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Czech Republic. Monica Shah Abby Price Kelly Steinhebel David Levitt. Overview. ERO regulation Ownership of utilities and transmission capacity Gas market reform history Electricity Infrastructure Liberalization Price regulation Summary. ERO Regulation.

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czech republic

Czech Republic

Monica Shah

Abby Price

Kelly Steinhebel

David Levitt

overview
Overview
  • ERO regulation
  • Ownership of utilities and transmission capacity
  • Gas market reform history
  • Electricity
    • Infrastructure
    • Liberalization
  • Price regulation
  • Summary
ero regulation
ERO Regulation
  • 2001 Energy Act created Energy Regulatory Office (ERO)
    • Grant licenses to operate in energy sector
    • Regulate and set max prices
    • Resolve disputes related to access to transmission or distribution networks
    • Responsible for opening of market
    • Manage privatization
ownership of utilities and transmission capacity
Ownership of Utilities and Transmission Capacity
  • Electric
    • CEZ – owns majority of production capacity
      • - 68% owned by National Property Fund
      • Remaining 32% distributed voucher privatization in 1992 and 1994
    • CEPS – owns transmission capacity
      • 34% owned and operated by CEZ
      • 66% owned by state, considering sale
gas market reform timeline
Gas – Market Reform Timeline
  • 1989: Czech Gas Works (CPP) in initial move towards capitalism
  • 1994: CPP divided into 8 RDCs and Transgas
    • Monopoly on gas imports
    • Owns and operates transmission system
    • Operates almost all storage facilities
    • Sells gas to RDCs
  • 1994-98: Privatization begins with vouchers
  • 2001: Transgas becomes joint stock company
  • 2002: Transgas and shares in RDCs sold to German RWE for $3.6 billion
shares sold by the national property fund of the czech republic 2002
Shares sold by the National Property Fund of the Czech Republic: 2002
  • Transgas 96.99%
  • Prague Gas 49.18%*
  • Central Bohemian Gas 48.49%
  • Eastern Bohemian Gas 47.10%
  • Northern Bohemian Gas 49.18%
  • Western Bohemian Gas 45.84%
  • Southern Bohemian Gas 46.66%*
  • Southern Moravian Gas 47.65%
  • Northern Morovian Gas 40.05%

*RWE gas received only minority shares of these companies

ownership of utilities and transmission capacity7
Ownership of Utilities and Transmission Capacity
  • Gas
    • Transgas- sold along with majority shares in 6 of 8 RDCs to German RWE in 2002
      • “One-package sale”
      • Owns 32,000 of gas pipelines
    • 2 RDCs – Foreign investors own majority shares
electricity infrastructure
Electricity - Infrastructure
  • CEZ
    • Joint stock company majority owned by NPF
    • Dominant electricity generator
    • Most of electricity sold to 8 regional distribution companies (REAS)
  • CEPS
    • Sole transmission operator
    • 66% owned by state
    • 34% owned by CEZ  will sell to third party ordered by Competition Office
    • Exclusive license for transmission until 2026
electricity infrastructure11
Electricity - Infrastructure
  • Regional Electricity Distribution Companies (REAS)
    • Natural monopolies in respective regions
    • CEZ controls 5 distributors and minority interest in other 3
electricity liberalization
Electricity - Liberalization
  • CEZ must sell minority stake and one of majority stake in distribution companies
  • Attempts to sell CEZ failed
  • Timetable for third party access
    • 2002: largest customers (approximately 2/3 of demand) able to choose supplier
      • 6 out of 77 eligible customers switched suppliers
    • 2006: all customers able to choose their supplier
prices
Prices
  • Moving away from industry subsidy of residential
    • 22% VAT in 2002 across the board
  • Gas
    • Quarterly price adjustments at the retail level
    • Monthly price adjustments at the wholesale level based on historical ave. fuel price
    • ERO determines rate with Transgas input
    • Two decreases in 2002, 4-5% increase in 2003
  • Electricity
    • Individual rates to captive RDCs and end users prepared for 2003 with aim of eliminating cross subsidies
    • Low voltage users: 50% of cost is transmission, 41% generation, 7% service fee
    • High voltage users: 29% transmission, 60% generation,10% fee
    • Small increase in transmission fee in 2003
summary
Summary
  • Recent efforts towards privatization to accommodate European Union
    • Expected entry on May 1st
  • Much of “privatized” industry still held indirectly by state, especially electric
  • Prices regulated by ERO
  • 3rd Party access to electricity grid by 2006, 1/3 of gas grid by 2008
  • Is it working?