business plan for 2004 - EDP

2003 - Annual Report - EDP
c) producers are entitled to use primary sources of
energy at their generation units that they consider
most appropriate taking into account legal restrictions
in the matter of the environment and planning
classification; and
d) there is a possibility of priority being given to
generation installations using local energies (e.g.
domestic coal), provided that they do not account
for more than 15% of total primary energy required
for electricity generation and are compatible with
free market competition.
• Guarantee of the proper working of the system through
the following:
a) REE – Red Eléctrica de España, S.A. (REE) carries
on transport manager and system operator
activities, and is responsible for technical
management with a view to ensuring the continuity
and security of the supply and the proper coordination
of the production and transport system;
b) responsibility for economic management of the
system is entrusted to the market operator
Compañía Operadora del Mercado Español de
Electricidad, S.A., an entity legally separate from
REE, which is responsible for the mechanisms
involved in the reception of offers and
communication required to establish the generation
market.
• Progressive liberalisation of electricity suppliers and
introduction of supply activity:
a) the announced extension of the liberalisation of low
voltage consumption came about as from January 1,
2002, thus completing the gradual process of
liberalisation established by law;
b) right to the use of the transport and distribution
networks by eligible customers and supply
companies paying single tolls at national level for
the use of these networks, without prejudice to
differing tolls depending on the voltage and on the
use of the network or on consumption
characteristics, depending on whether they are
transport or distribution networks;
c) remuneration of the distribution business for each
company in keeping with criteria based on the costs
necessary to carry on the business, taking into
account a model that characterises the distribution
areas and other parameters.
• Formation of single prices and tariff structures across
the whole country, applicable to non-eligible customers
or to those not wishing to exercise their right of
eligibility.
• Transitory period and tariff evolution
To allow a gradual process and to ensure the economic
and financial feasibility of the companies during the
transition to a competitive market, an initial 10-year
transitory period was determined, during which
remuneration was established for the electricity system
companies to cover the cost of transition to the
competitive system. Its value was later reduced by
about 20% and the initial period was extended to 2010.
• Through Royal Decree 1436/2002, published in the
Boletín Oficial del Estado on December 31, 2002, the
Spanish government fixed an overall average increase
of the electricity selling tariff for 2003 for the electricity
distributor companies, amounting to 1.69% of the tariffs
in force in 2002, and an average overall increase of
1.95% for the tariffs for access to the electricity
transport and distribution networks.
• Legal separation of activities
Under the terms of the law, companies carrying on any
of the regulated activities (economic and technical
management of the system, electricity transport and
distribution) must have the business in question as
their sole corporate of object, and they cannot carry on
unregulated activities as well.
• Accounting separation of activities
Companies whose corporate object comprises electrical
activities shall have separate accounts for each activity
and shall submit annual reports thereon.
Gas Sector
Following the acquisition of NaturCorp by Hidro-
Cantábrico in 2003, the organisation and regulation of the
gas sector in Spain warranted closer monitoring.
Therefore, on October 7, 1998, Law 32/1998 governing the
hydrocarbons sector was approved, marking the start to
the opening of the gas sector, while safeguarding the
public interest with no direct intervention in the market.
This law came to divide the sector into three activities: the
transporters, owning the natural gas regasification and
storage facilities; the distributors, owning the distribution
pipelines, charged with the operation, maintenance and
construction of the network up to the consumers; and the
sellers, who acquire gas to sell to end consumers or to
other sellers.
While the transport and distribution activities are
regulated, selling is undertaken on a free market basis.
With a view to lending greater transparency to the sector,
both the selling and the regulated activities have to be
carried out by different companies, though, within the
same group, transport, regasification, distribution and
storage activities can be carried on by the same company
though they must keep
separate accounts.
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