guidelines tso restructuring

GUIDELINES FOR TSO GUIDELINES FOR TSO RESTRUCTURINGRESTRUCTURING

Fourth Athens ForumFourth Athens Forum

Athens June 2 to 4th, 2004

Chapter I

Contextual Framework

Clear Vision of Regional Trading Potentialities and

Constraints

Some Harmonization

might be required

Strategy for Regional IntegrationStrategy for Regional Integration

National Energy LawNational Energy Law

EC DIRECTIVESEC DIRECTIVES

MISSING LINKMISSING LINK

TSO RESTRUCTURING REFERENCE FRAMEWORKTSO RESTRUCTURING REFERENCE FRAMEWORKTSO RESTRUCTURING REFERENCE FRAMEWORKTSO RESTRUCTURING REFERENCE FRAMEWORK

STRATEGIC JOINT OPERATION STRATEGIC JOINT OPERATION AGREEMENTS WILL HAVE A AGREEMENTS WILL HAVE A CRITICAL IMPACT ON SMALL CRITICAL IMPACT ON SMALL

COUNTRIES TSO RESTRUCTURINGCOUNTRIES TSO RESTRUCTURING

Balkans Countries: Load Peak 2001

6,912

8,532

6,812

2,796

1,8531,281

7141,256

1,838

01,0002,0003,0004,0005,0006,0007,0008,0009,000

MW

Relative Peak Load in 2001Relative Peak Load in 2001Relative Peak Load in 2001Relative Peak Load in 2001

Consolidated Peak 6600 MW

INTELLECTUAL TECHNICAL COHERENCEINTELLECTUAL TECHNICAL COHERENCE

BLUEPRINT BLUEPRINT FOR THE RESTRUCTURING OF FOR THE RESTRUCTURING OF

NATIONAL TRANSMISSION NATIONAL TRANSMISSION FUNCTIONSFUNCTIONS

Standard Regional Standard Regional Market Design Market Design

CEER/EFETCEER/EFETTSOs Restructuring TSOs Restructuring Guiding Principles Guiding Principles

ETSO/UCTEETSO/UCTE

ValidationValidation ValidationValidation

IMPLEMENTATIONIMPLEMENTATIONSEE - BENCHMARKING

Athens Memorandum of Understanding #1 & #2

National Market Design National Market Design

National Transitory Constraints

Strategy for Regional IntegrationStrategy for Regional Integration

National Energy LawNational Energy Law

EC DIRECTIVESEC DIRECTIVES

RESTRUCTURING REFERENCE FRAMEWORKRESTRUCTURING REFERENCE FRAMEWORKRESTRUCTURING REFERENCE FRAMEWORKRESTRUCTURING REFERENCE FRAMEWORK

INTELLECTUAL LEADERSHIPINTELLECTUAL LEADERSHIP

EUROPEAN EUROPEAN COMMISSION COMMISSION

MACRO REGIONAL PLANNING

(Key Milestones)


(Key Milestones)


(Key Milestones)


(Key Milestones)

HARMONIZATIONHARMONIZATION

UCTE

OPERATION STANDARDS

UCTE

SYSTEM OPERATION & SECURITY

EFETEFET

TRADING MECHANISMS

GUIDELINES FOR EFFICIENT TRADING

ETSOETSO

MARKET DEVELOPMENT FACILITATION

GUIDELINES FOR TSO

RESTRUCTURING

CEER

FAIR LEVEL PLAYING FIELD & MONITORING

CEER

SEE REGION STANDARD MARKET

DESIGN

CHANGE MANAGEMENT ADVISORY COMMITTEE

LEAD RESPONSIBILITYLEAD RESPONSIBILITY

URGENTLY REQUIREDURGENTLY REQUIRED

LEADERSHIP FRAMEWORKLEADERSHIP FRAMEWORKLEADERSHIP FRAMEWORKLEADERSHIP FRAMEWORK

THE TSO BENCHMARKING FRAMEWORKTHE TSO BENCHMARKING FRAMEWORK

GUIDELINES FOR THE REFORM OF THE

TRANSMISSION FUNCTIONS

NATIONAL BLUEPRINTS FOR THE

REFORM


REFORM


REFORM


REFORM


REFORM


REFORM


REFORM

NATIONAL BLUEPRINTS FOR TSO

REFORMS


REFORM


REFORM


REFORM


REFORM


REFORM


REFORM


REFORM

NATIONAL RESTRUCTURING IMPLEMENTATION

PLANS

BENCHMARKINGBENCHMARKING

ISSUES

COUNTRIES

ATHENS FORUM

REPORTING

ETSOETSO CEERCEERUCTEUCTE EFETEFET

REVIEW & ANALYSIS

EXECUTION AND PRESENTATION OF BENCHMARKEXECUTION AND PRESENTATION OF BENCHMARK

• Electronic data collection to facilitate information entry and compilation

• Presentation and consultation via a central database linked to background documents

