The new stage in the liberalization of the Baltic electricity markets from 2010 Apr 21, 2010
1. Liberalisation of energy markets through EU measures
Presently the main EC regulatory instrument in the field of energy markets is Directive No. 2003/54/EC concerning common rules for the internal market in electricity1. This Directive, which forms a part of the EC Second Energy Package (together with the Directive No. 2003/55/EC concerning common rules for the internal market in natural gas2), establishes common rules for the generation, transmission and distribution of electricity, lays down provisions relating to the organisation and functioning of the electricity sector, access to the market, the criteria and procedures applicable to calls for tenders and the granting of authorisations and the operation of systems. The First Electricity Directive3 brought important progress throughout the EU with regard to the development of the electricity markets. However, the broad discretion allowed to Member States in market opening, organisation of access to the network and its regulation has not prevented distortions of competition.
Therefore Directive No. 2003/54/EC, aims at achieving by both quantitative and qualitative elements of competitive internal energy market, where access to the network and a certain degree of market opening is ensured. Improving electricity markets in structural terms and through a non-discriminatory access to the network of the transmission or the distribution system operator is a key issue. One of the core features in achieving such efficient and non-discriminatory network access is the obligation of the Member States to ensure that where vertically integrated undertakings exist, the distribution and transmission systems must be operated through legally separate entities, thus providing for the unbundling of transmission and distribution system operators.
The adoption of the Second Energy Package, and Directive No. 2003/54/EC in particular, was undoubtedly a big step forward in the creation of the integrated electricity market, however, its implementation by the Member States has shown that more needs to be done to ensure that all industry and private customers receive the full benefits from the market opening in energy sectors. To complete the integration of the market and to remove remaining obstacles to the sale of electricity on equal terms and without discrimination or disadvantages within the Community, an additional follow-up package of legislative measures has recently been adopted. Directive No. 2009/72/EC concerning common rules for the internal market in electricity4 forms part of the Third Energy Package. With the Third Energy Package EU legislators and the Member States aim to create proper conditions to remove the remaining obstacles to the sale of electricity by improving non-discriminatory network access and an equally effective level of regulatory supervision. In support of unbundling, the new Directive No. 2009/72/EC goes a step further than the existing regulation and provides not merely for a separation of legal form, organisation and decision making, but also for unbundling of ownership. The latter is expected to ensure network operation is fully independent of supply and generation interests and to prevent exchanges of any confidential information. A transposition deadline of March 2011 has been set, meaning Directive No. 2009/72/EC has to be incorporated into national law by that date. The national transposition measures adopted have to enter into force in March 2013. In light of the specific nature of the electricity sector, the preparation for its implementation calls for the de facto liberalization of the sector to start immediately. This is why the member states, and in particular the Baltic States, are undertaking further regulatory steps to ensure the liberalisation of their electricity sectors.
2. Liberalization of the Lithuanian electricity market
The Lithuanian electricity sector has long traditions of being controlled by a vertically-integrated state- owned energy company. In 2002, efforts were made to unbundle the transmission and distribution network. Upon accession to the EU, Lithuania’s government policy and its legislative framework for the electricity sector were harmonized with the Second EU Electricity package (through the new Law on Electricity). Public suppliers provide electricity to consumers for a regulated price in the absence of the possibility or preference to choose an independent supplier, while independent suppliers should supply electricity to all other eligible customers at a contractual price. However, only a few eligible customers have opted to buy electricity from independent suppliers. Thus liberalization of the electricity market was a rather formal concept.
From 1 January 2010, circumstances and the legal regulation in the Lithuanian electricity market have changed substantially however. Since this date a new stage of the Development Plan of the Lithuanian Electricity Market (the Development Plan) has started. In addition the amendments to the Law on Electricity new Rules on Trade in Electricity entered into force. These acts create new opportunities for companies to participate in the electricity market, which is finally beginning to open up in practice. Implementation of the Development Plan also provides a real opportunity for Lithuanian electricity consumers to obtain electricity according to their individual needs (at easily and clearly comparable, transparent prices and also by choosing the electricity provider and by using all mechanisms of the free electricity market).
