce. That gas will have to be stuffed into a market somewhere, he said. Source: Platts European gas Daily (subscription required) Consumer Issues Meglena Kuneva attends fourth sitting of the World Forum for Energy Regulation in Athens Focus - 19/10/2009 European Commissioner for Consumer Protection Meglena Kuneva has attended the forth sitting of the World Forum for Energy Regulation in Athens. This year s edition is specially devoted to consumer protection. Commissioner Kuleva told FOCUS News Agency that the forum is held every three years and this year, it marks the big changes in the world energy sector - on balancing the issues on environment and the establishment of competitive markets and the switch to stable consumption. These are two spheres in which there could not be progress without the active participation of the consumers, Commissioner Kuneva added. Another direction of the forum was to reach stable consumption not only through the behavior of the consumers but also though behaviour of markets and society as a whole, Kuneva said. According to the European Commission, an action plan on stable consumption with the sector of consumer protection, quality products, which could raise the prosperity of the citizens, should be introduced. "I will give a simple example - for instance, the washing machines, which work at lower temperatures, or TV sets, which do not have waiting regime and thus saving energy, she said. In Kuneva s words, with the energy labeling consumers would be able to choose in different level the energy efficiency of the product they buy. "An important direction in this respect is eliminating the disloyal trade practice, when traders claim machinery is economic, while this is not true at all," Commissioner Kuneva commented. She warned that the European Commission has instruments to punish such producers, who mislead consumers and distort the market.

41 41 Electricity Global Gas, Electricity Demand Will Fall in 2009, IEA Says Bloomberg Markets - 19/10/2009 Global demand for electricity and natural gas will decline this year, Didier Houssin, director of the International Energy Agency's Directorate of Energy Markets and Security, said. ``We estimate electricity consumption worldwide to fall by 3.5 percent in 2009,'' he said at the World Forum on Energy Regulation in Athens. ``We estimate global gas demand will drop by around 3 percent in 2009.'' Electricity Prices Have Already Hit Bottom, Vattenfall CEO Says Bloomberg Markets - 19/10/2009 Electricity prices have already hit a bottom and their recovery will take some time, depending on the pace of an economic rebound, Vattenfall AB s Chief Executive Officer Lars Josefsson said today on the sidelines of an energy forum in Athens. IFC finds connection constraints for commercial electricity consumers Manilla Bulletin MB.com - 21/10/2009 A study by the International Finance Corporation (IFC) of the World Bank Group has unraveled various impediments that countries around the world encounter in securing access to electricity service. The study entitled Getting Electricity covered 140 countries and focused on electricity connection constraints confronting entrepreneurs, mainly for their newly-constructed buildings. The outcomes have been shared to the participants of the World Forum on Energy Regulation (WFER) here. The study serves as a benchmark to show the processes involved and the duration that commercial customers in various countries face in securing electricity service for their respective businesses.

42 In this, the IFC tracked the procedures, length of time and corresponding delays as well as the cost required for a business to obtain new electricity connection. The pilot study, the IFC noted, sheds light on the interactions of businesses with distribution utilities, adding that this also offers information on a number of issues previously non-existent for a number of countries. Some of these relevant data include efficiency and the corresponding cost of the services provided to commercial customers by the distribution utilities, the complexity of procedures and the financial resources that businesses must spend in obtaining power connection. As could be gleaned from the study outcome, IFC noted that the number of interactions customers have with the utility and other agencies is one of the most important determinants of connection delays. In particular, it was noted that in countries with less procedural requirements, the connection may only take 56 days on average; while those with lengthy procedures normally take 215 days. Because connection times are more likely to be long where entrepreneurs must go through many procedures, it is important to understand why particular procedures are needed and how they can delay connections, the IFC study said. It added that connection delays increase where opportunities are missed to streamline approvals with other public agencies. Romania, has been cited as an example, given circumstances wherein the private contractor hired to complete the connection works must get a separate construction license for the distribution transformer needed for the connection. Conversely, in Montenegro and Serbia, such construction license has already been integrated with the construction permit obtained from a municipality. Connection delays increase where customers face multiple procedures related to the quality and safety of internal wiring, the multilateral lending firm said. It further noted that middle-income economies offer the most scope to streamline procedures. Additionally, the study indicated that connection delays similarly occur where utilities do not have the materials needed to connect customers readily available. Problems of this sort, it was pointed out, are typical in low- and lower-middle-income countries. Survey respondents reported additional wait times of up to 150 days when the utility did not have such critical materials as distribution transformers or meters in stock, it said. As far as connection costs are concerned, it was established that it is generally higher in poorer countries; though they vary significantly in various jurisdictions depending on the type of infrastructure being utilized. 42