• Wide availability of results by publication and update maintenance via global internet website

Might be done by Czech Might be done by Czech International AssistanceInternational Assistance

INITIAL DATA COLLECTION TEMPLATE (I)INITIAL DATA COLLECTION TEMPLATE (I)

Straightforward working template developed to collect and organize information within an

Excel spreadsheet

•Simple “tree” structure to address all main areas being benchmarked

•Expandable “Tree” structure Provides more detailed information as required

Information to be collected for each country

INITIAL DATA COLLECTION TEMPLATE (II)INITIAL DATA COLLECTION TEMPLATE (II)

•Area being benchmarked can be expanded within “tree” structure to cover more detailed criteria

•Collected information presented in a color coded way or as links… (when appropriate)

INITIAL DATA COLLECTION TEMPLATE (III)INITIAL DATA COLLECTION TEMPLATE (III)

Links are activated to display background documents including text, spreadsheets, organization charts, presentations, maps, etc.

IMPLEMENTATION TIMEFRAME AND DANGERSIMPLEMENTATION TIMEFRAME AND DANGERSIMPLEMENTATION TIMEFRAME AND DANGERSIMPLEMENTATION TIMEFRAME AND DANGERS

BUILD UP OF VISION &

PERSPECTIVE

2002 2003

DESIGN & PLANNING

MOBILIZATION OF MEANS

2004

SET UP OF VIABLE INSTITUTIONAL FOUNDATIONS

2005

DEVELOPMENT OF MARKET

PARTICIPANTS

2006

PROGRESSIVE MARKET OPENING

2007

HARVESTING OF BENEFITS

2008

Strategic Strategic Vision of Vision of Potential Potential

Alliances is Alliances is Still Missing Still Missing (Currently underway)(Currently underway)

Countries Still Countries Still Have a Too Have a Too Short-Term Short-Term

and National and National PerspectivePerspective

(Danger of (Danger of replicating status replicating status

quo)quo)

Long-Term Long-Term Stability and Stability and Continuity in Continuity in Implementing Implementing the reforms is the reforms is

Important Important (Long & difficult (Long & difficult

process)process)

Establishment Establishment of Healthy of Healthy

Competitive Competitive Environment Environment (Increasing Number (Increasing Number

and Diversity of and Diversity of Market Participants)Market Participants)

Development of Development of Competitiveness Competitiveness and Progressive and Progressive State Divestiture State Divestiture

(Performance (Performance Improvement)Improvement)

Final Final ObjectiveObjective

The Market Design FrameworkThe Market Design FrameworkThe Market Design FrameworkThe Market Design Framework

Balancing MarketBalancing Market0 to 5% 0 to 5%

Real Time by System Operator

National and Regional Bilateral

Contracts

70 to 80% of 70 to 80% of DemandDemand

Annual – Seasonnal - Monthly

Day Ahead MarketDay Ahead Market15 to 20% 15 to 20%

Week to Day Ahead

GENERATOR CUSTOMER

TRADERSUPPLIERBROOKER

OffersBids

Price 1Price 1

Price 2Price 2

Price 3Price 3

Financial ProductsFinancial Products

Risk Mitigation

FUTURE CHANGES ARE ALREADY PREDICTABLEFUTURE CHANGES ARE ALREADY PREDICTABLEFUTURE CHANGES ARE ALREADY PREDICTABLEFUTURE CHANGES ARE ALREADY PREDICTABLE

• MARKET PARTICIPANTS: 2005 Industrial Eligible Customers

2005 Emergence of Trading Intermediaries

2006 Mix of Public/Private Participants

2006 Cross Border Alliances & Partnership

2006 Commercial Eligible Customers

2007 All Customers

2008 More Sophisticated Financial Products

Increased Number of:• Participants,• Intermediaries,• Commercial interests,• Competitors• Independent Behaviors• Products on the Market• Regulation

Flexibility in the Structures will be Flexibility in the Structures will be a Key Success Factora Key Success Factor

• MARKET: Consensus is already established

INTROVERT ORGANIZATIONS 1900 -

1980

COMMAND AND CONTROL

ORGANIZATIONS

CLIENT-ORIENTED ORGANIZATIONS

MARKET ORIENTED ORGANIZATIONS

More client oriented organizations are requiredMore client oriented organizations are requiredMore client oriented organizations are requiredMore client oriented organizations are required

EXPERTISE EXPERTISE CONCENTRATED AT CONCENTRATED AT

THE CORPORATE THE CORPORATE LEVELLEVEL

• Ever expanding

• Self centered

• Poor performers Can Hide within the Organization

• Protect Status Quo

• Internal controls difficult

• Client service oriented

• Profit center easily controllable

• Highly flexible and adaptable

• Competitive

DISTRIBUTED EXPERTISE, DISTRIBUTED EXPERTISE, TOOLS, SYSTEMS, TOOLS, SYSTEMS, MEANS, DECISION MEANS, DECISION

POWER AND INOVATIONPOWER AND INOVATION

Chapter IIChapter II

Guidelines for High Level Guidelines for High Level Unbundling of Power SectorUnbundling of Power Sector

