Claude Bessé Arze

ELECTRICITY SECTOR REFORM

General SuperintendencySectoral Regulatory System

Algeria, April 10, 2001

LA PAZ

ORUROCOCHABAMBA

TRINIDAD

SANTA CRUZ

TARIJA

COBIJA

SUCRE

POTOSIVallegrande

- Yacuiba

Camargo

PuertoSuarez

Larecaja

Guarayamerín Interconnected System

Isolated Systems

To establish the principles and rules to operate the electricity industry

To establish favorable conditions for capital investment in the electricity industry

To promote competition and efficiency in the activities of the electricity industry

To regulate those activities that due to their nature are monopolistic

To ensure adequate protection of the rights of consumers

To achieve an efficient electricity service with appropriate quality

To promote efficient operation, free access to the transmission and distribution installations

To establish a tariff system that reflects the economic cost of an efficient electricity supply

Investment in the sector based on concessional financing granted by multilateral organizations (IDB, WB) and other bilateral

Lack of initiatives to promote private investment

Lack of competition

Lack of efficiency in distribution

Weak regulatory system Dependent on the political system Tariffs fixed with political criteria

Accelerated growth in demand that requires doubling installed capacity every eight years

Conflict of interests: The State exercises functions as provider of the service, policy maker and regulator

Capitalization Law N°1544 of 03/21/94SIRESE Law N°1600 of 10/28/94Electricity Law N°1604 of 12/21/94Electricity Law Regulations S.D.N°24043 of 06/28/95

Operation of the Power Market Concessions, Licenses and provisional Licenses Use of public domain goods and right of way Prices and Tariffs Distribution Quality Infractions and Sanctions

Transmission Quality S.D. 24711 of 07/17/97Rural Electrification S.D. 24772 of 07/21/97

(Thousands of Dollars) 1996 1997 1998 1999 2000e TOTAL

GENERATION 27.044 57.988 76.255 96.689 46.311 304.287

TRANSMISSION 16.977 16.977

DISTRIBUTION 26.660 37.296 38.124 42.597 28.636 173.313

TOTAL 53.703 112.261 114.379 139.286 74.948 494.577

677.832

790.879

902.131

742.481

850.881

0

100.000

200.000

300.000

400.000

500.000

600.000

700.000

800.000

900.000

1.000.000

1995 1996 1997 1998 1999

Year

Nu

mb

er

of

Co

ns

um

ers

ELECTRICITY LAW

AND

SECONDARY REGULATIONS

EFFICIENCY This principle requires the correct and optimum assignment and utilization of resources for the supply of electricity at a minimum cost.

TRANSPARENCY The public authorities responsible for the regulatory process, conduct those process in a public manner, assuring the access of information to every competent authority and to interested persons.

QUALITY Compliance with the technical requirements set by the regulations.

CONTINUITY Supply must be provided without interruptions.

ADAPTABILITY Addition of technology and modern management systems to improve the quality and efficiency in rendering the services.

NEUTRALITY Requires fair treatment for all electric companies and consumers.

GENERATION

Generation in the National Interconnected System and generation for export, constitutes the production and sale of an intangible private asset.

TRANSMISSION

Transport of an intangible private asset

DISTRIBUTION

Public Service

GENERATIONCOMPANIES

DISTRIBUTION COMPANIES

TRANSMISSIONCOMPANIES

DISTRIBUTIONCOMPANIES

Maximum 35% of installed capacity in S.I.N.

GENERATION COMPANIES

TRANSMISSION COMPANIES

DISTRIBUTION COMPANIES

GENERATION COMPANIES

TRANSMISSION COMPANIES

NO

NO

NO

NO

NO

NO

G1 G2 G3 MoreGen.

