The Spanish Energy Regulator: The NationalEnergy Commission (CNE)

STRENGTHENING THE BULGARIAN ENERGY REGULATOR

Rafael Durban Romero

Director of External Affairs & Information services

Spanish National Energy Commission

SOFIA, 7- 8 February 2006

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TABLE OF CONTENTS

>PURPOSE

>PRECURSORS AND CREATION

>RESOURCES AND FINANCING

>MONITORING OVER THE CNE

>STRUCTURE

>INDEPENDENCE AND GOVERNANCE

>FUNCTIONS

>LEGAL PROVISIONS

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PURPOSE.

INSTITUTION

The CNE is a public body with its own legal personality attached to the Ministry of Industry

PURPOSE

To watch out for effective competition, objectivity and transparency in the functioning of the energy markets in the benefit of all agents including consumers

ENERGY MARKETS

•Electricity market•Gas market•Liquid hydrocarbons market

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PRECURSORS: FROM THE CSEN TO THE CNE.

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CCNENE

1997 1997 ElectricityElectricity ActAct

1998 1998 HydrocarbonsHydrocarbons ActAct

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CCNSENSE

1994 1994 ElectricityElectricity ActAct

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RESOURCES AND FINANCING

RESOURCES:a. Own assetsb. Incomesc. Transfers charged to the

State General Budgets

FUNDING:Liquid hydrocarbons marketFixed amount on the Cubic tonnes sold by the wholesale oil operatorsElectricity and gas marketsPercentage of the regulated end user tariffs and access tariffs

BUDGET:The CNE proposes a budget to the Ministry of Industry for the following year. After being approved by the Government it is integrated into the State General Budgets

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MONITORING OVER THE CNE

Financial monitoring• Assigned to the State Controller Office and if applicable to

the National Auditing Office

Monitoring of the PerformanceAssigned to the Ministry of Industry. The CNE must:• Prepare an Annual Action Plan in coordination with the

Ministry of Industry• Prepare a follow-up report each three months with the

activities undertaken and the degree of accomplishment• Prepare an Annual Report

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STRUCTURE (I). ORGANISATIONAL CHART.

BOARD

BOARD

SECRETARIAT

REGULATION & COMPETITION

LEGALAFFAIRS

EXTERNAL RELATIONS

OIL

ELECTRICITY

ADMINISTRATION

GAS

INSPECTION

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STRUCTURE (II). ADMINISTRATION BOARD

ADMINISTRATION BOARD

Formed by a President, a Vicepresident, seven Commissionersand a Secretary with non voting rights (the latter is appointed by the members)

• Appointed for a six years mandate. Possibility to renew once.• Must be acknowledged professionals.• Appointed by the Government following a proposal from the

Minister of Industry and latter discussion within the Committee of Economic affairs of the Parliament to check if they satisfy the requirements.

• Dismissal only by reasons set under the law• Restriction to work in the energy field in the following two

years after leaving office

Commissioners

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STRUCTURE (III). HUMAN RESOURCES

Council10 Deputy

Directors21

Directors 7Support Staff

46

Analysts 58

Heads Unit

31

Fig. 2: Professional levels

Lawyers9%

Engineers32%

Economists22%

Others37%

Fig. 1: Main professional backgrounds(approx.)

As of December 2005, 178 people works at the CNE

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STRUCTURE (IV). CONSULTATIVE BOARDS (I)

The Consultative Boards are Consultative bodies to theNational Energy Commission set up by the 1998 Hydrocarbons Act. They are to be called to issue reports on:

- Proposals of legal provisions in the energy sector

- Energy planning

- Tariffs and remuneration of regulated activities

- Issuing of “Circulars” for legislative development purposes

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STRUCTURE (V). CONSULTATIVE BOARDS (II)

Electricity Consultative Board. Formed by 36 representatives

Central Administration, the Nuclear Security Council, theAutonomous Administrations, Electricity Companies (Generation, Transmission, Distribution, Suppliers), the System Operator, theMarket Operator, the Consumers and Environment.