The Development Plan foresees that from the beginning of 2010 large electricity users, who altogether account for 35 percent of the Lithuanian electricity demand, are exempted from the regulated electricity tariff. To this end since the 1st January 2010 regulated electricity tariffs are no longer applied to objects where the consumption capacity exceeds 400 kW.
Users holding such electricity objects must choose an independent electricity supplier. They can no longer buy electricity from a public supplier, unless they are not ready to conclude contracts with the independent electricity suppliers. In the latter case, such users may purchase electricity from a public supplier until the transitional period is completed (the 1st July 2010). Naturally, on the expiration of the transitional period, these users must purchase electricity from independent suppliers in any case.
Moreover, the segment of the free electricity market will gradually increase, as from the year 2011 the regulated electricity tariffs will not be applicable for electricity users exceeding 100 kW, from 2012 – for users exceeding 30 kW, and from 2013 – for all remaining commercial consumers. For this reason it is now the period to conclude contracts with independent electricity suppliers before the changes mentioned are enforced.
Those electricity consumers, who must already purchase electricity at non-regulated prices in accordance with the Development Plan, are required to terminate their contracts with public suppliers with immediate effect. These users, must conclude two contracts to replace their current one: a contract for electricity supply with an independent electricity supplier (or a few suppliers); and a contract for electricity distribution with a distribution system operator.
Another substantial factor influencing the conditions of the electricity market is the changes in the wholesale electricity market. Having regard to the compulsory opening of the electricity market and the necessity to secure the functioning of deregulated electricity prices, on 1 January, 2010 the Lithuanian electricity power exchange started activity. BALTPOOL UAB is the operator of the power exchange and the licensed electricity market operator. The main function of the company is to organize the wholesale electricity trade: the trade at the Lithuanian power exchange and bilateral trade. The Lithuanian power exchange is based on the principles of Nord Pool Spot – the power exchange operating in the Nordic countries. The price of electricity changes constantly – every hour the price is different and trading (as in the bourse) is anonymous.
Thus, the companies operating in the Lithuanian market gain an opportunity to participate in the wholesale electricity market. Only direct participants in the market - such as transmission or distribution systems operators, electricity suppliers, importers, exporters and producers5 - are allowed to trade. Consumers are not treated as direct participants in the wholesale market and accordingly they cannot buy electricity at the power exchange. To become a direct market participant in order to trade electricity on the Lithuanian power exchange, a company must acquire a supplier’s, transmission or distribution systems operator’s, importer’s, exporter’s or producer’s license issued by authorized institutions. In addition, a contract must be made with a balance energy supplier on the sale or acquisition of balance electricity.
Trading on the stock exchange is pursued under its regulations determining trade and clearing conditions, responsibility for the breach of rules, market conduct rules, ethical guidelines, payment schedules and trading fees; and under agreements, concluded between the participants and the power exchange operator.
Trading on the Lithuanian power exchange is based on security of the payment among the participants of the electricity market, fair competition, reliability, fairness, equality and clear information principles.
According to a survey conducted by the Lithuanian electricity market operator the average daily (or monthly) wholesale price of electricity at the Lithuanian power exchange is usually lower than the regulated price of electricity, but the price of electricity traded at peak times is more expensive6. The Power Exchange has been operating for too short a period to track consistent tendencies or draw conclusions on the effect of participation in it. In any case, in the light of the forthcoming implementation of the Third EU energy package, liberalization of the electricity markets will move forward and the application of deregulated prices and the trade in electricity through the Power Exchange should prove their benefits.
3. Liberalization of the Latvian electricity market
For once Latvian legislator was ahead of its Baltic colleagues. The Latvian electricity market has been open already since 1 July 2007. Prior to the opening of the market in Latvia the Power Industry Law linked the electrical power trade and network services provision. Therefore in June 2005 the Electrical power market law7 was adopted and it provides for the legal framework of the functioning of the Latvian electrical power market.
