Global EnergyRegulation

Reporting on energy regulation issues around the world May 2016

Issue 204

EUROPEAN NEWS

UK

Fracking Given Green Light In North YorkshireNorth Yorkshire County Council’s planning committee has approved Third

Energy’s application to undertake shale gas fracking outside the village of Kirby

Misperton in the Ryedale district of North Yorkshire. In the face of huge public

opposition, this is the first fracking application to be approved since a ban was

lifted in 2012. Third Energy now will begin exploring for shale gas at an existing

well near Kirby Misperton. The company would need further approvals to

produce shale gas on an industrial scale.

Financial Times, 24/05/16; Energy Live News, 24/05/16

Ofgem Launches Review Into National Grid’s Price ControlsOfgem has launched a mid-period review into the 2012-2021 price controls

for electricity and gas transmission. This review takes place under the 2013

price control, which stipulated a mid-period review of the outputs that

the companies must deliver to consumers, in the event of any changes in

government policy or in the needs of network users and consumers. Ofgem

has decided to limit this mid-period review to National Grid electricity and gas

transmission, as it has not identified any issues that justify a similar review of

other transmission operators.

Energy Live News, 13/05/16; Ofgem, 12/05/16

Contents

1 Europe

11 North America

14 Central & South America

15 Asia Pacific

19 Middle East

General EditorTomas Haug

Regional EditorsAmparo Nieto: North America

Oscar Arnedillo: Spain, Portugal,

European Union and Latin

America

Marco Schönborn: Italy

May 2016 2

Belgium Inauguration Of New Pipeline Connecting Dunkirk And Zeebrugge The French and Belgian gas Transmission System Operators (TSOs), GRTgaz

and Fluxys, respectively, have inaugurated a new pipeline which connects

the new French liquefied natural gas (LNG) terminal at Dunkirk (expected to

become operational within the next months) with Zeebrugge in Belgium. The

pipeline was classified as a project of common interest by the European Union

and is expected to improve gas market integration in Northwestern Europe.

However, LNG from the US may have to be directly shipped to Zeebrugge

instead, as the French energy and environment minister Ségolène Royal

wants to ban shale gas from the Dunkirk LNG terminal.

Naturalgaseurope.com, 06/06/16; Agence Belga, 27/05/16

European Union ACER Estimates Contractual Congestion At 17% In European Gas NetworksThe EU’s Agency for the Cooperation of Energy Regulators (ACER) published

its Annual Congestion Report, which analyzes data from the Transparency

Platform of the European Network of Transmission System Operators for

Gas (ENTSOG) from 2015 to 2017 as well as 2015 auction data from the three

capacity booking platforms. According to ACER, contractual congestion (when

capacity demand exceeds an interconnector’s technical capacity) affects 17%

of all interconnection points across the EU. In its report, ACER also asked

Transmission System Operators and ENTSOG to ensure the availability of

reliable data on the Transparency Platform and also recommended that the

European Commission clarify and extend the scope of “contractual congestion.”

ACER, 31/05/16

EC Approves German Plans For Decommissioning Eight Lignite-Fired Power Plants The European Commission has concluded that German plans to grant €1,600

million (US$1,814 million) of public financing for mothballing and closing eight

lignite-fired power plants is consistent with EU state aid rules. The cost of

closing the plants will be borne by their operators, but they will be compensated

for their foregone profits. The first plant is scheduled to stop operating in

October 2016 and the last will do so in October 2019.

European Commission, 27/05/16

May 2016 3

EC Approves Spanish Mines Closure PlanThe European Commission (EC) has found that the Spanish government’s

plan to grant €2,130 million (US$2,416 million) to the operators of 26 coal

mines is in line with EU state aid rules. According to the EC, the Council of

the European Union adopted a decision in 2011 that allows Member States to

cover production losses and certain exceptional costs arising from the closure

of uncompetitive coal mines, in order to alleviate the social and environmental

impact. The grant is contingent on coal mines shutting down by late 2018. The

Spanish authorities have committed to recover aid given to any mines that have

not closed down by that date.

