„CHALLENGES AND OPPORTUNITIES FOR LITHUANIAN CONSUMERS IN THE OPEN ELECTRICITY MARKET”

1. „CHALLENGES AND OPPORTUNITIES FOR
LITHUANIAN CONSUMERS IN THE OPEN
ELECTRICITY MARKET”
RIGA
2014.03.14

2. OVERVIEW POINTS
1. Liberalization, legislation
2. Electricity pricing/ market price
3. What has changed since the opening of the market
4. Existing fears/questions and uncertainties

3. LIBERALIZATION, LEGISLATION
* 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.

4. 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.

5. 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.

6. 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

7. MARKET PRICE

8. ELECTRICITY PRICING/ MARKET PRICE
Consumers have now two different pricing options to
choose 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.

9. 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.

10. PRICING DECISIONS: ELECTRICITY IN 2013
* 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%

11. Average price of electricity in 2010–
2013, LTLct/kWh (VAT excluded)

12. Average price of electricity in 2010–
2013, LTL ct/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.

13. Electricity prices to household customers in
the European Union in 2012, EUR/kWh, VAT
excluded

14. 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.

15. PEX PRICE IN 2011- Aug 2012
www.baltpool.lt and www.nordpoolspot.com

16. PUBLIC ELECTRICAL POWER RATES AS OF
JANUARY 1, 2013
Tariffs and
their
components
Unit
Payment Plans
Standard
Electric
Cooker*
12,000
kWh**
Home Home Plus
Rates (including VAT)
Single time interval tariff:
fixed
LTL/month - - - 10,00 20,00
component single time
interval
energy
cents/kWh
component
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/kW
h 41,0 40,0 38,8 37,9 36,7

17. PUBLIC ELECTRICAL POWER RATES AS OF
JANUARY 1, 2014
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/kWh
Nightime, satruday and Sunday component is 0,384 Lt/kWh.

18. Energy Independence: What has
Changed?

19. WHAT HAS CHANGED SINCE THE OPENING OF THE MARKET AND
WHO IS RESPONSIBLE FOR WHAT?
Existing fears/questions and uncertainties
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.

20. WHAT HAS CHANGED SINCE THE OPENING OF THE MARKET
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).

21. WHAT HAS CHANGED SINCE THE OPENING OF THE
MARKET
* Independent suppliers are currently in active
operation in Lithuania;
* These suppliers should gradually take over the
consumer base from AB LESTO.

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

23. 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.

24. PRICING DECISIONS FOR 2014: ELECTRICITY
* 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).

25. THANK YOU FOR YOUR ATTENTION