STARTING POINT – Vertically Integrated Utility

IMPLEMENTATION FRAMEWORKIMPLEMENTATION FRAMEWORKIMPLEMENTATION FRAMEWORKIMPLEMENTATION FRAMEWORK

Telecommunication

CORPORATE SERVICES

Assets Management, Maintenance, Construction and Engineering

GENERATION

TRANSMISSION

DISTRIBUTION

SHARES OWNED BY THE GOVERNMENT

STARTING POINT – VERTICALLY INTEGRATED STARTING POINT – VERTICALLY INTEGRATED UTILITYUTILITY

STARTING POINT – VERTICALLY INTEGRATED STARTING POINT – VERTICALLY INTEGRATED UTILITYUTILITY

PHASE I – Functional Unbundling Within the Vertically Integrated Utility

CORPORATE SERVICES

TELECOMMUNICATION SERVICES

SUPPORT NON-CORE SERVICES

GENERATION TRANSMISSION DISTRIBUTION

THERMAL

HYDRO

NUCLEAR & OTHERS

GO

TO

SO

MO

POWER SECTOR SUPPORTPOWER SECTOR SUPPORT COMMERCIAL



PHASE I - FUNCTIONAL UNBUNDLINGPHASE I - FUNCTIONAL UNBUNDLINGPHASE I - FUNCTIONAL UNBUNDLINGPHASE I - FUNCTIONAL UNBUNDLING

ADVANTAGES Soft preparation for corporatization while

political process unfold;

Opportunity for internal rationalization before corporatization;

Identification of stranded resources before transfer to new operating corporations;

DISADVANTAGES Performed by current rather than future line

managers (lack of critical screening)

Based on current organizational structure and processes rather than redesigned structure and processes

Based on the use of same management systems, software and constraints;

Often reproduce the same functional status quo (no reengineering of operations)

CORPORATE SERVICES




SHARES STILL OWNED BY THE GOVERNMENT

THERMAL

HYDRO

NUCLEAR & OTHERS

GO

TO

SO

MO


PHASE II – High Level UnbundlingGO

TO

SO

MO

THERMAL

HYDRO

NUCLEAR & OTHERS

STATE HOLDING COMPANYGENERAL MANAGER

SUB-SECTOR MANAGERSUB SECTOR MANAGER SUB-SECTOR MANAGERSUB-SECTOR MANAGER


CORPORATE SERVICES




THERMAL

HYDRO

NUCLEAR & OTHERS

GO

TO

SO

MO




Three Leadership Paths can be Considered:Three Leadership Paths can be Considered: Government Lead PathGovernment Lead Path Utility Lead PathUtility Lead Path Government Initiated PathGovernment Initiated Path

HIGH LEVEL UNBUNDLINGHIGH LEVEL UNBUNDLING

STARTING FROM HERE THE REFORM STARTING FROM HERE THE REFORM NEEDS TO BE ORCHESTRATED FROM NEEDS TO BE ORCHESTRATED FROM

A LONG-TERM PERSPECTIVEA LONG-TERM PERSPECTIVE

Three concurrent processes need to be Three concurrent processes need to be simultaneously managedsimultaneously managed

IMPLEMENTATIONIMPLEMENTATION

IMPLEMENTATION

DEC 2004

JUL 2006

DEC 2006

JUL 2007DESIGNDESIGN

DESIGN & PLANNING

JUNE 2004

OPERATIONS

CURRENT LEVEL OF OPERATIONCURRENT LEVEL OF OPERATION

CLEAN UP - RATIONALIZATIONCLEAN UP - RATIONALIZATION

TIME

EFFORT & MONEY

HARVESTING OF HARVESTING OF BENEFITSBENEFITS

RESTRUCTURING DESIGN HORIZONRESTRUCTURING DESIGN HORIZON

PHASE IPHASE IFUNCTIONAL

UNBUNDLING & DESIGN

PHASE IIPHASE IIHIGH LEVEL

CORPORATIZATION

PHASE IIIPHASE IIICORPORATIZATION OF

BUSINESS UNITS

PHASE IVPHASE IVDIVESTITURE AND

PRIVATIZATION

PROPER CONDITIONS FOR

MARKET OPENING

DANGER

GLOBAL PERSPECTIVEGLOBAL PERSPECTIVEGLOBAL PERSPECTIVEGLOBAL PERSPECTIVE

GOVERNMENT LEAD IMPLEMENTATION PATHGOVERNMENT LEAD IMPLEMENTATION PATHGOVERNMENT LEAD IMPLEMENTATION PATHGOVERNMENT LEAD IMPLEMENTATION PATH