European Commission, 27/05/16

Member States Approve Draft Rules For The European Transmission System Operators Facilitating Renewables Integration EU Member States issued a favorable opinion on the System Operation

Guideline, a draft set of harmonized rules for the European Network of

Transmission System Operators for Electricity (ENTSO-E) on how to operate

the network to ensure security of supply amid growing output from

renewables. The System Operation Guideline is the sixth network code or

guideline drafted by ENTSO-E and adopted by Member States through the

EU’s Comitology process. Adoption of the document is subject to approval by

the European Council and Parliament.

ENTSO-E, 11/05/16

EU General Court Backs Commission Decision, Finding That German Law On Renewable Energy Of 2012 Involved State AidThe General Court of the European Union has dismissed the action brought by

Germany against a decision of the European Commission (EC) classifying the

2012 German law on renewable energy (EEG 2012) as state aid. Even though the

EC had largely approved the aid, Germany contested the EC’s decision to classify

as state aid both the support for production of electricity from renewable energy

sources and the exemptions granted to energy-intensive industries companies

from the EEG surcharge used to pay for this support. According to the court, the

EC was correct to take the view that EEG 2012 involved state resources.

General Court of the European Union, 10/05/16

May 2016 4

European Commission Refers Poland To Court Of Justice Over Exploratory DrillingThe European Commission (EC) is referring Poland to the EU Court of Justice

for not taking into account all relevant criteria and standards established by

the Environmental Impact Assessment Directive with regard to deep drilling,

including for shale gas extraction. According to the EC, it is possible under

Polish law to drill down to depths of 5,000 meters without assessing the

potential impact on the environment beforehand. Under EU law, however, such

deep drilling needs to be assessed, in particular for the waste it produces, its

effects on water and soil, its use of natural resources, the risk of accidents, and

any cumulative effects it may have on other similar projects or activities.

MiningSEE, 03/05/16; European Commission, 28/04/16

France French Government Publishes Decrees Governing The French Renewables Support SchemeThe French government published two decrees specifying the legal

framework for its support of renewable energy. The new provisions contain

a list of facilities that are eligible for sliding-scale feed-in premiums. The

list includes new hydropower and biogas plants with capacity greater

than 500 kW as well as Combined Heat and Power (CHP) systems with

capacity between 300 kW and 1 MW. Biomass projects, photovoltaic plants

with capacity greater than 500 kW, and standing offshore plants will be

tendered and supported with a sliding-scale premium. Operators that are

subsidized under the sliding-scale premium scheme generate revenues from

selling electricity on the market and also receive the difference between

a technology-specific price and a reference market price determined

ex-post. This mechanism is designed to provide electricity producers with

an incentive to align their electricity sales more closely with consumer

demand. For most technologies, the technology-specific prices and

management premiums have not yet been determined.

Office franco-allemand pour la transition énergétique, 03/06/16; Decree 2016-691,

28/05/16

France Studying Possible Ban On Import Of US Shale Gas: MinisterFrench Energy Minister Ségolène Royal announced she was investigating legal

means to ban the import of shale gas from the United States, alongside the

ban on hydraulic fracking imposed for environmental reasons. Answering a

question in parliament, Royal criticized contracts signed by utility companies

May 2016 5

Engie and EDF with a US producer that led to imports of liquefied natural gas

(LNG) containing about 40% shale gas, expressing a desire to ban such imports

if possible.

Reuters, 10/05/16; LNG World News, 16/05/16; NGI’s Shale Daily, 23/05/16

Germany European Commission Approves Climate ReserveThe European Commission confirmed that the planned climate reserve is

compatible with European state aid rules. The scheme forms part of a new law

designed to reform the German power market. It will see eight lignite plants

with a total capacity of 2.7 GW mothballed and moved into a reserve between

October 2016 and October 2019. The plants will remain in the reserve for four

years before being closed down completely. The government hopes that the

measure, for which the compensatory payments will cost around €230 million

(US$261 million) per year for seven years, will reduce carbon emissions by

11 million to 12.5 million tons per year by 2020. In its decision, the European

Commission accepts the argument of the German government that the reserve

represents an important contribution to the government’s climate goals. It also

accepts that annual payments to the operators of the relevant plants largely

represent compensation for foregone profits. It concludes that the measure will

only have a minor impact on the power market and that any potential harm to

competition will be outweighed by the positive effect on the environment.

