The Law of the Republic of Azerbaijan on Natural Monopolies; The Law of the Republic of Azerbaijan on Anti-monopoly Activities;

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1 Emin Shikhalyev Moldova, Kishinev, 5-6 May 2010

2 REGULATORY LEGAL BASIS The Law of the Republic of Azerbaijan on Natural Monopolies; The Law of the Republic of Azerbaijan on Anti-monopoly Activities; The Law of the Republic of Azerbaijan on Electricity; Decree of the President of the Republic of Azerbaijan on approving the Regulation on the Tariff (Price) Council of the Republic of Azerbaijan (Approved by Decree of the President of of December 26, 2005, No. 341); Decree of the Cabinet of Ministers of the Republic of Azerbaijan on the Secretariat of the Tariff (Price) Council of the Republic of Azerbaijan; Decree of the Cabinet of Ministers of the Republic of Azerbaijan on approving the Rules for ensuring state control over formation and application of tariffs (prices), with respect to which state regulation is applied (Approved by decision of the Cabinet of Ministers of of December 30, 2005, No. 247); Decree of the Cabinet of Ministers of the Azerbaijan Republic on approving the list of goods (works, services), prices (tariffs) for which are regulated by the state (Approved by decision of the Cabinet of Ministers of September 28, 2005, No. 178). Secretariat of the Tariff (Price) Council of the 2

3 GENERAL PROVISIONS The Council is the collective executive power body that carries out state regulation of prices (tariffs), payment for services, fees, to which state regulation is applied; In its activities the Council is guided by the Constitution of the Azerbaijan Republic, by laws of the Azerbaijan Republic, decrees and orders of the President of the Azerbaijan Republic, decrees and orders of the Cabinet of Ministers of the Azerbaijan Republic, international agreements, the party of which is the Azerbaijan Republic, and the current Regulation of the Tariff (Pricing) Council; The Council carries out its activities in coordination with central and local executive power bodies, economic entities, local self-governing bodies, as well as public organizations. 3

4 Regulatory Goal To set principles for functional operation and supply of energy To elaborate optimal schemes of consumption of energy, regulatory framework for investments and facilitation of efficient deployment of the newest technologies To unite interests of consumers, the state and private sector Energy efficiency in network operation and in consumption Legal and regulatory stability 4

5 IMPORTANT SPHERES OF REGULATION Utilities sector Energy Transport «Azərsu» JSC «Azəristiliktəçhizat» t JSC «Azərenerji» JSC «Bakıelektrikşəbəkə» JSC «DNŞ» (SOC) Various economic entities Communication Health care 5

6 Contribution of the regulatory body Power grids have to be planned and operated efficiently Decrease of losses of energy, introduction of smart power grids that ensure better accuracy and flexibility in real time Taking into consideration infrastructure, to determine models and solutions for main tasks, contribute to adaptation to climate changes To promote investments in power grids related to introduction ti of fthe new technologies 6

7 The main priority for the energy sector Energy efficiency Growing dependency from electricity as a moving force of our economies Raising awareness and improvement of understanding of consumers Elaboration of tariff structures and frameworks that award suppliers for their efforts Support of finformation campaigns about tbenefits of efficient use of energy for consumers. 7

8 Renewable energy sources Using energy from alternative sources, it is possible to get much more energy than equivalent electricity Solar radiation Wind energy Hydro energy Energy from biomass Geothermal Energy of sea waves 8

9 RESIDENTIAL CONSUMERS Consumer prices (Euro cents/kwh) (forecast) Price for electricity 1,52 5,6 5,6 Transmission tariffs 1,13 0,19 0,19 Value added tax (VAT) 18% 18% 18% 9

10 Non-residential (commercial, institutional and industrial) consumers Consumer prices (Euro cent/kwh) (forecast) Price for electricity 4,7 5,6 5,6 Price for wind energy ,2 42 4,2 Transmission tariffs 2,44 0,19 0,19 Value added tax (VAT) 18% 18% 18% 10

11 RELATIONS In the procedure set in accordance with the approved work plan, to obtain on issues that are in the competence of the Council necessary documents and information from state t bodies, institutions and organizations irrespective of their ownership and organizational legal form; To attract t to meetings of the Council and Secretariat t of the Council experts and consultants and to carry out other events in connection with issues that are examined by the Council Secretariat t of the Council forms working groups of the Secretariat t comprised of specialists from relevant executive power bodies, institutions, organizations state bodies and independent experts Receives es from relevant state bodies, institutions tions and organizations ations irrespective of their form of ownership and legal organizational forms, information, opinions and proposals on the issues in question. 11

12 Energy connections with neighboring countries Azerbaijan Г а х Mингечаурская ур в.х. Х ы з ы 12

13 STATE REGULATION OF PRICES IS DONE ON THE BASIS OF THE FOLLOWING INFORMATION A report justifying the need to revise tariffs; Calculation of cost of goods and services of a Subject; A Cost report for two previous and for the current year; Forecasted costs (disclosure of costs associated with production) and profit; Receivables and payables; Audit opinion on activities of economic entities; Comparative table on current and forecasted prices; The level of corresponding prices for some countries of the region. 13

14 THE STAGE OF APPROVAL OF TIFFS Based on the Decree of the Cabinet of Ministers No. 247, adopted on December 30, 2005, each year, by March 1, regulated entities have to present reporting materials to the Tariff Council; If it is necessary to revise tariffs, the prepared draft is examined (analyzed) within 1 month; Within 5 (five) days after transfer of materials, the Tariff Council informs the entity about deficiencies in the report; Within 5 (five) days, the entity has to provide required materials; Council members receive written description of the project proposed for discussion; According to the coordinated schedule, Decrees are issued at meetings; - Adopted Decree is disseminated. - With the help of mass media and the Tariff Council website, 14

15 INTERNATIONAL RELATIONS Cooperation with organizations NUC (National Association of Regulatory Utility Commissioners); ERRA (Energy Regulators Regional Association); EMRA (Energy Market Regulatory Authority of Turkey); Central Asia Regional Economic Cooperation (CEC) ADB Support European Bank for Reconstruction and Development (EBRD); USAID/Azerbaijan; 15

16 PLANS FOR THE FUTURE Improvement of the structure and regulatory-legal base, taking into consideration international experience; Improvement of the human resource potential of the Secretariat. Studying international experience (organization of workshops, vocational and language courses, meetings, trainings ); Improvement of the tariff structure by establishing retail and wholesale prices based on the market demand; Information provision and public relations of the Secretariat; P reparation of the Concept of the Tariff Policy of the Republic of Azerbaijan for

17 THANK YOU FOR YOUR ATTENTION! 17