GOVERNMENTGOVERNMENT

MINISTRY OF FINANCE OR ECONOMY

CORPORATE SERVICES



GENERATION TRANSMISSION

THERMAL

HYDRO

NUCLEAR & OTHERS

GO

TO

SO

MO


DISTRIBUTION

GENERATION

THERMAL

HYDRO

NUCLEAR & OTHERS

GO

TO

SO

MO

TRANSMISSION DISTRIBUTION

TELECOMSTELECOMS

SUPPORT Co

POWER SECTOR POWER SECTOR SUPPORTSUPPORT

NON CORENON CORE

GOVERNMENT DISPOSE OF LEFT OVER

FURTHER REFORMS DOWNSTREAM MORE DIFFICULT TO IMPLEMENT

WITHOUTDIRECT GOVERNMENT INTERVENTION IN OPERATIONAL MATTERS

CORPORATE SERVICES




THERMAL

HYDRO

NUCLEAR & OTHERS

GO

TO

SO

MO


DISTRIBUTION


SHARES OWNED BY THE STATE

TRANSMISSION SHELL

GENERATION SHELL

DISTRIBUTION SHELL

SUPPORT & NON-CORE SHELL

SHELL COMPANIES READY TO RECEIVE TRANSFER OF ASSETS, RESOURCES AND LIABILITIES FROM VERTICALLY INTEGRATED UTILITY

The Vertically Integrated Utility is Incorporating an Appropriate Number of Subsidiary Companies

UTILITY LEAD IMPLEMENTATION PATHUTILITY LEAD IMPLEMENTATION PATHUTILITY LEAD IMPLEMENTATION PATHUTILITY LEAD IMPLEMENTATION PATH

CORPORATE SERVICES


THERMAL

HYDRO

NUCLEAR & OTHERS


TELECOMSTELECOMS

GO

TO

SO

BMO

TRANSMISSIONGENERATION

THERMAL

HYDRO

NUCLEAR & OTHERS

DISTRIBUTION

POWER POWER SECTOR SECTOR SUPPORTSUPPORT

NON NON CORECORE

SUPPORT Co

GENERATION HOLDING OWNS THE SHARES OF THE OPERATING COMPANIES


SUB-SECTOR MANAGER

SUB SECTOR MANAGER

SUB-SECTOR MANAGER

SUB-SECTOR MANAGER

GOVERNMENTGOVERNMENTSTATE OWNS THE SHARES OF THE HOLDING COMPANY

UTILITY LEAD IMPLEMENTATION PATHUTILITY LEAD IMPLEMENTATION PATHUTILITY LEAD IMPLEMENTATION PATHUTILITY LEAD IMPLEMENTATION PATH


NON NON CORECORE

LEFT OVER

FORMER VERTICALLY INTEGRATED UTILITY



STATE HOLDING COMPANY

GENERAL MANAGER

SUB-SECTOR MANAGER

SUB SECTOR MANAGER

SUB-SECTOR MANAGER

SUB-SECTOR MANAGER

Telecommunication

CORPORATE SERVICES

Assets Management, Maintenance, Construction and Engineering

GENERATION

TRANSMISSION

DISTRIBUTION

SHARES OWNED BY THE GOVERNMENT

GOVERNMENT INITIATED IMPLEMENTATION PATHGOVERNMENT INITIATED IMPLEMENTATION PATHGOVERNMENT INITIATED IMPLEMENTATION PATHGOVERNMENT INITIATED IMPLEMENTATION PATH

NON COOPERATIVE MANAGEMENT

GOVERNMENT ESTABLISH AND STAFF A SHELL STATE HOLDING COMPANY

The Government Own the Shares of the Holding The Government Own the Shares of the Holding

(No Significant Assets Yet)(No Significant Assets Yet)



GENERAL MANAGER

SUB-SECTOR MANAGER

SUB SECTOR MANAGER

SUB-SECTOR MANAGER

SUB-SECTOR MANAGER

CORPORATE SERVICES


NON-CORE SERVICES


TRANSMISSION SHELL

GENERATION SHELL

DISTRIBUTION SHELL

SUPPORT & NON-CORE SHELL

The Holding Establish Shell Companies (Own the Shares)The Holding Establish Shell Companies (Own the Shares)