European Commission, 27/05/16; BMWi, 27/05/16

Energy Ministry Publishes Draft Law On Procuring Interruptible LoadOn 25 May, the Federal Ministry for Economic Affairs and Energy (BMWi)

published the cabinet draft of its amended law on the procurement of

interruptible load. Transmission network operators in Germany are allowed

to conclude contracts with large consumers to request reductions in their

electricity consumption if network stability is threatened. A central element

of the new draft law is the requirement for Transmission System Operators

(TSOs) to procure interruptible load through auctions. The participants can

bid a capacity price for committing the load as well as an energy price if the

TSOs actually call on the service. The capacity price is capped at €500 (US$567)

per MW, and the energy price is capped at €400 (US$455) per MWh. The four

German electricity TSOs are required to hold one combined auction per week,

tendering 750 MW of immediately interruptible capacity plus 750 MW of quickly

interruptible capacity (up to 15 minutes after notice). The TSOs will award the

tender according to the energy prices.

BMWi, 25/05/16

May 2016 6

BNetzA Publishes Study On Benefits of Merging Gas Market AreasOn 18 May, the German energy regulator Bundesnetzagentur (BNetzA) published

a study investigating options to improve the market environment in two

German market areas for gas – NetConnect Germany (NCG) and Gaspool (GPL).

The authors of the study start from the point of view that in 2014, NCG and

GPL did not satisfy all of the market liquidity requirements set out in the EU’s

Gas Target Model II. This situation is likely to exist until 2017 and beyond, if

not mitigated. As potential remedies, the authors analyze internal measures

for increasing liquidity as well as the option of merging NCG with GPL and

potentially with surrounding market areas. They investigate whether merging

the German market areas with market areas in the Netherlands (TTF), Belgium

(Zeebrugge), France (PEG Nord), or the Czech Republic (VOB) would increase

liquidity. The authors conclude that of all measures investigated, only market

area mergers including the Dutch TTF would sufficiently increase market

liquidity to fulfill the requirements of the Gas Target Model II. The TTF’s virtual

trading point is by far the most developed in continental Europe, with traded

volumes more than those of NCG and GPL combined.

BNetzA, 18/05/16

Regulator Revises Demand For Winter Reserve Out To 2019On 2 May, the German regulator for electricity, gas, and telecommunication

networks (BNetzA) updated its estimate of generation capacity required in the

next few years as “winter network reserve,” to manage transmission constraints

between North and South Germany when demand is high. According to the

BNetzA, German TSOs will need 5.4 GW of reserve capacity to ensure security

of supply in winter 2015-2016, a slight drop from last year’s estimate of between

6.6 GW and 7.6 GW for the same period. By 2018-2019, the BNetzA expects

demand for the reserve to fall to 1.9 GW due to the introduction of congestion

management procedures between Austria and Germany. The BNetzA notes

that TSOs have already contracted sufficient reserve capacity for 2016-2017,

from both domestic and foreign producers, and the regulator is confident that

demand for 2018-2019 can be met by domestic generation. The estimates for

2018-2019 will be revised before summer 2018.

BNetzA, 02/05/16

EU General Court Rules That EEG 2012 Constituted State AidThe General Court of the European Union upheld the European Commission’s

Decision (2015/1585) that the 202 version of the renewable energy law (EEG)

constitutes a form of state aid under Article 107(1) TFEU (Case T-47/15). The

May 2016 7

opinion rests on the fact that, although the EEG-surcharge is collected and

administered by the TSOs, the funds involved “remain under the dominant

influence of the public authorities.” It notes that the exemptions granted to

energy-intensive industries also constitute a form of operating aid. The BMWi

is currently examining the judgment and may decide to launch an appeal

within two months of the publication of the decision. The BMWi confirmed that

the decision will not affect the German industry. The current version of the

EEG, ratified in 2014, was preemptively cleared by the European Commission

as compliant with state aid regulation. In a similar vein, the government is

planning to obtain the European Commission’s approval for the current 2016

update before its planned ratification later this year.

