ROMANIAN ENERGY REGULATORY AUTHORITY - ANRE

1. ROMANIAN ENERGY REGULATORY AUTHORITY - ANRE Challenges in transitioning to a liberalised, competitive market – Romanian experience

2. Legal Framework • The transposition into national legislation of the provisions of the Third Energy Package was completed in: • June 2012 when the Parliament passed the Electricity and Natural Gas Law no. 123/2012, published in the Official Journal no. 485/16.07.2012 • October 2012 when the Parliament passed the Law regarding the organisation and functioning of ANRE no. 160/2012, published in the Official Journal no. 685/2012 (the law was sent back to the Parliament for reconsideration by the Romanian presidency at the beginning of July 2012) ANRE’s evolution In 1999-2006, the regulatory activity in the field of electricity and gas unfolded separately, within the two existing regulatory authorities, namely the Romanian Energy Regulatory Authority (ANRE) and, respectively, the Romanian Gas Regulatory Authority (ANRGN). In April 2007, ANRE took over the tasks, rights and obligations, budget, financing and staff of ANRGN and the activity was reorganised based on Government Decision (GD) no. 410/04.05.2007 In November 2009, ANRE took over the tasks, rights and obligations, budget, financing and staff of ARCE – Romanian Agency for Energy Conservation and the activity was reorganised based on Government Decision (GD) no. 1428/18.11.2009

3. ANRE – organisation and functioning • ANRE is organised as an autonomous administrative authority with legal personality and own patrimony. Annual reports regarding fulfilment of its mandatory attributes and competencies are sent to the Parliament, Government and the President of Romania, the Agency for Cooperation of Energy Regulators - ACER and the European Commission. • Financing current and capital expenditures is made entirely of ANRE own revenues (authorisations and licenses fee, yearly contributions of the regulated operators, other funds) • ANRE is managed by a president and two vice-presidents and for the approval of the regulations is constituted a regulatory committee composed of president, vice-presidents and 4 regulators, appointed by the Romanian Parliament. Their mandates may be renewed once. • ANRE have the power to decide independently the measures for effective competition, necessary for the operation of the electricity and gas markets, and enforce appropriate sanctions for the sector undertakings which do not observe their legal requirements.

4. Market Structure Implementation of the provisions of the Law 123/2012 Challenges - TSO certification - Implementation of the art. 23 - (1) On the competitive market, commercial transactions of electricity are performed in a transparent, public, centralized and non-discriminatory manner - The development of a gas market model that ensure an organized and transparent framework market where the participants exercise their rights to buy and sell natural gas in two segments of the wholesale market: • Primary market (including bilateral short and long measures for the national production and import). • Secondary markets (bilateral contracts for reselling the natural gas, transactions on a organized market and transactions on a regulated market on a short term which envisage mainly the commercial imbalances) - Phasing out regulated prices

5. TSO certification • Both electricity and natural gas transmission systems are public property, so the Independent system operator model was chosen for both sectors • The model allows the certification of the transmission system operator in compliance with European provisions, and at the same time, maintaining the existing ownership and providing also an effective unbundling of electricity and natural gas transmission from generation and supply • The Line Ministry proposes the legal person performing the TSO function, and the final certification decision belongs to ANRE, upon approval of the European Commission • For the complete transposition of TSO independence provisions two distinct public bodies (i.e. ministries) are necessary, exerting distinct control on the TSO, on the one hand, and on generators and suppliers, on the other.

6. Transactions on the electricity market (1) Implementation of the provisions of art. 23 • The provisions intend to increase the transparency of the contracts concluded on the competitive electricity market • But, after the publication of the law, several business organisations have asked clarifications regarding its application • There is a high degree of concern regarding the impossibility of concluding bilateral negotiated contracts for sale of electricity. Usually, bilateral contracts have been used to support the investments in new resources, including renewable ones, for import-export contracts • Concerns regarding the provisions of this article have also small power producers or self-producers, who seen in trading energy on a centralised platform only one additional bureaucratic barriers in selling electricity

7. Transactions on the electricity market (2) • In order to manage the risk that comes from uncertainty, ANRE belives that is important for buyers and sellers to be able to choose a portfolio of short-term, medium-term and long-term power supplies in organised markets • Possible solutions: • To develop the existing OPCOM platform in order to cover long and very short-term contracting • Review of the regulatory framework regarding issuing licenses

8. Gas market • Establishing a gas market operator • Issuing the principles of operation for gas wholesale market: • Market trading rules • Capacity allocation rules for interconnectors, • Balancing and administration of imbalances, • Reporting and publishing the market information • Revisions of the tariffs methodologies: • Methodology to recognition gas import price for regulated market based on the European prices • Methodology to set up transmission tariffs including entry-exit pricing system, • Methodology to set up the storage tariffs, • Methodology to set up the distribution tariffs, • Methodology to set up regulated price for final customers

9. Pricing Issues • Implementation of the provisions of the roadmaps for phasing out the electricity and gas regulated prices: Electricity: non-households 01.09.2012-31.12.2013 households 01.07.2013 – 31.12.2017 Gas: non-households 01.12.2012-31.12.2014 households 01.07.2013 – 31.12.2018 • More information on electricity bills (green certificates, quantities and prices from the competitive market, cogeneration)

10. Other current regulatory topics • REMIT obligations • Promotion of smart metering according with the results of the national cost-benefit analysis – the main conclusions of the CBA indicates a positive result for smart metering implementation in Romania only for electricity • Promotion of electricity from renewable energy sources, promotion of high efficiency cogeneration • Informed electricity and gas customers • Insuring a regional dimension of the electricity and gas markets in accordance with the European electricity and gas target models, infrastructure development

11. Contact Information ROMANIAN ENERGY REGULATORY AUTHORITY - ANRE Phone: (+ 40 21) 311 22 44 Fax : (+ 40 21) 312 43 65 Email: anre@anre.ro; info@anre.ro www.anre.ro