ANRE

ROMANIAN ENERGY REGULATORY

AUTHORITY- ANRE

Need for stability and predictability in the legislation of energy sector

Niculae Havrilet – ANRE’s president

Renewable energy sources and environment

investments in Romania –

Legal and economical general conditions

April 12, 2013

ANRE

� Long term legal commitments, announcement of automatic reductions in line

with volume achievements and/or lower technology costs, planned review

periods without threat of interim changes

� Commitment to avoid scheme or other changes that alter the return on

investments made and undermine investors' legitimate expectations

� Wide and public consultation on scheme design

� Financing primarily through energy levies and not taxation (avoids fiscal

impacts, uncertain budgets)

Renewable energy support scheme - best practice

European Commission -2013

ANRE

� Study case:

� ROMANIA – regulatory

environment:� Independence

� Transparency

� Accountability

� Predictability

ANRE

Legal framework

Primary legislation

(transposition of the 72/2009/CE and 73/2009/CE Directives)

Electricity and Gas Law no. 123/2012

Law regarding the organisation and operation of ANRE no. 160/2012

ANRE

Regulators sit in position between

public and government:

decisions can have direct and

immediate effect. Showing people

how the decisions are made and

allowing participation, is critical in

gaining support.

Public wants to be shown that

decisions are fair and understand

why they are made; this can be

more important than "favorable"

decision.

Energy regulators

ANRE

ANRE, is an autonomous administrative authority with legal personality, under

Parliamentary control, entirely self-financed and independent as regards its decision-making

process, organisation and operation, whose mission is to issue, approve and monitor the

implementation of the national-wide binding regulatory framework required for the proper

functioning of the electricity, heat and natural gas sectors and markets in terms of efficiency,

competition, transparency and consumer protection.

ANRE current expenditures and capital are entirely financed through its own

revenues (fees charged for licensing, permits and certifications, from annual contributions paid

by the regulated undertakings in the electricity, heat and natural gas sectors as well as from

funds provided by international organisations).

ANRE - main competencies conferred by primary legislation:

• to grant, modify, suspend and revoke authorizations and licenses;

• to issue trade and technical regulations, regulated access and connection rules to electricity

and gas networks;

• to set up and to approve the pricing methodologies and tariffs;

• to monitor the operation of electricity and gas markets;

• to promote the electricity/heat generation from renewable sources and high efficiency

cogeneration.

Independence – role and competencies of ANRE

ANRE Management of ANRE

� ANRE is managed by a president and two vice-presidents

� 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

� The members of the Regulatory Committee are appointed for a period of 5

years, a mandate that can be renewed only once. Upon the appointment of the

first Regulatory Committee, one Vice-President and two ordinary members will

serve a term of two and a half years that are to be set through Parliamentary

Appointment Decision

ANRE

� The members of the Regulatory Committee act independently of any interest

of the participants in the electricity or natural gas markets, shall not seek

or take direct instructions from any public or private entity when carrying

out the regulatory tasks, shall not perform lucrative businesses in the

electricity, heat and natural gas sectors, with the exception of those for

didactic purposes, shall not hold shares or equity interests and shall not be

board members with undertakings whose object of activity in the

electricity, heat and natural gas sectors or in any other areas under ANRE

powers, according to the law.

Regulatory Committee of ANRE

ANRE

� Publication of the regulations under discussion on the ANRE’s webpage

� Permanent consultations with the parties involved by means of public andbilateral discussions as well as through mediation meetings toaccommodate divergent viewpoints,

� The ANRE’s orders and decisions may be appealed in Court within 30days from the notification of the parties or from the date of their publicationin the Romanian Official Gazette

� The publication of the annual reports regarding ANRE’s activity and budget

The transparency and accountability of the regulatory process is ensured by :

ANRE The predictability of the regulatory process

� A successful market that attracts investors requires a predictable regulatory

process.

� Independent regulators are predictable if they adhere to the rule of law. The

most important features of the rule of law are respect for precedent and the

principle of stare decisis, particularly in common law jurisdictions.

� Respect for precedent - regulators do not reverse policy decisions unless

there is evidence that those decisions have led to significant problems or that

new circumstances warrant a change in the rules.

� The principles of stare decisis - the cases with the same underlying facts are

decided in the same way every time. This is of particular relevance in the

resolution of disputes.

� Adherence to these principles enhances confidence in and the credibility of the

regulator and reduces regulatory risk.