CURIA, 10/05/16; BNetzA, 10/05/16

Greece Construction Commences On Trans Adriatic PipelineOn 17 May, construction officially started on the Trans Adriatic Pipeline

(TAP), which will connect the Shah Deniz II gas field in Azerbaijan to

markets in the European Union and will reduce reliance on imports

from Russia. Upon its completion, expected in 2020, the TAP will be the

westernmost link of the Southern Gas Corridor, crossing Greece, Albania,

and the Adriatic Sea into Italy. It will connect with the Trans-Anatolian

Natural Gas Pipeline in Turkey, which will itself be connected to the

Southern Caucasus Pipeline in Georgia and Azerbaijan. The TAP is expected

to cost €5,000 million (US$5,670 million) and will supply roughly 10 billion

cubic meters (bcm) per year to European households.

The Wall Street Journal, 17/05/16; Reuters, 17/05/16

Netherlands Draft Decision Certifies TenneT As Offshore Network OperatorThe Dutch Electricity Act stipulates that wind farms built in the North Sea

will be connected by an offshore network to the national grid. TenneT TSO B.V.

(TenneT) will be the operator responsible for the offshore network. However,

before the Ministry of Economic Affairs can appoint TenneT as operator of the

offshore network, TenneT must be certified by the Authority for Consumers and

Markets (ACM), the Dutch energy regulator. In doing so, ACM assesses whether

the company meets the unbundling requirements of European Directive

2009/72/EC. ACM had already made such a decision with respect to TenneT

in 2013. However, under a recent amendment to the Electricity Act, TenneT is

required to re-apply for certification, after which ACM must re-run the test.

May 2016 8

ACM has now made a preliminary decision that TenneT fulfills the necessary

requirements. Before the decision can be finalized, the European Commission

must give its opinion. The draft decision was submitted to the European

Commission on 28 April 2016.

ACM, 23/05/16

Draft Decisions On Electricity And Gas CodesThe Authority for Consumers and Markets (ACM) would like to make all of

the 23 codes governing the electricity and gas markets available through the

Dutch legal repository website (wetten.overheid.nl). This move will improve

access to the codes and clarify which version of the codes applied on which

dates. ACM is publishing the full current text of all codes in the Official Gazette,

which establishes in law the current texts without amending them. Regulations

published in the Official Gazette automatically become available on the legal

repository website.

ACM, 11/05/16

Italy Aeegsi Proposes A New Regulatory Framework For Second Generation Smart Meters On 27 May 2016, the Italian energy regulator, Autorità per l’Energia Elettrica

il Gas e il Sistema Idrico (Aeegsi) published a consultation document on the

regulatory framework for second generation (2G) smart metering installations,

as part of the current fifth regulatory period for electricity transmission

and distribution services. In the document, Aeegsi sets out three alternative

approaches for setting allowed revenues for 2G smart metering installations:

(i) a standard cost methodology, in line with the gas distribution sector, (ii) a

standard cost methodology coupled with the use of an “IQI matrix” for capital

expenditures, or (iii) similar to (ii) but considering total expenditures and using

fixed capitalization rates. Overall, the outlined regulatory framework draws

on the British (Revenue=Incentives+Innovation+Outputs) RIIO framework by

proposing an incentive to offer lower forecasts (the “IQI matrix”) and also by

envisaging the use of “fast-tracking” for some companies’ smart metering

plans as well as output-based performance measures linked to bonus/penalty

mechanisms. Aeegsi expects to publish a final consultation document in August

and its final decision in the autumn. Stakeholders can submit their comments

on this consultation until 27 June 2016.