Hydrocarbons Consultative Act. Formed by 36 representatives

Central Administration, Autonomous Administrations, gas companies, oil companies, retail distributors, wholesale distributors, Strategic storage body, the Consumers and Environment.

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GOVERNANCE AND INDEPENDENCY (I)

Administration Board

• Highly executive. Among other areas: Positions, HHRR or costs.

• Their members meet at least once a week

• The Departments submit draft reports which after the assessment of the Legal Services Dept are discussed and approved by the Board. Commissioners are each assigned a portfolio of cases.

Board of Directors

• Formed by the Board Secretary and the Heads of each Directorate.

• The purpose is to inform the Directors about the decisions takenby the Administration Board and actions to be undertaken by the Depts.

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GOVERNANCE AND INDEPENDENCY (II)

CNE

•Commission•Odd number•Staggered terms

• Government but presented in Parliament

• Applicable incompatibility rules for high ranking public officials

• Professional competence criteria

• Irrevocable mandates• Limitations during and after

mandate• Stable funding

•Earmarked •From CONSUMERS and Industry (Oil)•21M€ for 2005

The CNE has freedom to establish the HHRR strategy. Personnel employed by regular employment contracts

Source: Regulatory Institutions in liberalised electricity markets (2001), International Energy Agency

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GOVERNANCE AND INDEPENDENCY (III)

Deputy Direction for Internal Control

In April 2003 the CNE set up an Internal Control Unit as required in a Law passed in 2002 to ensure that the reports by the CNE would be based on principles of impartiality, objectivity and would avoid conflicts of interest.

The main tasks of the Unit are as follows:

•Development of internal procedures

•Assessment and evaluation of the efficiency

•Control over the performance

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GOVERNANCE AND INDEPENDENCY (IV)

Internal procedures

Procedures will be developed in the following areas. Some of them already completed.

• Administrative appeals

• Monitoring of the energy markets

• Economical management

• Financial management

• Procurement

• HHRR Management

• Information services

• Internal control

• Legal counseling

• External Relations and communication policy

• Proceedings management

• Planning activities

• Requests for reports or for advice

• CNE Official Journal publications (Information/ Legislative)

• Inspections

• Arbitrations

• Disputes

• Settlements

• Authorisation of new facilities

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FUNCTIONS(I). Classification according to topics

Legal related functions

Solving Disputes

Competition

Settlement of regulated costs

Economical and Technical Inspections

Quality of supply

Others

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FUNCTIONS(II). Legal related functions

- To participate through proposal or analysis in the drafting of legislation (basic and developments)

- To participate through proposal or analysis in determining tariffs

- Development of the legislation when the law states so. The CNE would in this case publish a “Circular” in the Official Journal

- To participate in the national energy planning

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FUNCTIONS(III). Disputes

- To solve Third Party Access Disputes in the electricity, gas and liquid hydrocarbons sectors

- To solve disputes related to the technical and economical management of the electricity and gas sectors

- To act as an arbitration body if agreed by all the parties involved in the dispute

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FUNCTIONS(IV). Competition issues

- To watch out for competition reporting antitrust practices to the Competition Authority

- To authorise operations that companies with businesses in regulated activities pursue in companies with business lines in liberalised activities.

- To issue a report on market concentration operations in the energy sector.

- To authorise the exercise of voting rights and the appointment of members of the Administration Boards in case the so called main operators acquire more than 3% of another main operator

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FUNCTIONS(V). Settlement of regulated costs

- To settle the regulated costs in the electricity sector

-To propose the settlement of the regulated costs in the gas sector. The definitive settlement is in this case approved by the Ministry of Industry.

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FUNCTIONS(VI). Inspections(When requested by relevant Administration or ex-officio)

- Technical conditions of the energy facilities

- Check that the specifications of the facilities comply with their authorisations

- Actions and economical conditions of the agents whose activities may affect tariffs and the remuneration of regulated activities.

