The Wholesale Electricity Market and Regulatory Challenges

Baltic Energy Forum 2015, October 21, 2015

Dr.Valdis LokenbahsPublic Utilities Commission of Latvia

Content

• Interconnections

• Projects of Common Interest (PCI)

• Independent electricity system operator ISO –TSO certification

• Market surveillance

• CEREMP, REMIT, NRA cooperation

• NPS – before and after opening

• NordBalt Interconnection

Interconnections

Source: AS «Augstsprieguma tīkls», Nord Pool Spot

Interconnections:

• EE-LV = 2 interconnections

• LV-LT = 4 interconnections

• LV-RU = 1 interconnection

• EE-FI = 2 interconnections

More than 60% of timecongestion EE->LV

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Congestion EE->LV, 2015

Congestion on EE-LV border

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Congestion time from EE to LV, % of total

2014 2015

Projects of Common Interests (PCI)

• On 14 October 2013, the European Commission has adopted the first list of248 PCIs, and the list of PCIs will be updated every two yearsPUC decisions regarding the allocation of investment costs:

• PUC decision on April 9, 2014, No.77 on Internal Line between Ventspils, Tume and Imanta(LV)

• PUC decision on April 23, 2014, No.90 on Interconnection between Kilingi–Nõmme (EE) andRiga TEC 2 Substation (LV) and Internal Line between Harku and Sindi (EE)

In accordance with CEF :• 3rd EE-LV interconnection received financial support of 65% of total costs

• 3rd Stage of Kurzeme Link received financial support of 45% of total costs

• Second PCI list will be accepted at the end of 2015, additionally there areincluded projects from «Baltic corridor» for increase of capacity of 600MW:

• Internal line Rīgas TEC2 - Rīga HES as reinforcement of 3rd EE-LV interconnection

• Replacement of 330kV interconnection lines Tartu(EE) – Valmiera (LV) and Tsirgulina (EE) –Valmiera (LV)

Independent electricity system operator ISO – TSO certification

• On January 30, 2013 PUC completed a certification of anindependent electricity system operator ISO - JSC “Augstspriegumatīkls” (TSO)

• On February 1, 2015 JSC “Augstsprieguma tīkls” completed allconditions of certification decision, and TSO has taken over thefollowing functions of commercial activity from JSC „Latvijaselektriskie tīkli”:

• Service and maintenance of transmission system assets;

• Development of transmission system, construction of new networks,rebuilding and refurbishment of existing networks.

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100%Electricity bought from NPS vs OTC traded amounts

NPS OTC

Elspot traded volumes since NPS started operation in Latvia

AS «Latvenergo» signedGross bidding contractwith NPS

Increases liquidity andtransparency of market

Market surveillance

Number of investigated cases:

• in 2013: 1

• in 2014: 2

Market surveillance in 2013

Number of investigated cases in 2013: 1

Case subject: Case relates to high price peaks in all Baltic countries

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Elspot hourly prices in EUR/MWh. June 25.

2013

Latvia Estonia Lithuania Finland

Source: Nord Pool Spot

PUC conclusion: Coincidenceof technical circumstancessimultaneously in all threeBaltic countries, Russia andBelarus. As a result – lack ofcapacity and high price peaks

Market surveillance in 2014 (1)

Case No.2: Case relates to high price peaks during July and August, 2014

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NPS Elspot prices in Latvia, summer 2014

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Source: Nord Pool Spot

Market surveillance in 2014 (2)

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Block Bid Hourly price Average price

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Block Bid Average price 05.06.2014

Including Block Bid,average price dropsdown and Block Bidis rejected

Block Bid is rejected

Block Bid is rejectedand price goes high

Market surveillance in 2014 (3)

PUC conclusion: Price peaks appeared because ofphenomenon called «Paradoxically rejectedblock bid»

CEREMP, REMIT

• CEREMP registration status: 14 MP registered

• October 7, 2015: data collection started (ACER)

• NRA co-operation:

• Nord Pool Spot Regulatory Council

• Market Monitoring Expert Sub-group of Nord Pool SpotRegulatory Council

• Nord Pool Spot Regulatory Council Fundamental TransparencyRegulation expert Subgroup

• Common Nordic-Baltic Wholesale Market monitoring andcommon UMM monitoring

Electricity prices before and after NPS Latvia bidding zone opening

Source: Nord Pool Spot

43,3148,49 50,08

40,15

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2012 (ELE, 6 month) 2013 (ELE/LV) 2014 (LV) 2015 (LV, Q1-Q3)

Electricity wholesale market price in Latvia, EUR/MWh

SE-LT interconnection – hope for price drop in Latvia

Source: Nord Pool Spot

Sweden = 12,97 EUR

Latvia, Lithuania = 46,66 EUR

THANK YOU !

Dr.Valdis LokenbahsPublic Utilities Commission of Latvia

www.sprk.gov.lv