The basic principle introduced by the Electrical power market law is that the price of electricity is determined by an agreement between the producers, traders and users. The tariffs are determined by the Public Utilities Regulation Commission (the „Regulator“) and by the law only with respect to the mandatory procurement of the electricity, produced by co-generation or electricity, produced, using renewable energy sources. The Regulator has also issued a number of guidelines for the calculation of the electrical power tariffs8, namely:
The Electrical power market law distinguishes between two types of electrical power users: the associated users and participants of the electricity market. The associated users are those persons, who do not use the opportunity to become a participant of the electricity market and thereby freely select an electricity trader, but purchase electricity from a public trader or the relevant distribution system operator for tariffs approved by the Regulator. These associated users are entitled to a guaranteed right to a supply of electricity of a certain quality for a price which may be easily and clearly compared and revised (the so called „right to universal service“). The provider of the universal services is the public trader, which is under the obligation to supply electrical power to all associated users.
However, once a person opts out of the universal services system, such person becomes the electricity market participant and is free to choose an electricity trader and, accordingly, to purchase the electrical power for free price.
The electrical power can be traded by the following persons:
The power is then delivered by either the public trader or by the distribution system operator, provided that to its distribution networks less than one hundred thousand users are connected.
The provider of the electrical power can always be changed, provided, however, that there is an at least two months prior notice submitted by the user (the electricity market participant) to both the electricity trader, with whom it has a valid agreement on supply of power and the relevant distribution system operator.
Overall the system is working quite well and the market participants in Latvia are well accustomed to the above rules and are using the advantages, offered by the liberalised market. Once the Estonian and Lithuanian energy markets are open as well we would expect more cross-border activity as well.
4. Liberalization of Estonian electricity market
Estonia is the last country, not only among Baltics, but among all the EU countries to completely open the electricity market. The reasons for this are rooted in the specific geographic and technical circumstances prevailing when Estonia was acceding to the EU in 2004. The exceptions granted to Estonia during the accession process were based on the need to maintain the integrity of the EU electricity market, protect the investments made for the enhancement certain technical capabilities (Narva Electrical Plant) and from the need to further develop Estonia’s connectivity to the EU and Nordic power grid by building the Estlink 1 cable (project completed) and Estlink 2 cable (project under way). The completion of those projects should ensure that Estonia meets all technical requirements to fully open the electricity market in 2013.
The guiding principles ad rules of the liberalization of the electricity market are provided by the Electricity Market Act, adopted in 2004, which has gone through major changes in 208, 2009 and 2010. The act defines the market participants, who are electricity undertaking (producer, network operator, line possessors and seller), customer, balance provider and electricity exchange operator.
1 April 2010 marked an important milestone in liberalization of Estonian electricity market as 35% of the Estonian electricity market opened. This was preceded by unbundling the main power grid from the state-owned electricity producer Eesti Energy, establishment of an independent transmission system operator Elering that also shall operate the Estlink-1 cable and shall lead the completion of the Estlink-2 cable. To further develop the rules and principles necessary for the liberalization of the electricity market, amendments to the Electricity Market Act were made and came into force on 27.02.2010.
The amendments define the operation of the electricity exchange, including the definition of the electricity exchange operator and trader in electricity exchange as market participants and thereby subjecting them to the regulator (Estonian Competition Authority).