VERTICALLY INTEGRATED

UTILITY

And Lead the Realization of the And Lead the Realization of the Preparatory Functional Unbundling Preparatory Functional Unbundling

and Screening Processand Screening Process

CORPORATE SERVICES




THERMAL

HYDRO

NUCLEAR & OTHERS

GO

TO

SO

MO


DISTRIBUTION

NO ASSETS YETNO ASSETS YET

BUT ORGANIZATIONAL DESIGN BUT ORGANIZATIONAL DESIGN INITIATEDINITIATED



GENERAL MANAGER

SUB-SECTOR MANAGER

SUB SECTOR MANAGER

SUB-SECTOR MANAGER

SUB-SECTOR MANAGER

CORPORATE SERVICES


NON-CORE SERVICES



CORPORATE SERVICES




THERMAL

HYDRO

NUCLEAR & OTHERS

GO

TO

SO

MO


DISTRIBUTION

TRANSMISSION DISTRIBUTION SUPPORT Co



THERMAL

HYDRO

NUCLEAR & OTHERS

GO

TO

SO

MO


DISTRIBUTIONGeneration Transmission

Telecommunications

SUPPORT AND NON-CORE SERVICES


TELECOMSTELECOMS

TRANSMISSION SHELL

GENERATION SHELL

DISTRIBUTION SHELL

SUPPORT & NON-CORE SHELLGO

TO

SO

MO

THERMAL

HYDRO

NUCLEAR & OTHERS


NON NON CORECORE



DISTRIBUTIONGeneration Transmission

Telecommunications

Non-Core and Support Services


NON NON CORECORE

LEFT OVER




TELECOMSTELECOMS

GO

TO

SO

BMO

TRANSMISSIONGENERATION

THERMAL

HYDRO

NUCLEAR & OTHERS

DISTRIBUTION

SUPPORT Co


SUB-SECTOR MANAGER

SUB SECTOR MANAGER

SUB-SECTOR MANAGER

SUB-SECTOR MANAGER

LEFT OVER


NON NON CORECORE

LEFT OVER

NATIONAL ENERGY POLICY DEVELOPMENT

IMPLEMENTATION OF NATIONAL ENERGY POLICY

AND MANAGEMENT OF THE RESTRUCTURING PROCESS UNTIL FULL

DIVESTITURE

INDEPENDENT MANAGEMENT OF

OPERATIONS

SECTOR ORGANIZATION AT THE END OF SECTOR ORGANIZATION AT THE END OF PHASE II – HIGH LEVEL UNBUBDLINGPHASE II – HIGH LEVEL UNBUBDLING

SECTOR ORGANIZATION AT THE END OF SECTOR ORGANIZATION AT THE END OF PHASE II – HIGH LEVEL UNBUBDLINGPHASE II – HIGH LEVEL UNBUBDLING

AND STILL FAR FROM A MARKET AND STILL FAR FROM A MARKET ENVIRONMENTENVIRONMENT

NO INTERNAL COMPETITIONNO INTERNAL COMPETITIONSTILL A VERTICALLY INTEGRATED UNDERTAKING

The Market Design FrameworkThe Market Design FrameworkThe Market Design FrameworkThe Market Design Framework

Balancing MarketBalancing Market0 to 5% 0 to 5%

Real Time by System Operator

National and Regional Bilateral

Contracts

70 to 80% of 70 to 80% of DemandDemand

Annual – Seasonnal - Monthly

Day Ahead MarketDay Ahead Market15 to 20% 15 to 20%

Week to Day Ahead

GENERATOR CUSTOMER

TRADERSUPPLIERBROOKER

OffersBids

Price 1Price 1

Price 2Price 2

Price 3Price 3

Financial ProductsFinancial Products

Risk Mitigation

Chapter IIIChapter III

Guidelines for Establishing a Guidelines for Establishing a Competitive Environment Prior Competitive Environment Prior to Market Openingto Market Opening

PHASE III – Corporatization of Business Units


GENERAL MANAGER

PORTFOLIO MANAGER OTHERPORTFOLIO MANAGER GENERATION PORTFOLIO MANAGER DISTRIBUTION

STATE OWNED DISTRIBUTORS

Distributor 3Distributor 3



STATE OWNED POWER PLANTS

GO

TO

MO

SO

TelecomTelecom

MeteringMetering

PHASING OUT

Public Wholesale SupplierPublic Wholesale Supplier

Left OverLeft Over

LEFT OVERLEFT OVER

TSO

PHASE II – High Level Unbundling of Sub-SectorsGO

TO

SO

MO

THERMAL

HYDRO

NUCLEAR & OTHERS




CORPORATE SERVICES




THERMAL

HYDRO

NUCLEAR & OTHERS

GO

TO

SO

MO




PROGRESSIVE ESTABLISHMENT OF A COMPETITIVE ENVIRONMENTPROGRESSIVE ESTABLISHMENT OF A COMPETITIVE ENVIRONMENT

INDEPENDENT OPERATING CORPORATIONS EXPOSED TO COMPETITION

MISSIONMISSION

IMPROVEMENT OF THE INDIVIDUAL PERFORMANCE AND OF THE IMPROVEMENT OF THE INDIVIDUAL PERFORMANCE AND OF THE COMPETITIVENESS OF EACH BUSINESS UNIT, WITH THE OBJECTIVE OF COMPETITIVENESS OF EACH BUSINESS UNIT, WITH THE OBJECTIVE OF

