Presented by: Wojciech Cetnarski – Vice President of Izba Energetyki Przemysłowej i Odbiorców...

Presented by:Wojciech Cetnarski – Vice President of

Izba Energetyki Przemysłowej i Odbiorców Energii

(Association of Industrial Power and Energy Consumers)

For AEM / SVSE Conference in Praha, 14-15 September 2005

Energy Market in Poland From the Point of View of Large Consumers

Prepared by : IEP Poland, www.iep.org.pl

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AEM/SVSE Conference, Praha, Sept. 14-15, 2005

Presentation Outline

• Introduction of IEP• Outline of Polish Energy Market

– Generation / consumption / distribution– Regulation– Sales and Prices

• Main Issues From Industrial Consumer Point of view– System inefficiencies– TPA implementation / barriers– Tax policy


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Introduction of IEP

• IEP has been created in 1998• The mission of IEP is to represent and defend the interest

of industrial energy consumers in confront with:– Generators/distributors lobbies– Government institution / bodies – Regulatory Office (URE)

• IEP is composed currently of 72 members, of which 41 members belong to the Large Energy Consumers Section

• IEP actively co-operates with main Industry Associations in Poland, such as, chemical, steel, mining, pulp&paper, glass

• In 2005 IEP applied to become the member of IFIEC Europe


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Outline of Polish Energy Market

• 20 condensing power plants (5 on lignite), privatized – 5• 32 CHP Plants (non industrial), privatized – 18

2 347 2 309 2 2702 279

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

MW

2000 2002 2003 2004 Available power MW Maximum power demand MW Autogenerators Available Power

Avqailability and Demand for Power in PolandAvqailability and Demand for Power in PolandAvqailability and Demand for Power in Poland

Source: ARE Statistics of Polish Power Industry 2004


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7 204 7 763 7 9408 099

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

GW

h

2000 2002 2003 2004

Electricity Generation Electricity Consumption Autogeneration

Generation and Consumption of Electricity in Poland



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2000 2002 2003 2004

Others

IndustryTotal Use

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

GW

hEnergy Use in Poland

• 2004 deliveries for the end-users: 106 189 GWh

• 2004 sale to end-users: 97 760 GWh



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Cross-border electricity trade in 2004



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• In 2004 there was 164 Power Autoproducers in Poland (industrial power plants), while in 2003 - 169

Autoproducers by Installed Capacity [2004]

137

9 7 4 1 6

to 1 MW over 1 to 20 MW over 20 to 50 MW

over 50 to 100 MW over 100 to 200 MW over 200 to 300 MW



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• Distribution system in Poland is consists of over 555.000 km of power lines and 227.000 transformers (HV,MV,LV)

• Sector’s structure is composed of:– „PSE Operator” – exist from July

1st, 2004, (state owned) responsible for the HV transmission system operations and balancing (400, 220 kV)

– Polish Power Grid Company – „PSE” (state owned), responsible for Lon Term PPA fulfilment and cross-border trade

– Historically – 33 local distribution companies (of which 2 have been privatized), now divided into 6 regional groups – final division and composition still not agreed

Source: TOE TPA Report 2004


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• The foundation act for Polish Energy Market is the Energy Law of April 10, 1997 (26 changes till now).

• EL includes all form of energy carriers (electricity, heat, gas, fuels) and assumes creation of liberal, open and competitive energy market, with some regulated areas:– where the natural monopoly system exist (transmission and

distribution), and – where energy is delivered to retail customers

• EL requires legal split between trading and distribution services activities, even within the same company

• Implementation of the EL and regulatory duties are executed by the independent Regulatory Office (URE), using as the tools:– Concessions– Decisions– Tariffs

• By-laws to EL are issued by Ministry of Economy

Regulations


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Sales and Prices

• Electricity sale structure reflects the changes of the Polish Energy Market

• Still over 40% of electricity is traded under the long term PPA (KDT) by PSE

• Distribution companies are forced to reduce the trade volumes in favour of TPA customers, trading companies and Pool

Electricity sale

in this:

GWh

TOTAL 2002 114 331 45,8 18,8 1,1 0,06 17,4 9,4Power plants 2003 117 282 42,3 25,0 3,4 0,07 13,2 7,5

2004 119 222 43,5 19,4 4,8 0,09 20,4 10,2% 102% 103% 77% 143% 128% 154% 136%

Distribution companies

STRUCTURE OF ELECTRICITY SALE IN POLAND

YEAR TOTALKDT

%

Final consumersEnergy traders

Pool and balancing

marketTPA others



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Sales and Prices

Summary of average wholesale (PolPX) and retail prices 2003-2005: Centrel (PL, CZ, SL, HU) Source: DG Energy and Transport QUARTERLY REVIEW OF EUROPEAN ELECTRICITY AND GAS PRICES


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Sales and Prices

• Competitive electricity wholesale market forced producers to reduce prices, even more then there were able to reduce their cost

PLN/MWh PLN/MWh

Power plants and CHP plants 2002 141,46 132,76 2003 147,06 133,71 2004 145,61 132,71

*) incl. transmission services and capacity reserve % 99,0% 99,3%

AVERAGE PRODUCERS' ELECTRICITY PRICES

Total cost

YearTotal

price *)



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Average price in this:

Average price in this:

electricity

% %

Consumers on HV (Group A) 188 118 70 189 120 69 101% 99%Consumers on MV (group B) 222 124 97 223 126 97 101% 100%Consumers on LV (Group C) 331 137 194 333 138 195 100% 101%Consumers in Group G 301 139 162 309 142 167 102% 103%

electricity transm.

