Annual Report 2010 - Enel.com

The long-term capacity market will start operation in 2011
in the Europe and Urals zone (Price Zone 1) and Siberia
(Price Zone 2), each of which will be subdivided into Free
Capacity Transfer Zones, on the basis of interconnection
difficulties.
The first auction was held in October 2010 for capacity
for 2011. The auction for offers as from January 1, 2012,
2013, 2014 and 2015 will be held on June 1, 2011. As from
2011, the capacity auctions will be held each year by December
1 for offers for the subsequent four years.
In the Free Capacity Transfer Zones, the price will be
formed through the matching of supply and demand,
with a floor and, where competition between generators
is limited, a price cap.
The price cap set for 2011 for the zone relevant to Enel
(Europe and the Urals, denoted as Zone 1) is equal to
about €3,150/MW/month, while the zones of application
and the annual updating method for the price cap have
yet to be decided.
As regards new capacity, to be built on the basis of Capacity
Contracts (DPM), the new decrees establish that certain
investments agreed with the government shall be granted
a guaranteed remuneration (capacity payment). In entering
into the Capacity Contracts, the OGKs and TGKs make
specific commitments to undertake investments in new
capacity within specified time limits. In reality, the obligation
to invest in new capacity has already been assumed
by private investors as part of their acquisition of the OGKs
and TGKs from RAO UES: for Enel OGK-5, this capital expenditure
will involve two new gas combined-cycle plants
at Nevinnomysskaya and Sredneuralskaya, with a capacity
of 410 MW each.
Under the Capacity Contracts, the capacity offered by
plants has priority access to the capacity market at a price
calculated on the basis of the parameters defined in the
ministerial decrees issued in April. They guarantee the
remuneration of the investments for ten years, as from
2011, with no price cap. The rates are based on standard
parameters established on the basis of an analysis of market
benchmarks that ensure the partial coverage (71% for
CCGT plants with a capacity of more than 250 MW) of the
investment costs, operating expenses, property tax, and
the costs of connection to the electricity and gas networks.
In addition, for certain new plants ad hoc parameters may
be negotiated to cover the actual level of investment. Enel
is currently in negotiations for the new unit at Nevinnomysskaya.
62 Enel Annual Report 2010 Report on operations
Electricity rates
With Decree 1045 of December 21, 2009, in force since
January 1, 2010, the government granted poor regions
having difficulty in collecting receivables (Chechen Republic,
Ingushetia, Dagestan, North Ossetia, Kabardino-Balkaria,
Karachaevo-Cherkasskaya) subsidies for the payment
of electricity, introducing a number of temporary measures
for the wholesale market under which electricity and
capacity are to be sold at regulated rates.
Ancillary services market
The rules for the ancillary services market were approved
with Decree 117 of March 3, 2010. The operator responsible
for system security (System Operator of the Unified
Energy System of Russia - SO UES) will choose operators to
provide ancillary services by the end of 2010.
Emissions market
Sberbank, the operator responsible for managing the ERU
registries (emission credits from joint implementation - JI
projects) and holding the tenders for selecting JI projects
on behalf of the government, carried out two tenders for
the selection and approval of JI projects.
Slovakia
Must-run plants
With Decision 17/2009, the Ministry for the Economy
set the volume of ancillary services that the ENO plant
(Nováky) is required to provide in 2010, fixing the prices
at the same level set by the regulator URSO for 2010. The
primary regulation of 11 MW will be compensated at a
rate of €73.02/MWh and the secondary regulation of 31
MW at a rate of €63.06 euro/MWh.
Pursuant to Energy Act no. 656/2004, the Slovakian government
issued Decision 47/2010 of January 2010, which
extended the domestic coal use obligation until 2020,
with the possibility of a further extension until 2035. Each
year, the Ministry for the Economy will set requirements
for Slovenské elektrárne (SE) to generate and sell electricity
produced using domestic coal. Thereafter, URSO will
set, again on an annual basis, the prices for electricity generated
from domestic resources, as well as ancillary services
prices. Therefore, ENO will benefit from guaranteed
revenues from the sale of electricity and the provision of
ancillary services.
In August 2009, URSO established the amount of the adjustment
factor for ENO’s remuneration rate (Y=32.6%),