Aeegsi, 27/05/16

May 2016 9

Spain Spanish Supreme Court Orders Compensation To Photovoltaic Investors Affected By Cuts In Renewable IncentivesThe Supreme Court of Spain ordered the Spanish government to compensate

certain investors in photovoltaic generation for the expenses and costs

incurred in developing projects that were ruled not eligible for economic

incentives (subsidies) following the approval of Royal Decree-Law 1/2012. This

Decree-Law suspended all economic incentives to new renewable electricity

installations. The investors had filed a claim with the government, but it

was dismissed by the Council of Ministers in April 2014. The Supreme Court,

however, backed the investors by arguing that when they made the investment

decision, they could not have foreseen that the economic incentives would be

eliminated just three-and-a-half years after they were approved.

Energías Renovables, 10/05/16; Evolutiza Lawyers & Tax, 04/05/16

Spanish Regulator Fines Galp For Interfering With Consumers’ Right To Choose Energy SupplierThe Spanish energy regulator (CNMC) has imposed a fine of €400,000

(US$454,000) on Galp Energía España for improper practices in consumer

switching of electricity and gas suppliers as well as for not complying with

customer protection standards. CNMC found that the company’s salespeople

switched the gas and electricity supplier of several consumers without their

consent. In addition, the company was required to have a toll-free customer

service line but, in many instances, the number provided by Galp involved the

payment of premium telephone rates.

CNMC, 23/05/16

Constitutional Court Backs Murcia Autonomous Community’s Renewables LawThe Spanish Constitutional Court has lifted the suspension of Article 20bis of

Murcia’s Renewable Energy Law, as requested by the Spanish government. This

article classified certain small renewable generators as isolated from the main

electricity system, even though they were not physically isolated from it. In

addition, the article enabled small renewable energy generation facilities with

capacity for self-consumption to be considered as energy exchange facilities,

which exempts them from having to pay charges for the energy they produce

and consume within their own premises.

Energía Diario, 19/05/16; Europa Press, 18/05/16

May 2016 10

Switzerland Regulator Sets Rules For Regulatory Treatment Of Stranded AssetsThe Swiss regulatory authority for the electricity sector (ElCom) published

rules for the regulatory treatment of stranded assets. The regulator identified

four scenarios that may lead to extraordinary depreciation: (1) destruction

of an asset (e.g., through an avalanche); (2) redundancy of an asset; (3)

premature replacement due to technical changes to the network system; and

(4) unnecessary premature replacement. In cases where assets are destroyed,

become redundant, or have to be prematurely replaced due to technical

changes to the network system, the regulator will allow network operators to

pass accelerated depreciation on to clients by way of higher network tariffs.

Depreciation corresponding to unnecessary replacements of assets may only

be passed through if network costs decrease.

ElCom, 28/04/16

Turkey Turkey And Israel Near Energy DealIn an interview with Bloomberg on 5 May, Israeli Minister of National

Infrastructure, Energy, and Water Resources Yuval Steinitz announced that

Turkey and Israel are nearing an energy deal, which would see gas exports

from Israel to Turkey. Starting in 2020, Turkey hopes to consume half of the gas

in Israel’s Leviathan gas reservoir. Though the two countries were longtime

regional allies, relations between Turkey and Israel cooled in 2010 after Israeli

commandos killed ten Turkish activists aboard a humanitarian ship who were

attempting to break Israel’s blockade of Gaza. After months of conciliatory

talks, Steinitz suggested that a deal could be completed in the coming weeks.

Bloomberg, 05/05/16; Daily Sabah, 02/06/16

May 2016 11

NORTH AMERICAN NEWS

US NYPSC Adopts New Utility Revenue Models In REV ProceedingIn an order dated 19 May 2016, the New York Public Service Commission

(NYPSC) adopted the basis for a new utility regulatory model intended to

better align utility profits with the state’s energy goals under its Reforming

the Energy Vision (REV) proceeding (Case 14-M-0101). In this order, the NYPSC

asserted that the conventional cost-of-service ratemaking model inhibits

innovation and discourages utilities from undertaking certain activities under

the REV, such as encouraging distributed generation. Distribution utilities will

be required to develop retail markets for distributed energy resources (DERs).