- Proper use of the domestic coal in power plants which are being paid the so called domestic coal incentive

- Availability of power plants under the ordinary regime

- Continuity in the supply

- Quality of the supply

- Effective unbundling of the activities

- Proper invoicing and selling conditions of suppliers and distributors to customers

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FUNCTIONS(VII). Quality of the supply, others

QUALITY OF THE SUPPLY

- To identify the agents responsible of breaches in the quality of the supply

OTHERS

- To issue reports when requested by the Central or Autonomous Administrations

- To issue a report on the authorisations of new facilities

- To open proceedings when agreed with the Central Administration

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FUNCTIONS (VIII). Information & Appeals

POWERS TO OBTAIN INFORMATION

The CNE shall request as much information as needed for exercising its functions by issuing “Circulars” in the Official Journal. The CNE may inspect the information provided by undertaking inspections.

APPEALS TO DECISIONS ADOPTED BY THE CNE

The CNE Decisions may be appealed to the Minister of Industry except those on:

1. Solving disputes related to the technical and economical management of the electricity and gas systems

2. Circulars issued to request information

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FUNCTIONS (IX). Functions compendium

GENERAL

G1. Consultative body of the Administration on energy matters

G2. Participate in the making law process

G3. Participate in the energy planning process

G4. Participate in projects on determining tariffs and the remuneration of regulated activities

G5. Issue a report on authorisations of energy facilities

G6. Issue reports when requested by the Autonomous Regions

G7. Development and execution of legislation if CNE is enforced by law

G8. Technical and economic inspections including vertical unbundling if requested by the competent Administration

G9. Arbitration body in disputes when requested by the parties

G10. Identify the agents responsible and propose the actions to be taken when deficiencies in the supply are spotted.

G11. Open proceedings when agreed with the Administration

G12. To keep watch over free competition

G13. To solve TPA disputes

G14. To authorise stakes of companies with regulated activities on other companies with non regulated activities

G15. To issue a report on market concentration by companies

G16. To establish its internal rules and organization

G17. Issue an annual report

G18. Others enforced by law or by the Government

SPECIFIC TO THE ELECTRICITY SECTOR

E1. Settlement of the transmission and distribution costs and other regulated costs

E2. To solve disputes related to the technical and economical management of the system

SPECIFIC TO THE GAS SECTOR

GAS1. Proposal of the Settlement of the transmission and distribution costs

GAS2. To solve disputes related to the technical and economical management of the system

SPECIFIC TO COMPETITION MATTERS (RD-L 6/2000)

COM1. To authorise voting rights and/or appointments of members in Administration Boards when exceeding participations in principal operators in an energy sector

APPEALS TO DECISIONS BY CNE Any decision may be appealed to the Minister of Economy except those on:

1. Consequence of Function E2 2. Consequence of the “Circulars” issued by the CNE to request

information

LEGAL INSTRUMENTS TO REQUEST INFO The CNE in order to perform its functions may issue “Circulars” which are to be published in the Official Journal. The CNE may validate the information provided by undertaking inspections.

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LEGAL PROVISIONS

1998 Hydrocarbons Act. Additional Dispositions 11th and 12th.

Royal Decree 1339/1999, on the CNE Bye-Laws

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Web site of Comisión Nacional de Energía: www.cne.es

Web Web EligibilityEligibility 2003: 2003: http://www.cne.es/elegibilidadhttp://www.cne.es/elegibilidad

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MORE INFORMATION, CONTACT TO:

Rafael Durban RomeroE-Mail: rdr@cne.es

Tfno: 91- 4329600 - 4329628 Fax: 91- 5776218 E-mail: dre@ cne.esComisión Nacional de Energía

C/ Alcalá, 47- 28014 - Madrid.

Access to WEBSITE- www.cne.es (Spanish Energy Regulatory Commission)Access to WEBSITE- www.ceer-eu.org (Council Of European Energy Regulators)Access to WEBSITE- www.ariae.org (Latinoamerican Energy Regulators)

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END OF THE PRESENTATION

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