SECURING ITS LONG-TERM VIABILITY IN THE NATIONAL AND SECURING ITS LONG-TERM VIABILITY IN THE NATIONAL AND REGIONAL ELECTRICITY MARKETREGIONAL ELECTRICITY MARKET

ANDANDPREPARE FOR STATE DIVESTITURE (IF AND WHEN APPROPRIATE)PREPARE FOR STATE DIVESTITURE (IF AND WHEN APPROPRIATE)

POLICY ORIENTATIONS


PHASE III – CORPORATIZATION AND PRODUCTIVITY PHASE III – CORPORATIZATION AND PRODUCTIVITY IMPROVEMENT OF BUSINESS UNITSIMPROVEMENT OF BUSINESS UNITS

PHASE III – CORPORATIZATION AND PRODUCTIVITY PHASE III – CORPORATIZATION AND PRODUCTIVITY IMPROVEMENT OF BUSINESS UNITSIMPROVEMENT OF BUSINESS UNITS


GENERAL MANAGER

PORTFOLIO MANAGER OTHER

PORTFOLIO MANAGER GENERATION

PORTFOLIO MANAGER DISTRIBUTION

PORTFOLIO MANAGER TRANSMISSION

PORTFOLIO MANAGER TRANSMISSION

ARMS LENGH MANAGEMENT OF ARMS LENGH MANAGEMENT OF PORTFOLIOS OF INDEPENDENT BUSINESS PORTFOLIOS OF INDEPENDENT BUSINESS

UNITSUNITS

TSMO

GO

TO

SO

BMO

Generator 1Generator 1







Generator 8

Generator 9

Generator 10









WholesaleWholesale

ConstructionConstruction

EngineeringEngineering

TelecomTelecom

Non CoreNon Core

Non CoreNon Core

Non CoreNon Core

Non CoreNon Core

PHASE III – Corporatization of Business Units


GENERAL MANAGER

PORTFOLIO MANAGER OTHERPORTFOLIO MANAGER GENERATION PORTFOLIO MANAGER DISTRIBUTION






GO

TO

MO

SO

TelecomTelecom

MeteringMetering

PHASING OUT

Public Wholesale SupplierPublic Wholesale Supplier

Left OverLeft Over

LEFT OVERLEFT OVER

TSO

PHASE II – High Level Unbundling of Sub-SectorsGO

TO

SO

MO

THERMAL

HYDRO

NUCLEAR & OTHERS




CORPORATE SERVICES




THERMAL

HYDRO

NUCLEAR & OTHERS

GO

TO

SO

MO



PHASE IV – State Divestiture or Privatization








Non CoreNon Core

Non CoreNon Core

Ind SupplierInd Supplier



APPROPRIATE TIMING FOR MARKET OPENINGAPPROPRIATE TIMING FOR MARKET OPENING

PHASING OUT OF NON-CORE CO




TSMOGO

TO

MO

SO

Independent State Owned TSMO

TelecomTelecom

MeteringMetering LEFT LEFT OVEROVER

PHASE IV – STATE DIVESTITUREPHASE IV – STATE DIVESTITUREPHASE IV – STATE DIVESTITUREPHASE IV – STATE DIVESTITURE


PORTFOLIO MANAGER OTHER

PORTFOLIO MANAGER GENERATION

PORTFOLIO MANAGER DISTRIBUTION

LIQUIDATION MANAGER








Generator 8

Generator 9

Generator 10









WholesaleWholesale



TelecomTelecom

Non CoreNon Core

Non CoreNon Core

Non CoreNon Core

Non CoreNon Core







Independent Privately Owned

Power plants






Privately Owned Distribution Companies



Non CoreNon Core

Non CoreNon Core



Private Businesses

PROCEEDS OF DIVESTITUREPROCEEDS OF DIVESTITURE

PREDEFINED MAXIMUM % OF VALUE OF STRANDED ASSETS PREDEFINED MAXIMUM % OF VALUE OF STRANDED ASSETS USED TO LIQUIDATE LEFT OVERSUSED TO LIQUIDATE LEFT OVERS

BALANCE OF PROCEEDS PAID TO THE CONSOLIDATED STATE BALANCE OF PROCEEDS PAID TO THE CONSOLIDATED STATE ACCOUNT AS DIVIDENDS FROM THE HOLDINGACCOUNT AS DIVIDENDS FROM THE HOLDING

PREDEFINED MAXIMUM % OF PROCEEDS ALLOCATED TO PREDEFINED MAXIMUM % OF PROCEEDS ALLOCATED TO FURTHER PRODUCTIVITY IMPROVEMENT OF REMAINING FURTHER PRODUCTIVITY IMPROVEMENT OF REMAINING

STATE OWNED BUSINESS UNITSSTATE OWNED BUSINESS UNITS

Chapter IVChapter IV

Organizational Design of Organizational Design of the Power Transmission the Power Transmission FunctionsFunctions