T R A N S M I S S I O N C O M P A N Y

DISTRIBUTION COMPANIESLa Paz, CRE, ELFEC ELFEO, CESSA,

SEPSA

CONSUMERS

G4

NON REGULATED CONSUMERS

GeneralSuperintendence

ElectricitySuperintendence

Vice-Ministerof Energy

Prices Fiscalization Concessionsand Licenses

EstablishNorms

IndicativeExpansion

Plan

Ensure compliance with the law and its regulationsPromote competition and efficiencyProtect rights of consumersGrant concessions and licensesWatch over the fulfillment of obligations and rights of concessions or licenses holdersEstablish rights of way for the exercise of the electricity industryApprove, publish and control, as applicable, maximum prices for regulated activities of the electricity industryResolve complaints filed by consumers, regulated companies and StateSupervise the operation of the Load Dispatch CenterPut in the authorities knowledge any environmental contravention's

National Load Dispatch Committee

Wholesale Power Market Contract Market Spot Market

Rights and duties of the market agents

Planning, operation and load dispatch in the market

Firm capacity

Marginal cost per node

Transactions in the spot market

Remuneration to the transport system

SPOT MARKET

GENERATION

CONTRACTS

TRANSMISSION

SUPPLY DEMANDMarginal Cost

•Hydroelectric•Thermoelectric

Free Prices

•Distribution Companies

•Non-Regulated Consumers

National Load Dispatch CommitteeCoordination

SUPERVISION

AND

FISCALIZATION

COORDINATION

ElectricitySuperintendence

NLDC

To plan the integratedoperation of the SIN

To carry out the load dispatch in real time with a minimum cost

To manage the transactions in the Wholesale Power Market

Generation licenses (indefinite)

Transmission licenses (indefinite and non exclusivity)

Provisional licenses (studies - 3 years term)

Distribution concessions (40 years term)

Activities free of concession or license granting Generation below 300 kw Self-production below 2000 kw Distribution by a self-producer who does not qualify as

public service

Requirements for obtaining a concession, license and provisional license

Procedure for granting concession, license or provisional license

At request Public bidding

License for import and/or export of electricity

Concession and license contracts

Caducity of concession and licenses

Preventive intervention

Free competition

Adjustment of existing concessions to the law

Requirements for obtaining the right to use goods of public domain

Protected area

Right of way

Opposition

Compensation or indemnification criteria

Maximum price from generators to distributors

Marginal cost

Maximum transmission price

Cost plus of a economically adapted system

Maximum distribution price

Price cap with efficiency factor

Indexation formula

Implementation Stages Preliminary (one year): distribution companies must implement the

methodology to measure and control quality standards Trial (6 months): to verify the applicability of quality standards Transition (24 months): to apply and comply with standards and to

adjust its facilities Quality of services

Quality of product (technical) Quality of service Commercial quality

Distributor remuneration reductions Notification to the distributor Term to amend the causes of non-compliance Reduction calculation Reimbursement to consumers

Superintendence duties

Third party denouncement

Definition of infractions and penalties to the consumer

Definition of infractions and penalties to the operators

Proceeds of fines destined to finance rural electrification projects

Company

To not fulfill the Electricity Law rules

To not fulfill the S.E. rules

To not fulfill NLDC rules

FINES

To carry out arbitrary connections

To modify measurers To deny inspections to

his installations

Consumers Third Party

To carry out activities in the electric industry without concessions and licenses

To damage electric installations.

FINES

RURAL ELECTRIFICATION FINANCIAL

ImposeSANCTIONS

EstablishINFRACTIONS

FINES2nd. Superintendency process

1st. Company process

Behavior of the transmission Responsibility of the transmitter Responsibility of the users of transmission (generators,

distributors and non regulated consumers)

Measurement of transmission quality Responsibility of the transmitter Responsibility of the users

Transmitter remuneration reduction

Implementation Stages Preliminary (16 months): Implement the methodology to

measure and control the quality Trial (one year): the penalties are reduced to 50% Regime: full application of the regulation

Remains as a State Responsibility

Central Government

Local Government

Financing by

State

Multilateral and bilateral concessionary resources

Private sector

Prices and tariffs to cover only

Operational cost

Cost of external financing

Return on private investment

Service Quality Control1. Technical Products

Assure regulated levels of tension,etc.2. Technical Service

To avoid that the frequency and duration of the interruption exceeds the permissible level.

3. Commercial ServiceTo assure a suitable and diligent consumer attention

VoltVolt Max.Max.Min.Min.

Assure the electricity supply and its expansion

Promote competence and efficiency in the electric industry activities.

Fair tariffs and prices

Consumer complaints attention - Consumer office (ODECO)

What is ODECO?

System of attention of reclamations

Which are its objectives?

To protect consumers

To know through its reclamations the right application of the legal norms, and the fulfillment of the quality parameters.

General SuperintendencySectoral Regulatory System

Claude Bessé ArzeAlgeria, April 10, 2001

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