Deregulation for domestic customers in Sweden

1. Deregulation for domestic customers in Sweden “Organizational consequences for network companies in Sweden andthe consequences for their IT systems after opening the electricity marketfor domestic customers”Sven Lindgren

2. Deregulation for domestic customers in Sweden • Scope • Milestone of the deregulation process in Sweden • Opening of the electricity market for domestic customers – • organizational consequences • New revenue regulation model from 1 January 2004 • Merging process of network companies in a cost effective • manner – Example from Vattenfall Sveanät • IT systems for customer switching administration • Monthly meter reading of all customers 2009 • IT systems for remote meter reading and billing – Example from Vattenfall

3. Deregulation for domestic customers in Sweden Milestones of the deregulation process in Sweden Date Milestone/New Laws 1 January 1996 Deregulation of the electricity market In reality for commercial and public business 1 July 1997 Maximum rate for customer switching 2 500 SEK (270€) - hourly metering still required 1 November 1999 Hourly metering no longer required up tp ~ 80 A Market in reality opened for domestic customers 1 July 2001 New regulation of merging concession areas Same network prices in merged areas 2007 1 January 2004 New regulation of prices with the ”Network Performance Assessment Model (NPAM)” 1 January 2009 Monthly meter reading of all customers and billing of consumed energy – i.e. not preliminary

4. Deregulation for domestic customers in Sweden • Organizational consequences of opening the market for domestic customers 1 November 1999Example from Vattenfall Sveanät • A new organizational group was established for customer switching administration • A special organizational function was built for new IT- system support • Independence function to price network tariffs - Considering regulators demands • Resources to meet the increased interest from publicists concerning the deregulated market

5. Deregulation for domestic customers in Sweden • New revenue regulation model from 1 January 2004 • ”The Network Performance Assessment Model (NPAM)” • Model for objective measurements of distribution companies performance as seen by the their costumers • Model designed to assessing the tariffs for - differing conditions- quality of supply provided by each company • Performance defined by a fictitious network with- coordinates (x,y) for all customers- energy consumption for all customers - quality of supply parameters • Must be reported to Swedish Energy Agency 31 March every year (starting 2004).

6. Deregulation for domestic customers in Sweden Fictitious network created of the Network Performance Assessment Model A quarter of the city of Sundbyberg Low Voltage network

7. Deregulation for domestic customers in Sweden Merging process Vattenfall Sveanät AB Number of customers440,000 Transmission volume32,000 GWh Turnover300 MEUR Number of employees220 Area structureUrban, rural, archipelago(700 electrified islands)

8. KBAB VRAB Mergers 1995-2001 Norduppland Roslagen Ingarö Knivsta Avesta Sydmälaren Mälarnät Mälarbygden Salem Botkyrka- Salem Bergslagen VATTENFALLSVEANÄT Botkyrka Norberg Uppsala Elnät Solna Huvudsta Östra Roslag Sigtuna Elnät Sundbyberg Södertörn Roden Elnät Tyresö Värmdö Huddinge Drefviken

9. Deregulation for domestic customers in Sweden To be successful in a Merging process Important issues to consider • Rapid merging of companies - In organisation and appointment of managers • Information to employees • Honesty • To be aware of crisis • Manage personnel reduction well • Competence development •Staff welfare Year 1999 2003Costumer 240,000 440,000Employees 199 220 Contractors and call centre with billing (bought services) are not included

10. Deregulation for domestic customers in Sweden Customer switching administrationExample from Vattenfall Sveanät Accumulated18 % Number ofcustomer440,000 1 November 1999 Accumulated number, including costumer switching back to previous electricity supplier

11. Deregulation for domestic customers in Sweden • Supplier • Z03contract of New supplier • Z09Supplier has changed Balance provider Data flow of message and data changes Costumerswitchingsystem SABEL Billing system Curry Prodat • Supplier • Z04 confirms the contract to the New supplier, • Z05 drops out the contract with the current supplier • m m EDIEL- Converter To updateCurry • Daily changes • Measuring stands • Measuring changes • New Customer • Balance Provider • Preliminary account • Finally account

12. Deregulation for domestic customers in Sweden • Monthly meter reading of all customers 2009 • Resolution from the Swedish Parliament expected this year • Hourly reading of all meters > 63 A fuse – 1 July 2006(Today for meter fuse > 200 A) • Monthly meter reading of all customers – 1 July 2009 • The switching to a new electricity supplier shall be easer for the costumer • In reality this means that remote metering system have to be implemented for all costumers. This is also the lawmakers intention.

13. Deregulation for domestic customers in Sweden Dataflow of hour based energy values SVK System authority Ediel Collecting system 1 Hour based value Ediel converter GS2 • Balance providers • Supplier inhouse Collecting system 2 GS2 Hour based value Balance account systemMVS Billing system Curry GS2 Collecting system 3 Hour based value Bills

14. Deregulation for domestic customers in Sweden Monthly meter reading of all customers 2009 Project: “Number 1 for the Customer” - A fresh approach to the customer

15. Deregulation for domestic customers in Sweden Monthly meter reading of all customers 2009 It is unacceptable for customers to feel that they come second • Complicated bills • ”It is unacceptable that customers cannot understand their own electricity bills” • Pay for actual consumption”It is unacceptable that customers cannot pay for their actual consumption” • Customers feel that information is inadequate and vague • ”It is unacceptable that customers do not fully understand what they are paying for” • Switching electricity suppliers is complicated • ”It is unacceptable that it should be so difficult to switch electricity suppliers”

16. Deregulation for domestic customers in Sweden • Powerful initiatives from Vattenfall... • Investment of more than EUR 70 million (SEK 600 million) • Installation of approx. 300,000 remote-read meters in 2003-2005 • Eliminate preliminary charges

17. Deregulation for domestic customers in Sweden • “The opening of the electricity market for domestic customers in Sweden has in many aspects greatly changed the conditions forthe network companies business”