ANRE

Renewable energy sources –

support scheme

ANRE Renewable energy sources – legal framework (1)

� PRIMARY LEGISLATION:

oThe Law 220/2008 for the promotion of electricity produced from renewable

energy sources - the mandatory quota system combined with the trading of

green certificates (GC) - authorized by EC Decision no 4938/2011;

o Government Emergency Decision 88/12.10.2011 - the Law 220/2008 was

modified to fulfil the EC Authorization Decision requirements;

o Law no. 134/2012 for the approval of the Government’s Emergency Decision

no. 88/2011

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E-RES

ANRE Renewable energy sources – legal framework (2)

� SECONDARY LEGISLATION ( ANRE regulations):

� Order 42/2011 – Regulation regarding certifying E-RES producers for the

support scheme

� Order 43/2011 – Regulation for issuing GC

� Order 44/2011 – Regulation regarding organization and operation of the GC

market

� Order 45/2011 - Methodology for establishing the annual quota of GC

� Order 6/2012 - Methodology for monitoring of the support scheme

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E-RES

ANRE

Electricity Market

Green Certificates Market

Market price for electricity

Market price for green certificates

Price

E-RES

Penalities for noncompliance with mandatory

quota

E-RES Promotion Scheme(1)

Mandatory quotas and green certificates trading system

E-RES

ANRE

RES Type of power plant/group Number of

GC/MWh

Lifetime

(years)

1. HYDRAULIC

ENERGY – used in

power plants with

installed power ≤10

MW

New (Commissioned as of January 1, 2004) 3 GC 15

Upgraded/refurbished 2 GC 10

commissioned prior to January 1, 2004 and

not upgraded

0.5 GC 3

2. WIND energy (new) 2 GC until 2017 15

1 GC as of 2018

3. - Biomass

- Biogass

- Bio-liquid

- Geothermal

- Landfill gas

(new) 1 - 3 GC* 15

High efficiency cogeneration

(1 additional GC)

1 GC 15

4. SOLAR Energy (new) 6 GC 15

• 1 GC for landfill gas and sewage treatment plant gas; 2 GC for all types of biomass – residues; 3 GC for biomass from energy

crops.

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E-RES

E-RES Promotion Scheme (2)

* Approved by Decision EC 4938/2011

ANRE

E-RES

National targets pursuant to Directive 2008/29/EC

E-RES percentage in the final gross consumption (%)

ANRE

Total installed

capacities2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Wind (MW) 1.250 1.850 2.450 2.880 3.200 3.400 3.600 3.750 3.900 4.000

Hidro (MW) 437 487 537 587 637 687 702 713 721 729

Biomass (MW) 90 165 250 340 425 510 540 565 590 600

Solar (MW) 8 43 78 113 148 183 200 220 240 260

TOTAL [MW] 1.785 2.545 3.315 3.920 4.410 4.780 5.042 5.248 5.451 5.589

National Renewable Energy Action Plan –JUNE 2010

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E-RES

ANRE The perspectives of E-RES investments in Romania

Source: C.N. TRANSELECTRICA S.A., March 2013

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E-RES

RES

Connection

Permit

Connection

ContractsTOTAL

TOTAL

N.R.E.A.P.

2020

[MW] [MW] [MW] [MW]

Wind 7739 13215 20954 4000

Hydro under 10 MW 423 2018 2440 729

Biomass 84 52 136 600

Solar 2113 762 2874 260

TOTAL [MW] 10359 16045 26404 5589

ANRE

STATISTICS REGARDING E-RES PROMOTION SYSTEM

31.12.2012

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E-RES

RES

In operation* benefitting

from the support scheme Setting-up authorisation

TOTALLicensed Test period Issued

Under ANRE

analysis

[MW] [MW] [MW] [MW] [MW] YEAR

Wind 1534 260 1339 796 3669 2017 +

Hydro 427 0 108 31 566 2013 +

Biomass 29 0 39 2 70 2011 -

Solar 39 12 253 220 511 2020 ++

TOTAL [MW] 2029 272 1738 1049 4816

ANRE

In compliance with legal provisions, the analysis for overcompensation is accomplished on an annual basis on theperiod in which this activity is promoted by the green certificates support scheme, upon the following indices:•average level of investment;•average level of specific variable costs;•average level of specific costs;•average level of the capacity factor.

On the validity period of the support scheme, the mechanism for reviewing the number of green certificates as aresult of the overcompensation analysis is based upon annual recalculation, of the number of greencertificates/MWh so that the Internal Rate of Return (IRR) for each technology, for new entries, at aggregatedlevel, to be equal to the reference IRR value resulted from the cost benefit analysis established whenauthorizing the promotion scheme.If a growth tendency is emphasized of the internal rate of return with more than 10% from the reference level, theGovernment shall reduce the number of green certificate for the specific technology.

E-RES/technology Current

(no. GC/MWh)

Results of the

overcompensation analysis

(no. GC/MWh)

New wind power plants 2 1,5

Refurbished wind power plants 2 1,3

New hydro power plants, Pi<=10 MW 3 2,3

Solar 6 3

Monitoring of the application of the promotion scheme

E-RES

ANRE

Conclusions

� Meeting the national targets

� Providing the regulatory framework for promoting new investments, and

ensuring its predictability

� Monitoring the results of the application of the support scheme and

providing sustainable development

� Constant evaluation of the impact upon the final customer

E-RES

The changes in the energy sector at European level by promoting with

high priority the renewable energy sources for electricity and heat

production is based on:

ANRE

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

Contact