One of the key amendments concerns the definition of “eligible customers” under the Electricity Market Act. An eligible customer is a customer who is under obligation to purchase the electricity from electricity market with free market prices. The goal of the amendment was to enlarge the amount of the eligible customers, to enable the opening of the 35% of the electricity market in practice. The earlier regulation provided that the status of eligible customer is to be defined according to the throughput capacity of a single “connection point” through which a customer is connected to the network and consumes the electricity for its “own use”, then according to the amendments, the status of “eligible customer” is now defined through the place of consumption. Consumer that uses electricity in a single place of consumption in excess of 2 GWh, is automatically qualified as eligible customer. This amendment affects potentially hundreds of consumers, who are now unable to buy electricity at more affordable regulated prices and have to buy it from the open market. The amendment has already sparked a number of legal disputes as to the extent of the definition of the eligible customer and has prompted the regulator (Estonian Competition Authority) and the Estonian Ministry of Economic Affairs and Communications to issue clarifications on the topic. According to the clarifications consumers who re-sell the electricity to customers who let or sublet the property (office spaces, shopping centers etc) fall under the definition of “eligible customer”. At the same time the Competition Authority has emphasized that the electricity consumed at the place of consumption has to be consumed for “the own use” of the consumer. It can be predicted that the scope of definition of the “eligible consumer” and “own use” may need further clarification in legal disputes.
The next step in liberalization of the Estonian electricity market shall take place in 2011 where the scope of “eligible consumers” shall be defined by the Minister of Economic Affairs and Communications by the determining the respective amounts of consumption. The determinations shall be made by 30 September 2010, and it has to meet the goal of 35% free electricity market. The same applies to the year 2012. Starting from 1 January 2013 all consumers shall be regarded as eligible consumers and Estonian electricity market is fully opened.
Estonia is making only its first steps in liberalizing its electricity market. In this context there are important issues that need to be tackled and legal interests that have to be kept in mind. Those include the principles and rules of operating of the electricity exchange, the scope of definition of the eligible consumers, the various issues arising at the conclusion of the purchase contracts of electricity from free market, the rules related to the support measures of cogeneration of renewable energy. This calls for well-pondered decisions in coming months and years.
1Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC OJ 2003 L 176, p. 37.
2Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas, OJ 2003 L 176, p. 57.
Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity, OJ 1997 L 27, p. 20.
3Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing 4Directive 2003/54/EC, OJ 2009 L 211, p. 55.
5See 9 December 2009 Order of the Energy minister of the Republic of Lithuania No. 1-244 “Considering The Rules of Electricity Trade“.
6www.baltpool.lt
7In Latvian: Elektroenerģijas tirgus likums. In force as of 08.06.2005, as amended on 10.04.2008.
8The text of the guidelines is available here: http://www.sprk.gov.lv/index.php?id=975&sadala=56.
For further information please contact:
Lithuania: Ms Elzė Matulionytė
Latvia: Ms Julija Jerneva
Estonia: Mr Lauri Almann
The adoption of the Second Energy Package, and Directive No. 2003/54/EC in particular, was undoubtedly a big step forward in the creation of the integrated electricity market, however, its implementation by the Member States has shown that more needs to be done to ensure that all industry and private customers receive the full benefits from the market opening in energy sectors. To complete the integration of the market and to remove remaining obstacles to the sale of electricity on equal terms and without discrimination or disadvantages within the Community, an additional follow-up package of legislative measures has recently been adopted. Directive No. 2009/72/EC concerning common rules for the internal market in electricity4 forms part of the Third Energy Package. With the Third Energy Package EU legislators and the Member States aim to create proper conditions to remove the remaining obstacles to the sale of electricity by improving non-discriminatory network access and an equally effective level of regulatory supervision. In support of unbundling, the new Directive No. 2009/72/EC goes a step further than the existing regulation and provides not merely for a separation of legal form, organisation and decision making, but also for unbundling of ownership. The latter is expected to ensure network operation is fully independent of supply and generation interests and to prevent exchanges of any confidential information. A transposition deadline of March 2011 has been set, meaning Directive No. 2009/72/EC has to be incorporated into national law by that date. The national transposition measures adopted have to enter into force in March 2013. In light of the specific nature of the electricity sector, the preparation for its implementation calls for the de facto liberalization of the sector to start immediately. This is why the member states, and in particular the Baltic States, are undertaking further regulatory steps to ensure the liberalisation of their electricity sectors.