TRANSMISSION INSTITUTIONAL FRAMEWORK OPTIONS


GENERAL MANAGER

SUB-SECTOR SUB-SECTOR OTHEROTHER

SUB-SECTOR SUB-SECTOR GENERATIONGENERATION

SUB-SECTOR SUB-SECTOR DISTRIBUTIONDISTRIBUTION

SUB-SECTOR TRANSMISSION

TSMO

GO

TO

BMO

SO

REG

ULA

TO

RS

Regional Day Ahead Market

GENERATION DISTRIBUTIONNON

CORE

TRANSMISSION GRID RELATED

SYSTEMS OPERATION RELATED

TRANSMISSION GRID OWNERSHIP

RELATED

TRANSMISSION GRID OPERATION

RELATED

POWER SYSTEM OPERATION

RELATED

MARKET OPERATION

RELATED

Sorting of Critical Transmission FunctionsSorting of Critical Transmission FunctionsSorting of Critical Transmission FunctionsSorting of Critical Transmission Functions

GO

SO

TO

BMO

WILL LIKELY BE THE FINAL OPTION WILL LIKELY BE THE FINAL OPTION RETAINED BY COUNTRIES SHARING RETAINED BY COUNTRIES SHARING

BALANCING AND DAY-AHEAD MARKETSBALANCING AND DAY-AHEAD MARKETS

SOLE OPTION CURRENTLY CONSIDERED SOLE OPTION CURRENTLY CONSIDERED BY ETSO MEMBERSBY ETSO MEMBERS

OPTION FAVORED IN NORTH AMERICAOPTION FAVORED IN NORTH AMERICA

RETAINED IN CROATIA AND BiHRETAINED IN CROATIA AND BiH

Transmission Institutional Organizational OptionsTransmission Institutional Organizational OptionsTransmission Institutional Organizational OptionsTransmission Institutional Organizational Options

INCREASED LEVEL INCREASED LEVEL OF:OF:

• INDEPENDENCEINDEPENDENCE

• NUMBER OF PLAYERSNUMBER OF PLAYERS

• INSTITUTIONAL INSTITUTIONAL COMPLEXITYCOMPLEXITY

• MANAGEMENT MANAGEMENT COMPLEXITYCOMPLEXITY

• EFFORT REQUIRED TO EFFORT REQUIRED TO FORM BUSINESS UNITSFORM BUSINESS UNITS

• MORE COMPLEXITY TO MORE COMPLEXITY TO MANAGE INTERFACES MANAGE INTERFACES (AGREEMENTS)(AGREEMENTS)

• MORE REGULATIONMORE REGULATION

• OPERATIONS COSTSOPERATIONS COSTS

• HIGHER DEGREE OF HIGHER DEGREE OF CONFIDENCE OF PRIVATE CONFIDENCE OF PRIVATE INVESTORSINVESTORS

GO TO ISO IMOOPTION 4

UNLIKELY OPTION UNLIKELY OPTION (AT LEAST FOR MANY YEARS)(AT LEAST FOR MANY YEARS)

IMOTSO

(GO+TO+SO) OPTION 3

GridCo (GO+TO)

ISMO(SO + MO)

OPTION 2

TSMO(GO + TO + SO + BMO)

OPTION 1

FOR PROFIT NOT FOR PROFIT

Management Department

GOGO

Grid OwnershipManagement Department

Grid Operation

Department

TOTO

Grid Operation

Department

TSO

Transmission Company Before Market Opening

Legal Corporations Departments Within Corporations

Traditional European TSO Before Market OpeningTraditional European TSO Before Market OpeningTraditional European TSO Before Market OpeningTraditional European TSO Before Market Opening

System Operation

Department

SOSO

System Operation

Department

ACCEPTABLE TO ETSOACCEPTABLE TO ETSO


GOGO


Grid Operation

Department

TOTO

Grid Operation

Department

Market Operation

Department

MOBMO

Market Operation

Department

System Operation

Department

SOSO

System Operation

Department

Legal Corporations Departments Within the Corporation

TSMO

OPTION # 1 – No UnbundlingOPTION # 1 – No UnbundlingIntegrated Transmission Functions after Market OpeningIntegrated Transmission Functions after Market Opening

OPTION # 1 – No UnbundlingOPTION # 1 – No UnbundlingIntegrated Transmission Functions after Market OpeningIntegrated Transmission Functions after Market Opening

ACCEPTABLE TO ETSOACCEPTABLE TO ETSO

INDEPENDENT AND INDEPENDENT AND NOT FOR PROFITNOT FOR PROFIT

FOR PROFITFOR PROFIT


GOGO


Grid Operation

Department

TOTO

Grid Operation

Department

Market Operation

Department

MOMO

Market Operation

Department

System Operation

Department

SOSO

System Operation

Department

GridCoGridCo

Grid Management

ISMOISMO

System Management

Legal Corporations Departments Within Corporations

OPTION # 2 OPTION # 2 Separation of Grid Operation from System OperationsSeparation of Grid Operation from System Operations

