„CHALLENGES AND OPPORTUNITIES FOR LITHUANIAN CONSUMERS IN THE OPEN

ELECTRICITY MARKET”

RIGA2014.03.14

1. Liberalization, legislation 2. Electricity pricing/ market price3. What has changed since the opening of the

market4. Existing fears/questions and uncertainties

OVERVIEW POINTS

For customers an open market means: - you can choose a producer or trader from

whom you buy power at your agreed price;

- the power itself will be delivered to the customer by the system operator whose networks the customer is connected to.

LIBERALIZATION, LEGISLATION

The Lithuanian Power Exchange began operation on January 1, 2010 – a free electricity market was formed.

On June 18, 2012 the power exchange operator of Nordic countries Nord Pool Spot AS started administration of Lithuanian Power Exchange.

LIBERALIZATION, LEGISLATION

The electricity market in LT changed markedly in 2010. One producer was dominant in Lithuania: transmission,

generation and supply activities were concentrated in one company;

Following are the chief changes in the electricity sector: The Ignalina Nuclear Power Plant was shut down on

January 1, 2010 and Lithuania lost its largest and cheapest producer of electricity.

AB “Lietuvos Energija” was dissolved.Production, management of the power grid and

supply where separated, thereby implementing the EU Third Package directives, the main point of which is the promotion of competition in the energy sector by separating production, transmission and distribution.

LIBERALIZATION, LEGISLATION

From January 1st of 2010 - consumers with over 400 kW capacity

From January 1st of 2011 - consumers with over 100 kW capacity

From January 1st of 2012 - consumers with over 30 kW capacity

From January 1st of 2013 all consumers, except households

LIBERALIZATION, LEGISLATION

MARKET PRICE

Consumers have now two different pricing options tochoose from. There is no just one correct answer, different

options suit different people.

Fixed price suits consumers who like to reduce risks and plan a budget for longer periods. Fixed price means that you will not be affected by market price changes; you always pay a fixed cost.

Market price is defined as giving more freedom and at the same time entailing more risks by buying electricity for a price that is not fixed.

This type of electricity price comes from the market where new prices are calculated on an hourly basis. It is possible to maximize the amount of money you save with this price type, but as nobody can predict how the market price changes, it is also possible to lose.

ELECTRICITY PRICING/ MARKET PRICE

The price of electricity in the Baltic States, including Lithuania, depends largely on the costs and production capacity at the local power plants, and also on the prices on the Nord Pool power exchange.

The price of electricity depends on a number of factors including transmission capacity and the global prices of energy resources such as oil, gas and coal.

It also depends on local (water resources, transmission restriction, power station maintenance works), regional (hydrological situation, main power stations’ and transmission lines’ maintenance works) and global factors.

ELECTRICITY PRICING/ MARKET PRICE

All components increased, except distribution price - reduction by 3% due to the elimination of Public Service Obligation and system service cost from the losses cost;

In total regulated end-user price increased 7%;

The major 33% increase was of PSO price due to the higher natural gas price;

Pre-tax WACC increased from 5% to 6.13%;

Generation 40% Transmission 6% System services 2% Distribution MV 12% Distribution LV 16% Supply 1% Public Service Obligations 23%

PRICING DECISIONS: ELECTRICITY IN 2013

Average price of electricity in 2010–2013, LTLct/kWh (VAT

excluded)

In the recent years the prices of electricity for household customers have been significantly impacted by the adjustment of the PSO price, which in 2010 – 2013 increased nearly twice -

from 4.73 LTL ct/kWh to 9.38 LTL ct/kWh.

Average price of electricity in 2010–2013, LTL ct/kWh (VAT

excluded)

Electricity prices to household customers in the European Union in

2012, EUR/kWh, VAT excluded

As compared to the electricity prices applied to the household customers of other EU Member States, the price in Lithuania was one of the lowest – 36.00 LTL ct/kWh, i.e. by 20.8 percent lower than the average electricity price in the European Union.