2. Liberalization of the Lithuanian electricity market
The Lithuanian electricity sector has long traditions of being controlled by a vertically-integrated state- owned energy company. In 2002, efforts were made to unbundle the transmission and distribution network. Upon accession to the EU, Lithuania’s government policy and its legislative framework for the electricity sector were harmonized with the Second EU Electricity package (through the new Law on Electricity). Public suppliers provide electricity to consumers for a regulated price in the absence of the possibility or preference to choose an independent supplier, while independent suppliers should supply electricity to all other eligible customers at a contractual price. However, only a few eligible customers have opted to buy electricity from independent suppliers. Thus liberalization of the electricity market was a rather formal concept.
From 1 January 2010, circumstances and the legal regulation in the Lithuanian electricity market have changed substantially however. Since this date a new stage of the Development Plan of the Lithuanian Electricity Market (the Development Plan) has started. In addition the amendments to the Law on Electricity new Rules on Trade in Electricity entered into force. These acts create new opportunities for companies to participate in the electricity market, which is finally beginning to open up in practice. Implementation of the Development Plan also provides a real opportunity for Lithuanian electricity consumers to obtain electricity according to their individual needs (at easily and clearly comparable, transparent prices and also by choosing the electricity provider and by using all mechanisms of the free electricity market).
The Development Plan foresees that from the beginning of 2010 large electricity users, who altogether account for 35 percent of the Lithuanian electricity demand, are exempted from the regulated electricity tariff. To this end since the 1st January 2010 regulated electricity tariffs are no longer applied to objects where the consumption capacity exceeds 400 kW.
Users holding such electricity objects must choose an independent electricity supplier. They can no longer buy electricity from a public supplier, unless they are not ready to conclude contracts with the independent electricity suppliers. In the latter case, such users may purchase electricity from a public supplier until the transitional period is completed (the 1st July 2010). Naturally, on the expiration of the transitional period, these users must purchase electricity from independent suppliers in any case.
Moreover, the segment of the free electricity market will gradually increase, as from the year 2011 the regulated electricity tariffs will not be applicable for electricity users exceeding 100 kW, from 2012 – for users exceeding 30 kW, and from 2013 – for all remaining commercial consumers. For this reason it is now the period to conclude contracts with independent electricity suppliers before the changes mentioned are enforced.
Those electricity consumers, who must already purchase electricity at non-regulated prices in accordance with the Development Plan, are required to terminate their contracts with public suppliers with immediate effect. These users, must conclude two contracts to replace their current one: a contract for electricity supply with an independent electricity supplier (or a few suppliers); and a contract for electricity distribution with a distribution system operator.
Another substantial factor influencing the conditions of the electricity market is the changes in the wholesale electricity market. Having regard to the compulsory opening of the electricity market and the necessity to secure the functioning of deregulated electricity prices, on 1 January, 2010 the Lithuanian electricity power exchange started activity. BALTPOOL UAB is the operator of the power exchange and the licensed electricity market operator. The main function of the company is to organize the wholesale electricity trade: the trade at the Lithuanian power exchange and bilateral trade. The Lithuanian power exchange is based on the principles of Nord Pool Spot – the power exchange operating in the Nordic countries. The price of electricity changes constantly – every hour the price is different and trading (as in the bourse) is anonymous.
Thus, the companies operating in the Lithuanian market gain an opportunity to participate in the wholesale electricity market. Only direct participants in the market - such as transmission or distribution systems operators, electricity suppliers, importers, exporters and producers5 - are allowed to trade. Consumers are not treated as direct participants in the wholesale market and accordingly they cannot buy electricity at the power exchange. To become a direct market participant in order to trade electricity on the Lithuanian power exchange, a company must acquire a supplier’s, transmission or distribution systems operator’s, importer’s, exporter’s or producer’s license issued by authorized institutions. In addition, a contract must be made with a balance energy supplier on the sale or acquisition of balance electricity.
Trading on the stock exchange is pursued under its regulations determining trade and clearing conditions, responsibility for the breach of rules, market conduct rules, ethical guidelines, payment schedules and trading fees; and under agreements, concluded between the participants and the power exchange operator.