PLN/MWh PLN/MWH

PRICES OF ELECTRICITY AND TRANSMISSION FEES

2003 2004

Indicies

electricity transm. transm.

• URE efforts in controlling the tariff prices is visible as „cross subsidizing” of smaller customers by larger is being reduced

• Unfortunately, the electricity prices still grow despite their reduction by producers

Sales and Prices



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Main Issues From Industrial Consumer Point of View

• The most important problems slowing down development of the free and competitive Energy Market in Poland:

Energy price higher then it should be !

•Lack of law stability and clarity•Uncompleted privatisation •Unsolved Long Term PPA (KDT)•TPA implementation barriers


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• System inefficiencies:– Incomplete privatization is causing lack off real game of interest

on the market – State owns generation, transmission and distribution assets and is regulating the market at the same time

– Unsolved KDT are strongly influencing the electricity price and whole system of electricity trade – only 50% of electricity in Poland, potentially, can be freely traded

– EL, after 26 changes is lacking consistency and clarity – some obvious solutions have been introduced only recently, as in the past were strongly blocked by lobbies opposite to market opening

• Solving the above inefficiencies should allow a fair relationship between the customers and electricity suppliers willing to accept tariff system


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• TPA implementation barriers– Market snapshot (2005 TOE estimates):

• There is 294 Electricity Trading Companies (ETC) licensed by URE

• In reality only 20-22 ETC actively trades on the market • Estimated volume of electricity traded by ETC - 32 TWh • No of customers dealing with ETC – 44

DataMin. Purchaseper y. (GWh)

No of eligible customers

Volume(TWh)

Market open. degree [%]

No of customers benefiting from TPA

1 January 2002 >10 641 38 37%19

1 January 2004 >1 c.a. 6.600 53 51%44

6,6 TWh

1 July 2004all

Companies c.a. 1,9 mln 69 68%

acc. URE 78 acc. TOE 44

9,8 TWh

1 July 2007all

Customers c.a. 15,6 mln 102 100% ???

Source: TOE TPA Report 2004


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GWh PLN / MWh GWh PLN / MWh

HV consumers 6 215 43 9 307 49 115%

MV consumers 462 81 840 85 104%

TOTAL 6 677 45 10 146 52 115%

ELECTRICITY SUPPLY TO THE "TPA" CONSUMERS

Electricity supply

Transmision fees

Electricity supply

Transmision fees Transmission

Fees Increase

2003 2004

amountaverage

priceamount

average price

amountaverage

priceamount price

GWh PLN/MWh GWh PLN/MWh GWh PLN/MWh % %

Thermal power plants 2 480 121 5 369 121 7 163 123 133% 102%

Trading companies 1 772 120 2 347 113 1 975 116 84% 102%

Distribution companies 96 601 123 96 440 130 97 761 132 101% 101%

SALE OF ELECTRICITY TO FINAL CONSUMERS

2002 2003 2004Indicies

2003/2004

• In case of the TPA customers, despite the significant increase in volume, price increase for transmission services was 5 X bigger (!!!) then for the tariff customers

• Vertical consolidation of the power sector, promoted by government will increase the squeezing of new ETC, which are the cheapest seller, in favour of existing players




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• TPA implementation barriers– Extremely high demand from transmission system

operator (PSE Operator) and local distributors regarding the accuracy and redundancy of the measurement equipment and data transfer systems – no standards

– Lack of possibility to balance the market locally and with the accuracy smaller then 1 MW

– Lack of standardized Transmission Agreements and procedures for change of energy supplier

– Calculation of cost of balancing the market not based on real cost incurred by the participants


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• TPA implementation barriers– The barriers are well known and defined– IEP, together with other market participants (mainly ETC) developed

several solutions which should be implemented– Some of the postulates have been accepted by URE and government

and implemented to the last amendments to the EL (March 10,2005):• Legal and organizational

separation of the energy trade activities from transmission anddistribution services

• HV/MV transmission systems operating instruction will be subject to the approval of URE

• IEP hopes that by continuing thelobbying efforts and cooperation with key market players will be able to change the today’s pictureof the energy consumer trying touse its TPA rights


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Składowe ceny energii elektrycznej [PLN/MWh]

140,10

193,92

71,77

62,04

62,04

62,04

20,00

20,00

20,00

48,87

60,71

33,84

0

50

100

150

200

250

300

350

400

[PLN/MWh] [PLN/MWh] [PLN/MWh]

Morning Peak Evening Peak All Day

VAT

Excise Tax

Transmission

Energy

Energy Price Structure by Time Zone

51,7% 57,6%

38,2%

22,9%18,4%

33,1%

7,4% 5,9% 10,7%

18,0% 18,0% 18,0%

0,0%

20,0%

40,0%

60,0%

80,0%

100,0%

120,0%

[%] [%] [%]

Morning Peak Evening Peak All Day

VAT

Excise Tax

Transmission

Energy

• Critical issue for industrial consumers of energy in Poland is the level of energy taxation

• EU imposes only minimum excise tax requirement on member states: EUR 0,5-1,0

• Last government announcement of increasing the excise tax on electricity up to EUR 5,4 will put Poland among top 5 countries with highest excise tax (D, FIN, S, DK)

Source: 2005 ENEA Tariff for A23 Group customers

THANK YOU

Presented by:Wojciech Cetnarski – Vice President

Izba Energetyki Przemysłowej i Odbiorców Energii

ul Poleczki 2102-822, Warszawa

Tel.: +48 22 545 0365Fax : +48 22 545 0366

[email protected] www.iep.org.pl

mailto:[email protected]

Presented by: Wojciech Cetnarski – Vice President of Izba Energetyki Przemysłowej i Odbiorców...

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