OPTION # 2 OPTION # 2 Separation of Grid Operation from System OperationsSeparation of Grid Operation from System Operations

OPPOSED BY ETSOOPPOSED BY ETSO

SPARE SLIDES NOT USED

•The Serbian Case

ELEKTROISTOK

EPS CORPORATE OFFICE

Transmission Support Services

Telecommunication Department

Other Departments

Power System Control Department

SubsidiarySubsidiary

Step 1 of the ReformStep 1 of the Reform(Transformation of the EPS Elektroistok Subsidiary into a Transmission and System

Operation Company (TSO)

Transmission Grid Owner & Transmission Grid Operator

(GO + TO = TSO)

SO

TSO

System Operation Control

(Dispatch Centre)

OperationsPlanning and

Analysis

MeteringAccounting &

Tariffs

ElectricityTrading

Telecommunications Group

Energy Planning

Group

TransmissionNetwork Group

Information Technology Group

EPS Holding Company

Generation Companies

Distribution Companies

System Operation Functions (on Vojvode Stepe)

Elektroistok System Operations Building Isolated from other EPS

functions located on Vojvode Stepe

TSO ElektroistokTransmission Grid and

System Operation Subsidiary

Physical, Functional and Accounting

Unbundling

Grid Operation Functions (on Kneza Milosa)

Elektroistok Grid Operations Remains in the Same Building on

Kneza Milosa

Step 1 of the ReformStep 1 of the ReformMinimization of the Cultural Shock at Time of the Merging of the SO Functions




Other Departments


Step 2 of the ReformStep 2 of the Reform(Unbundling and Transfer of the EPS Corporate Transmission Technical Support

Services to the Elektroistok Subsidiary)

ELEKTROISTOK

SubsidiarySubsidiary

Transmission Grid Owner & Transmission Grid Operator

(GO + TO = TSO)

SO

TSO

STRENTHENING OF THE MANAGEMENT CAPACITY AND INDEPENDENCE OF

ELEKTROISTOK



Other Departments


Step 3 of the ReformStep 3 of the Reform(Unbundling and Corporatization of the EPS Telecommunication Department as a

Subsidiary of Elektroistok)


ELEKTROISTOK

Subsidiary of EPSSubsidiary of EPS

SO

TSO

Subsidiary of the Elektroistok TSO

Telecommunication

Commercial Commercial OperationsOperations

Power Sector Operations

Step 4 of the ReformStep 4 of the Reform(Development and Establishment of a Market Operation Department within Elektroistok)




Other Departments


ELEKTROISTOK



SO

TSMO

Telecommunication

MO

ESTABLISHMENT OF THE NATIONAL MARKET

OPERATION DEPARTMENT

Step 5 of the ReformStep 5 of the Reform(Transformation of Elektroistok into a Fully Independent Transmission,

System and Market Operator)




Other Departments


ELEKTROISTOK



SO

ITSMO

Telecommunication

MO

XX FULL UNBUNDLING & TRANSFORMATION OF ELEKTROISTOK INTO AN ITSMO

ITSMO - Elektroistok Company

END OF PHASE V OF RESTRUCTURINGEND OF PHASE V OF RESTRUCTURING

EPS Holding Company

Portfolio of Generation Companies

Portfolio of Distribution Companies

Market Operation Department

(on Vojvode Stepe)

Grid Operation Department

(on Kneza Milosa)

System Operation Department

(on Vojvode Stepe)

GO ?GO ?

GO ?GO ?

POTENTIAL FURTHER RESTRUCTURING STEPSPOTENTIAL FURTHER RESTRUCTURING STEPS

ITSMO - Elektroistok Company

Market Operation Department

(on Vojvode Stepe)

Grid Ownership & Operation Department

(on Kneza Milosa)

System Operation Department

(on Vojvode Stepe)

Independent ISMO(on Vojvode Stepe)

Independent IMO (on Vojvode Stepe)

Independent ISO (on Vojvode Stepe)

OR

Independent GridCo(on Kneza Milosa)

GR

SK

RO

TR

BG

AL

A

I

HR

H

Ser

Mon

SLO

BiH

BG

UA

MD

MK

ROHRHRSLOSLO

BiHBiH

ALAL

SerSer

MonMon

MKMK

BGBG

RORO

GR GR

Proposed UCTE Proposed UCTE Control BlocksControl Blocks

Proposed UCTE Proposed UCTE Control BlocksControl Blocks

AA

SKSK

HH

BORZENOPCOM

guidelines tso restructuring

Business

reformnational blueprints

tso reformsnational

progressive market opening

market regulation flexibility

required information

detailed information

contextual framework

system operator national