Trading on the Lithuanian power exchange is based on security of the payment among the participants of the electricity market, fair competition, reliability, fairness, equality and clear information principles.
According to a survey conducted by the Lithuanian electricity market operator the average daily (or monthly) wholesale price of electricity at the Lithuanian power exchange is usually lower than the regulated price of electricity, but the price of electricity traded at peak times is more expensive6. The Power Exchange has been operating for too short a period to track consistent tendencies or draw conclusions on the effect of participation in it. In any case, in the light of the forthcoming implementation of the Third EU energy package, liberalization of the electricity markets will move forward and the application of deregulated prices and the trade in electricity through the Power Exchange should prove their benefits.
3. Liberalization of the Latvian electricity market
For once Latvian legislator was ahead of its Baltic colleagues. The Latvian electricity market has been open already since 1 July 2007. Prior to the opening of the market in Latvia the Power Industry Law linked the electrical power trade and network services provision. Therefore in June 2005 the Electrical power market law7 was adopted and it provides for the legal framework of the functioning of the Latvian electrical power market.
The basic principle introduced by the Electrical power market law is that the price of electricity is determined by an agreement between the producers, traders and users. The tariffs are determined by the Public Utilities Regulation Commission (the „Regulator“) and by the law only with respect to the mandatory procurement of the electricity, produced by co-generation or electricity, produced, using renewable energy sources. The Regulator has also issued a number of guidelines for the calculation of the electrical power tariffs8, namely:
- The guidelines for the calculation of the electrical power system operation services tariffs;
- The guidelines for the calculation of the electrical power system distribution services tariffs;
- The guidelines for the calculation of the electrical power tariffs for associated users.
The Electrical power market law distinguishes between two types of electrical power users: the associated users and participants of the electricity market. The associated users are those persons, who do not use the opportunity to become a participant of the electricity market and thereby freely select an electricity trader, but purchase electricity from a public trader or the relevant distribution system operator for tariffs approved by the Regulator. These associated users are entitled to a guaranteed right to a supply of electricity of a certain quality for a price which may be easily and clearly compared and revised (the so called „right to universal service“). The provider of the universal services is the public trader, which is under the obligation to supply electrical power to all associated users.
However, once a person opts out of the universal services system, such person becomes the electricity market participant and is free to choose an electricity trader and, accordingly, to purchase the electrical power for free price.
The electrical power can be traded by the following persons:
- a producer of electricity, which uses one or several producing units in one or several locations and which has been issued a licence for the production of electricity;
- a distribution system operator, provided that to its distribution networks less than one hundred thousand users are connected and only if such distribution system operator complies with the independency requirements of the law; and
- an electricity trader, provided that it receives a respective licence from the Regulator.
The power is then delivered by either the public trader or by the distribution system operator, provided that to its distribution networks less than one hundred thousand users are connected.
The provider of the electrical power can always be changed, provided, however, that there is an at least two months prior notice submitted by the user (the electricity market participant) to both the electricity trader, with whom it has a valid agreement on supply of power and the relevant distribution system operator.
Overall the system is working quite well and the market participants in Latvia are well accustomed to the above rules and are using the advantages, offered by the liberalised market. Once the Estonian and Lithuanian energy markets are open as well we would expect more cross-border activity as well.
4. Liberalization of Estonian electricity market
Estonia is the last country, not only among Baltics, but among all the EU countries to completely open the electricity market. The reasons for this are rooted in the specific geographic and technical circumstances prevailing when Estonia was acceding to the EU in 2004. The exceptions granted to Estonia during the accession process were based on the need to maintain the integrity of the EU electricity market, protect the investments made for the enhancement certain technical capabilities (Narva Electrical Plant) and from the need to further develop Estonia’s connectivity to the EU and Nordic power grid by building the Estlink 1 cable (project completed) and Estlink 2 cable (project under way). The completion of those projects should ensure that Estonia meets all technical requirements to fully open the electricity market in 2013.
