business plan for 2004 - EDP

• International Price Comparison
Electricity prices in Portugal, as of January 1, 2003, for
domestic consumers were about 7.2% below the
average of the European Union.
International Comparison of Average Electricity Prices
(domestic consumers) Cent. Euro/KWh
Country
DK
NL
IT
DE
SE
LU
BE
U.E.
AT
IE
PT
FR
ESP
UK
FI
GR
0 5 10 15 20 25 30
Start-up of the Iberian Electricity Market (MIBEL)
During 2003, the Portuguese Government announced a
new Basic Law for the sector, establishing the principles
and conditions inherent to the implementation of MIBEL.
Together with the deepening of the Internal European
Market, brought about by Directive 2003/54/EC of June
26, the Portuguese and Spanish Governments signed a
protocol on November 14, 2001, which sets forth the main
principles for the creation of an Iberian electricity market,
to be developed in accordance with two complementary
systems:
• Bilateral contracts freely established between the
parties; and
• Contracts organised through the Iberian Market
Operator, in which management of the daily and
intraday markets will be in the hands of the Spanish
pole and management of the forward markets will be
the responsibility of the Portuguese pole;
Implementation of this market has been performed in
stages, and it is expected to be fully operational in 2006
on finalisation of the projects to strengthen the links that
will allow an increase of commercial capacity for crossborder
transactions from the present 650 MW to 1500
MW.
At the 19th Portuguese-Spanish Summit held at Figueira
da Foz on November 7 and 8, 2003, final agreement was
reached by Portugal and Spain on the conditions
necessary to implement MIBEL, namely:
• Implementation of all the operating mechanisms
governing the work of the two poles of the market and
their integration;
2003 - Annual Report - EDP
•The harmonised regulation of the spot and forward
electricity markets in Portugal and Spain;
• Termination of the majority of the CAEs in Portugal by
the start date of the integrated operation of MIBEL;
and
• Institutionalisation of the Iberian Regulatory Board,
including representatives of the two regulators, the
purpose of which will be to solve conflicts and control
the work of the markets within the scope of their
common responsibilities.
The start of the integrated work of the two poles of
MIBEL on April 20, 2004, was also announced at the
Summit.
It was also establish that within two years of the start of
the integrated work of the two poles of MIBEL, the
Iberian Energy Market Operator – Portuguese Pole and
the Iberian Energy Market Operator – Spanish Pole will
be merged with a view of setting up a single Iberian
Market Operator.
The gradual development of MIBEL will take place as
both electricity systems evolve in the approach of their
respective operating frameworks, particularly in the
matter of:
• Extending end-customer eligibility to the whole of the
low tension.
The opening of the markets to all consumers started in
Spain on January 1, 2003, while, for Portugal, in
accordance with Council of Ministers’ Resolution
63/2003 of April 28, which approved the guidelines of
the Portuguese energy policy, total opening of the
market is called for by July 2004;
• Extinction of the CAEs.
About 85% of electricity generation in Portugal is
covered by this type of long-term contract. In a context
of a competitive market in generation, at Iberian level,
the CAEs constitute a market restriction that should be
terminated. This will be done without prejudice to the
financial compensation due to producers and without
overloading consumers. In November 2003 Economy
Minister Order 894/XV /2003 was published, restating
the principles set out in Order 14315/2003 of July 23,
particularly with regard to the guarantee of the
neutrality of the net economic value of the Contractual
Balance Maintenance Costs (CMEC) compared to the
value net of taxes of the acquisition contracts. It further
establishes that quantification and payment of the
CMECs shall be undertaken so as to allow their
securitisation on the international financial market.
Therefore, payment of the compensations (CMEC) must
safeguard the investments made and cover the
commitments in the CAEs in the part not covered by
the revenues expected in a market regime. To prevent
any additional costs for consumers, the repercussions
on the tariff will be diluted over time; and