Regulation in the UAE Authority of Energy Regulators and competition rules

Transcription

1 Abu Dhabi Emirate Regulation in the UAE Authority of Energy Regulators and competition rules Regulation and Supervision Bureau October 2008

2 Electricity production Installed Capacities Electricity 9,564 MW Water 710 MGD S 1 S 2 S 3 Abu Dhabi A P C G T T C M S T A P Dubai Dhaid Al Ain F 1 F 2 Qidfa Jebal Dhana F2 2,000 MW 130 MG Liwa 5,000 MW currently under construction or award S2/S3 3,000 MW 200 MG MGD = Million gallons per day

3 The Sector PWPA admin PRODUCTION ADWEC Sells output to supply business TRANSMISSION DISTRIBUTION SUPPLY sales WASTE TRANSMISSION DISTRIBUTION IC WATER Customer connections Irrigation Company Disposal Treatment Collection 58% 1.8 bn Figures in US$ 14% 20% 8% 0.4 bn 0.6 bn 0.25 bn US$ 3 billion + turnover in 2007

4 Total annual unit demand 40,000 electricity water 240,000 Electricity average growth rate = 9.8% 30, ,000 Demand (GWh) 20, ,000 Demand (MG) 10,000 Water average growth rate = 12.7% 60, Price Control Periods PC1 PC2 PC3

5 Competitive and monopoly activities Capacity via project finance is competitively bid Treatment plants via project finance are competitively bid PWPA admin ADWEC Sells output to supply business PRODUCTION TRANSMISSION TRANSMISSION DISTRIBUTION DISTRIBUTION SUPPLY sales Customer connections Collection Treatment WASTE WATER Disposal Grey water Monopoly activities

6 Part 2 Competition Influences Project Finance some 30 percent of sector costs

7 Ownership structure Government Authority ADWEA Privatization Group Government Holding Company Abu Dhabi Power Corporation Subsidiaries 1 Production Transmission Distribution Supply Remote Areas Single Buyer Foreign Government 40% 60% IWPPs 9 IWPP Companies IWPP = Independent Water and Power Project

8 Competition in production No by-pass sales exist at present Single-buyer model New capacity through project finance Open bidding process for Build, Own, Operate Long term 20+ year purchase agreements Typical debt to equity ratio 80% Equity ownership 40% 60% Government Fixed return on equity

9 Typical IWPP structure Lenders Lenders O & M O & Ltd Partnership Ltd Partnership JV Partner JV Partner ADWEC ADWEC Power & Water Purchase Agreement (PWPA) Project Company Project Company Shareholder s Agreement 40% 60% R e g u l a t i o n Limited Partnership Limited Partnership Joint Stock Joint Stock Company Company JV Partner JV Partner

10 BST calculations / PWPAs BST = PWPAs + Fuel + ADWEC (costs) PWPAs = Capacity Payments + Variable O & M Costs Capacity Payments = Capex + Fixed O & M Costs Note Capacity Payments must be paid even if the plant is not dispatched

11 Part 3 Competition Influences Duty to economically despatch Case Study

12 Single Buyer / TSO Duties Duty to procure capacity economically Duty to procure fuel Licensed by the Bureau Produce 7 year generation planning statements Procure new capacity Economically despatch generation units Take account of co-generation issues with respect to water production

13 HPAD Project Scope Hydrogen Fuel GREEN POWER PLANT Power Export Transco Transmission Network Nat Gas PROCESS HPAD Others Gas Pipeline PLANT Gas Distribution System CO 2 Product CO 2 COMPRESSION CO 2 Export CO 2 Transmissi on Network

14 Economic Despatch HPAD is a must-run station in that in order to produce CO2 it must run generation sets Must-run is not the same as base load The HPAD arrangement is outside the principles of economic despatch but has a dual benefit beyond the water and electricity sector

15 Green Payment Arrangement Determined by RSB (using average IWPP Charges) Income from ADWEC PWPA admin ADWEC Gas HPAD Project TRANSMISSION Determined by separate independent review. Commissioned by ADWEC and approved by RSB From Green Tariff via Government CO2

16 Part 4 Market Share Influences Licence Conditions and Market Power

17 Market share stipulations Generation and Desalination licenses contain conditions as to market share Economic interest no more than 25% of total Emirate production capacity Economic interest defined as ownership of shares, etc which might add up to 25% Share condition based on a Public Interest Test

18 Market power RSB sees Market Power as the ability to raise prices above competitive levels supply goods at a lower quality holding a monopoly position RSB s views on Market Power Market share will always form the basis of assessing market power Market power should form the primary basis for determining a position of dominance

19 SLC test Where a proposed licensee might hold an economic interest of more than 25% then the RSB will:- conduct a Substantial Lessening of Competition test taking into account Operational control Market concentration Economic interest both here and abroad

20 The Regulation and Supervision Bureau, Abu Dhabi, UAE