The guiding principles ad rules of the liberalization of the electricity market are provided by the Electricity Market Act, adopted in 2004, which has gone through major changes in 208, 2009 and 2010. The act defines the market participants, who are electricity undertaking (producer, network operator, line possessors and seller), customer, balance provider and electricity exchange operator.
1 April 2010 marked an important milestone in liberalization of Estonian electricity market as 35% of the Estonian electricity market opened. This was preceded by unbundling the main power grid from the state-owned electricity producer Eesti Energy, establishment of an independent transmission system operator Elering that also shall operate the Estlink-1 cable and shall lead the completion of the Estlink-2 cable. To further develop the rules and principles necessary for the liberalization of the electricity market, amendments to the Electricity Market Act were made and came into force on 27.02.2010.
The amendments define the operation of the electricity exchange, including the definition of the electricity exchange operator and trader in electricity exchange as market participants and thereby subjecting them to the regulator (Estonian Competition Authority).
One of the key amendments concerns the definition of “eligible customers” under the Electricity Market Act. An eligible customer is a customer who is under obligation to purchase the electricity from electricity market with free market prices. The goal of the amendment was to enlarge the amount of the eligible customers, to enable the opening of the 35% of the electricity market in practice. The earlier regulation provided that the status of eligible customer is to be defined according to the throughput capacity of a single “connection point” through which a customer is connected to the network and consumes the electricity for its “own use”, then according to the amendments, the status of “eligible customer” is now defined through the place of consumption. Consumer that uses electricity in a single place of consumption in excess of 2 GWh, is automatically qualified as eligible customer. This amendment affects potentially hundreds of consumers, who are now unable to buy electricity at more affordable regulated prices and have to buy it from the open market. The amendment has already sparked a number of legal disputes as to the extent of the definition of the eligible customer and has prompted the regulator (Estonian Competition Authority) and the Estonian Ministry of Economic Affairs and Communications to issue clarifications on the topic. According to the clarifications consumers who re-sell the electricity to customers who let or sublet the property (office spaces, shopping centers etc) fall under the definition of “eligible customer”. At the same time the Competition Authority has emphasized that the electricity consumed at the place of consumption has to be consumed for “the own use” of the consumer. It can be predicted that the scope of definition of the “eligible consumer” and “own use” may need further clarification in legal disputes.
The next step in liberalization of the Estonian electricity market shall take place in 2011 where the scope of “eligible consumers” shall be defined by the Minister of Economic Affairs and Communications by the determining the respective amounts of consumption. The determinations shall be made by 30 September 2010, and it has to meet the goal of 35% free electricity market. The same applies to the year 2012. Starting from 1 January 2013 all consumers shall be regarded as eligible consumers and Estonian electricity market is fully opened.
Estonia is making only its first steps in liberalizing its electricity market. In this context there are important issues that need to be tackled and legal interests that have to be kept in mind. Those include the principles and rules of operating of the electricity exchange, the scope of definition of the eligible consumers, the various issues arising at the conclusion of the purchase contracts of electricity from free market, the rules related to the support measures of cogeneration of renewable energy. This calls for well-pondered decisions in coming months and years.
1Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC OJ 2003 L 176, p. 37.
2Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas, OJ 2003 L 176, p. 57.
Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity, OJ 1997 L 27, p. 20.
3Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing 4Directive 2003/54/EC, OJ 2009 L 211, p. 55.
5See 9 December 2009 Order of the Energy minister of the Republic of Lithuania No. 1-244 “Considering The Rules of Electricity Trade“.
6www.baltpool.lt
7In Latvian: Elektroenerģijas tirgus likums. In force as of 08.06.2005, as amended on 10.04.2008.
8The text of the guidelines is available here: http://www.sprk.gov.lv/index.php?id=975&sadala=56.
For further information please contact:
Lithuania: Ms Elzė Matulionytė
Latvia: Ms Julija Jerneva
Estonia: Mr Lauri Almann