43 Smart grid could impact power trading, peak periods ICIS Heren European Daily Electricity Markets - 20/10/

44 44 Financial Market/Transparency Issues German Regulator seeks protection for physical traders ICIS Heren European Daily Electricity Markets - 21/10/2009

45 45 EU Energy Trades Need Transparency, Abuse Rules, Regulator Says Bloomberg - 21/10/2009 By Ewa Krukowska The European Union could introduce legislation as soon as next year to increase transparency and prevent abuse in energy markets, the EU securities regulator said. The regulations should apply to both physical and derivatives markets, particularly in electricity and gas sectors, said Carlo Comporti, secretary general of the Committee of European Securities Regulators. The committee advises the European Commission, the executive arm of the 27-member EU. ``We do consider that in the energy sector there should be a regime as stringent as what we have currently in the Market Abuse Directive for the financial markets to counteract market abuse,'' Comporti said in an interview today at the World Forum on Energy Regulation in Athens. The EU market abuse directive, known as MAD, prohibits insider dealing and market manipulation. It also creates obligations aimed at deterring abuses, such as insiders' lists, suspicious-transaction reporting and disclosure of trades by managers of issuers. ``The objective would be the same, but since MAD is very much focused on the specificity of financial markets, we suggested that a specific legislative tool would be probably best and most appropriate in the context of energy markets,'' Comporti said. ``And I think that the new commission that will come from January will have to address this.'' The European Commission outlined plans yesterday to improve transparency in the over-the-counter derivatives market, which has an estimated global value of $592 trillion. The commission said that it would draft common standards for central counterparties and proposed setting position limits on trades. `Sound Mechanism' The EU should also establish a ``sound mechanism'' of cooperation between financial and energy market regulators and introduce new legislation on the transparency of the energy industry, Comporti said. ``Particularly it's the aspects of transparency of trades executed. They should be as close to real time as possible,'' he said. ``The key words are consistency of regulation between energy and financial markets and in so doing, the commission should also try to ensure consistency with the other main economic partners outside Europe, in the first place the U.S.'' Comporti said that consultations with the European Regulators' Group for Electricity and Gas among market participants showed a ``growing consensus that these legislative actions are really needed.'' ``We first addressed gas and electricity markets, but it could be that the interdependencies go beyond those two markets, particularly coal or emission allowances,'' he said. ``The derivatives markets is already to some extent covered by

46 European legislation. Where we see the imbalance is that spot or physical markets are not covered. And that is where we have to establish a level playing field to fill the gap.'' The current term of the European Commission expires at the end of this month, but it will likely stay in office until the end of this year before new commissioners are appointed. 46

47 47 "Banks, not derivatives, need tighter rules" Montel Powernews 22/10/2009 Imposing tighter capital adequacy requirements on banks could be a better way to regulate trade in energy derivatives than forcing players away from the OTC markets, said Carlos Lapuerta, principal at consultancy Brattle Group. Stricter capital adequacy requirements would address directly the excessive risks taken by banks, who were at at the heart of the financial crisis, Lapuerta told Montel Powernews at the sidelines of the World Forum of Energy regulators in Athens on Wednesday. It makes sense to target the market failure of the banks, he added. On the other hand forcing all derivatives trading onto exchanges or into central clearing could substantially increase the collateral requirements for non-banking players, he added. Non-banks were mostly hedgers and not taking excessive risk, Lapuerta said. Many proposals Another proposal on the table at the regulatory level is the splitting of retail and investment banking. [This] is to prohibit banks who take consumer deposits to engage in derivatives trading, he said. Taking the capital adequacy route would see no change for non-banking players in energy trading. However, energy companies may lose a counterparty or trading could become more costly if a bank needs more capital. Lapuerta said he was unsure of the best way to regulate energy derivatives. You need to look at a set of proposals and decide which is the best one. My concern is that the appropriate analyses of alternative approaches might not be performed." Nothing had been decided even if the European Commission (EC) said on Tuesday it wanted to force through central clearing for derivatives, Lapuerta said. However, position limits such as those enforced by the US regulator were unlikely to be successful, he added. In a cost-benefit analysis, we see the benefits [of imposing position limits] as being very low, and the costs high. Position limits will affect the larger players who have a major role in generating liquidity. In addition, they will result in disproportionate limits for market makers. On Tuesday, EC set out a list of future actions to ensure efficient, safe and sound derivatives markets, including commodity derivatives, which should result in a legislative proposal in 2010, it said. Snjolfur Richard Sverrisson richard@montelpowernews.com London, Thursday, 22 October 2009

48 48 Journalist Interviews on WFER IV Interview with Lord Mogg (CEER President) European Energy Review Regulators have a role in fighting climate change Interview with Lord Mogg, CEER President, European Energy Review Sept -Oct 2009