Pursuant to the order, utilities will have additional earning opportunities,

namely: (1) Platform Service Revenues derived from the operation and

facilitation of distribution-level markets (whether such services are required by

the NYPSC or voluntary); (2) Earning Adjustment Mechanisms (EAMs) linking

revenues to specific targets for System Efficiency, Energy Efficiency, Customer

Engagement, Distributed Generation Integration, and Affordability; and (3)

revenues for meeting greenhouse gas reductions. The order required utilities

to file revisions to their standby service tariffs by 1 August, a progress report

on aggregated data reporting by 1 September, a privacy policy statement for

data reporting by 1 October, and a System Efficiency proposal with a peak

reduction target and a load factor improvement target by 1 December, among

other proposals. Utilities are also required to file voluntary time of use rates

by 1 June 2017 and are encouraged to propose metrics for evaluating program

outcomes under EAMs.

Utility Dive, 20/05/16; NYPSC, 19/05/16

FERC Approves New York ISO’s Behind-the-Meter Tariff RevisionsIn an order dated 17 May 2016, the Federal Energy Regulatory Commission

(FERC) conditionally accepted revisions to the Market Administration and

Control Area Services Tariff and the Open Access Transmission Tariff (OATT) of

New York Independent System Operator (NYISO). These revisions are intended

to encourage behind-the-meter generation resources to participate in NYISO’s

wholesale markets. Although the current NYISO rules do not explicitly exclude

behind-the-meter generation from participating in the market, the only two

behind-the-meter generators participating in the NYISO market were active in

the operator’s predecessor market and were allowed to continue participating

through NYISO’s establishment. Accordingly, NYISO believes the current rules

May 2016 12

lack the clarity and incentives to support behind-the-meter participation.

The proposals by NYISO include the following revisions: (1) behind-the-

meter resources seeking to participate in the market must have a minimum

nameplate generation capability of 2 MW, a minimum load of 1 MW, and an

interconnection allowing an export of 1 MW to the New York State transmission

system; (2) calculations of behind-the-meter resource capacity will be revised to

account for NYISO’s adjusted host load; and (3) market power mitigation rules

will be applied to behind-the-meter resources. Such changes are expected to

expand NYISO’s resource base by relaxing the qualification requirements and

better clarifying which resources are eligible to participate. NYISO has been

requested to submit a compliance filing.

SNL, 20/05/16; FERC, 17/05/16

DOE Grants Solar Fund For Development Of Distributed Energy Grid SolutionsFrom 2008 to 2015, solar capacity in the United States expanded from 1.2 GW

to 27.4 GW, including utility-scale and distributed generation (DG) systems.

To balance the presence of solar on the system, the US Department of Energy

(DOE) has allocated US$25 million of its Grid Modernization Initiative toward

a program of accelerating solar power’s integration into the network through

improvements to system integration technology. The initiative is called the

Enabling Extreme Real-Time Grid Integration of Solar Energy (ENERGISE)

program, and it will seek to finance the development of data-driven and

flexible tools and models to help utilities balance and integrate distributed and

variable generation sources into the network more reliably and cost effectively

in real time. ENERGISE will offer funding for projects that demonstrate

enhancements in sensing, communication, and data analytics. Interested

vendor-utility partnerships must submit a concept paper by 17 June 2016, and

eligible concept papers can be followed with full applications by 26 August

2016. The Office of Energy Efficiency and Renewable Energy (EERE) will notify

selected projects by 9 December 2016.

Utility Dive, 04/05/16; DOE, 02/05/16

May 2016 13

Mexico Mexican Electric System 2016-2030 Planning DocumentOn 30 May, the Mexican Energy Ministry (SENER) issued the National Electric

System Development Program 2016-2030 (in Spanish, PRODESEN). This

document contains the 15-year plan for the Mexican Electric System, which

includes all generation, transmission, and distribution. According to the

document, during that period, 57 GW of capacity will be added and 63% will

be clean energy sources. According to Energy Secretary Pedro Joaquín Coldwell,

the plan features investments worth US$131,600 million from 2016 to 2030, of

which about US$100,000 million will be devoted to generation projects.

