Regulatory Issues for Gas and Electricity. Dr. Burckhard Bergmann Member of the E.ON Board of Management and CEO of Ruhrgas AG

Transcription

1 Regulatory Issues for Gas and Electricity Dr. Burckhard Bergmann Member of the E.ON Board of Management and CEO of Ruhrgas AG

2 Relevance of Regulation to E.ON's Business Areas Electricity Markets Generation Transmission Distribution Supply/Retail Germany R 1) R 1) 2) UK -- R Nordic (Sweden) -- R Gas Markets Production Transmission Storage Distribution Supply/Retail Germany -- R 1) R 1) UK Nordic (Sweden) -- R 1) -- R 1) R: Regulated : Unregulated - : No E.ON presence 1) Regulated from 1 July ) Except for standard rate customers 2

3 3 Regulatory Effects on Electricity Business in Germany Upstream Midstream Downstream Generation Transmission Wholesale Retail Distribution regulated Only transmission and distribution network business is affected by regulation E.ON group s generation and sale functions are by far the biggest customers of E.ON's electricity transmission and distribution network business

4 4 Regulatory Effects on Natural Gas Business in Germany Upstream Midstream Downstream Production Purchase Storage Transport Wholesale Retail Distribution regulated Only transmission and distribution network business is affected by regulation Ruhrgas utilizes more than 90 % of its transportation capacity for its own gas marketing business

5 5 Dos and Don'ts of Energy Regulation Regulation of natural monopolies Adequate investment climate Predictable and reliable regulatory process Legal unbundling Balanced regulation in the international context Regulation of competitive markets incl. storage Regulation of merchant function Impairment of new or existing investment Bureaucracy Trial and error decisions

6 Regulatory Development in Germany 1998/2003 February /2001 Associations' Agreements for Electricity 2000/2002 Associations' Agreements for Gas Implementation of 1st Electricity (1998) and Gas Directive (2003) in German Energy Act Draft Energy Act for implementation of 2nd Gas and Electricity Directives Containing detailed TPA rules, agreed by network operators and large customers Negotiated access to gas and electricity networks Regulated access to gas and electricity networks 6

7 7 German Draft Energy Act (1) Regulatory Framework Regulated access to gas and electricity networks Legal/organisational unbundling New Federal Energy Regulatory Authority with ex-ante and ex-post powers Ex-ante regulation: Access conditions and tariffication methods detailed in network access regulations Cost-based access pricing with possible exemption for gas transmission in case of existing pipe-to-pipe competition

8 8 German Draft Energy Act (2) Regulatory Framework Regulation of pricing methods, no individual tariff approval Pricing method to enable investment required to ensure viability of networks Review of regulatory system not later than 1 July 2007 Network operators responsible for reliability/safety of networks Electricity and gas marketing companies responsible for availability of commodity

9 9 Network Access System for Gas (1) Previous Point-to-Point System Capacity check on transmission route Capacity booking on transmission route Distance-related tariff

10 10 Network Access System for Gas (2) New entry/exit system proposed by the gas industry Exit Entry Individual entry/exit systems for each network operator Separate booking of entry/exit capacities Entry/exit capacities separately marketable Once a specific entry/exit point combination has been determined, the network operator will check available network capacities Cooperation between network operators to provide multi-grid access Individual entry and exit tariffs

11 11 Specific German Gas Issues (1) High and still increasing import dependence Mega investments required for exploration, production and infrastructure Importance of long-term contracts

12 12 Specific German Gas Issues (2) Many independent network operators Pipeline competition in gas transmission Freedom to construct pipelines Competitive storage capacity market: no natural monopoly

13 13 Specific German Electricity Issues Competitive market (acknowledged in Monitoring Report of the Ministry for Economics and Labour): - Price decrease - New competitors - Moderate concentration rate in comparison with EU average Associations' Agreement between network operators and large customers: - Suitable network access system - Calculation guideline as "Good Practice" (Energy Act, court decision in TEAG case) Consequence: New regulatory regime to be based on existing rules

14 14 German Regulation: Outlook Electricity - Existing rules are backbone for new legislation - Network access system - Tariffication - Level of tariffs appropriate for facilitating new investment accepted Gas - Existing access system will be replaced by new entry/exit system on the basis of network operators' proposal - Cost-based tariffication, exceptions in case of pipeline competition - Level of tariffs appropriate for facilitating new investment accepted

15 15 German Energy Act 2004: Initial Time Schedule February/March: March/April: May: May/June: Inter-ministerial coordination Cabinet decision 1 st reading - Bundesrat 1 st reading Bundestag 2 nd (3 rd ) reading Bundestag 2 nd reading Bundesrat Mediation proceedings, if any 1 July 2004: Implementation

16 16 Conclusions E.ON is reassured that the process of implementing regulation is going in the right direction. E.ON expects that E.ON Energie as well as Ruhrgas will manage the impact of the regulation.