Bucharest Workshop 18-20 May, 2008

Valuation of AssetsBasic Principle – Original Cost Less

Accumulated Depreciation

Privatisation of Distribution Networks and six HPPs (2007). Cost of assests was equal to that of under original cost less accumulated depreciation

Assets used in non-regulated activities are not considered in tariff calculations

Treatment of O&M CostsActivities Provided Outside the Utility

Only the costs that are necessary to carry out regulated activities are treated in tariffs

Costs should incurr at reasonable (acceptable) prices

Allocation of Costs Between Regulated and Non-regulated Activities

List of costs related to regulated activities is defined in the methodology of setting tariffs

According to The Law the Licensees are required to keep separate accounting of costs and revenues for regulated and non-regulated actitivies.

Disallowable Costs in Setting Tariffs

Only the costs necessary for carrying out regulated activities are subject to inclusion in tariff calculation

All other costs remain as disallowable

New Construction

Investors start to recovery the costs for new constructions only after the plant is put into service

Supply Cost

Different sources of supply bear different costs

High volatility is forcastable to some extent

Thank You