Electricity prices to household customers in the European Union in

2012, EUR/kWh, VAT excluded

PEX PRICE IN 2011- Aug 2012

www.baltpool.lt and www.nordpoolspot.com

PUBLIC ELECTRICAL POWER RATES AS OF JANUARY 1, 2013

Tariffs and

their

components

Unit

Payment Plans

StandardElectric

Cooker*

12,000

kWh**Home Home Plus

Rates (including VAT)

Single time interval tariff:

fixed component

LTL/month - - - 10,00 20,00

single time interval energy component

cents/kWh

50,1/

0,15Eur cents/kWh

48,7 46,7 45,5 43,8

Dual time interval tariff:

fixed component

LTL/month - - - 10,00 20,00

daytime energy component

cents/kWh

54,1

0, 16 Eur cents/kWh

52,5 50,3 48,8 46,8

night time, Saturday and Sunday energy component

cents/kWh

41,0 40,0 38,8 37,9 36,7

Tariff plans for consumers receiving power from low output grid: „Standard“ tariff plan, according to which most private

energy users settle the accounts; Single time interval tariff:

Component of single time interval is 0,474 Lt/kWh -- 0.14 Eur/kWh

Dual time interval tariff:Daytime component is 0, 513 Lt/kWh/ - 0.15Eur/kWhNightime, satruday and Sunday component is 0,384 Lt/kWh.

PUBLIC ELECTRICAL POWER RATES AS OF JANUARY 1, 2014

Energy Independence: What has Changed?

1. Independent electricity suppliers aim to appropriate the functions of the guaranteed supplier LESTO?

Consumers believe that upon choosing an independent supplier, it will become responsible for all electrical matters?

All the works related to the implementation of technical details, even under a contract with the supplier, remain the responsibility of LESTO.

LESTO is responsible for the electrical wires while independent suppliers are accountable for the electricity that flows through the wires.

WHAT HAS CHANGED SINCE THE OPENING OF THE MARKET AND WHO IS RESPONSIBLE FOR WHAT?

Existing fears/questions and uncertainties

2. Two Invoices and Agreements instead of One? The anxiety is caused by two invoices – one received from

the supplier, and the other one from LESTO. Most frequently, such a situation is associated with double taxation.

Users who choose an independent electricity supplier do not terminate their agreement with LESTO; they simply adjust it and purchase only the transfer service.

Therefore, they receive two invoices – one from the supplier for the active power, the other – from LESTO for electricity transfer via transmission and distribution networks, as well as for system (quality electricity supply) services and Public Service Obligations (PSO) at a price set by the National Control Commission for Prices and Energy (NCC).

WHAT HAS CHANGED SINCE THE OPENING OF THE MARKET

Existing fears/questions and uncertainties

Independent suppliers are currently in active operation in Lithuania;

These suppliers should gradually take over the consumer base from AB LESTO.

WHAT HAS CHANGED SINCE THE OPENING OF THE MARKET

3. Is a Power Shortage Possible when Buying from Suppliers?4. What happens if the supplier goes bankrupt?

If you select a supplier that goes bankrupt, power supply will be ensured by LESTO – the power will not be cut. Your agreement with the independent supplier will simply be null and void, and you will be obliged to pay LESTO at the guaranteed power supply rate, which is about 25 per cent higher than the one offered by suppliers. 

what has changed since the opening of the market Existing fears/questions and uncertainties

Independent Suppliers Provide the Possibility to Choose.When deciding on a power supplier, the customer should analyse the electricity prices offered by different suppliers. The truth is that this particular price-related aspect is determined by the competitive conditions of the market and may vary depending on supplier offers. Other components of the final price, such as power transmission, distribution or PSOs, are determined and approved by the NCC and apply to all customers. This is because the electricity transmission and distribution network in Lithuania is an integral and monopolistic system.

WHAT HAS CHANGED SINCE THE OPENING OF THE MARKET

Existing fears/questions and uncertainties

Energy price and public supply price increased accordingly 1% and 6%;

Transmission, system and distribution service prices decreased accordingly 9%, 55% and 1-6% depending on voltage level;

Public Service Obligation price may decrease about 28%, if quotas are not approved – there is a need of Government decision;

•The final decision is not taken yet (preliminary data in LTLct/kWh).

PRICING DECISIONS FOR 2014: ELECTRICITY

THANK YOU FOR YOUR ATTENTION