SENER, 30/05/16; Mexicoxport, 31/05/16

SENER Presents The “Public Policy For The Implementation Of The Natural Gas Market” On 24 May, SENER presented for public consultation a document titled: “Public

Policy for the Implementation of the Natural Gas Market: A Strategic Process.” The

purpose of the document is to outline the actions that will generate the necessary

incentives to establish a natural gas market, supported by the publication and

registration of commercial transactions across the country. SENER will accept

comments during June before the final release of the document.

SENER, 24/5/16

Diagnostic Of The Petroleum Products Industry In Mexico SENER released a “Diagnostic” of the petroleum products industry in Mexico. This

document shows the installed infrastructure for oil refining, transport, storage,

distribution, marketing, and public sales of petroleum products, as of 2015.

SENER, 18/5/16

May 2016 14

CENTRAL & SOUTH AMERICAN NEWS

Argentina Government Launches First Tender Under The RenovAr Renewable Energy SchemeThe president of Argentina and other government representatives launched a

renewable energy development scheme for 2016 through 2025 called RenovAr.

In the first round of this program, the government expects to increase the

country’s renewable capacity by 1,000 MW by tendering contracts for the

purchase of electricity. The program favors wind and solar generation projects

(for 600 MW and 300 MW, respectively), but also considers support for biomass,

small-hydro, and biogas projects (for 65 MW, 20 MW, and 15 MW, respectively).

These additions to the installed capacity are expected to generate US$300

million of savings in fuel import costs per year.

Ministry of Energy and Mines, 18/05/16

Brazil Government Approves Law Fostering Energy EfficiencyThe Brazilian government approved a bill requiring electricity distributors to

pass over to the National Program for Electric Conservation (Procel) 20% of the

amount that they are required to spend on energy efficiency measures. This

measure would allow Procel, whose objective is to promote the rationalization

of consumption, to collect R$100 million (US$28 million) per year. The new

bill also creates the Energy Efficiency Management Committee and grants

the energy regulator, Aneel, powers to define the collection schedule of Procel

resources as well as the corresponding fine and penalty scheme.

Ministry of Mines and Energy, 4/05/16

May 2016 15

ASIA PACIFIC NEWS

Australia AER Issues Final Decision For ActewAGL’s Gas Distribution NetworkThe Australian Energy Regulator (AER) issued its final decision on the access

arrangement that will apply to ActewAGL’s gas distribution network from

1 July 2016. The corresponding revenue accounts for approximately 34% of an

average household’s annual gas bill in the Australian Capital Territory (ACT).

If other components of the bill stayed the same and the lower distribution

charges flowing from this final decision are passed on to customers, the average

household’s annual gas in the ACT would fall by approximately A$107 (US$80) in

2016–2017, before rising for the next four years by 1.2% per year on average.

AER, 26/05/16

AER Issues Final Decisions For Victorian Electricity DistributorsThe AER announced its final decisions on revenues for the five businesses that

run Victoria’s electricity networks. These revenues make up between 20% and

40% of electricity bills in Victoria. AER Chair Paula Conboy said the decisions

published today “lock in consumer savings” on household electricity bills of

between A$50 and A$120 (US$37 and US$89) over 2016-2020.

AER, 26/05/16

AER Issues Final Decision For AGN’s South Australian Gas Distribution NetworkThe AER issued its final decision on the access arrangement that will apply to

Australian Gas Networks’ South Australian distribution network from 1 July

2016. The corresponding revenue accounts for approximately 56% of an average

South Australian gas bill each year. If other components of the bill stayed the

same and the lower distribution charges flowing from this final decision are

passed on to customers, the average annual gas bill for a residential customer

in South Australia would fall by approximately A$144 (US$107) in 2016-2017,

before rising for the next four years by an average of 3.4% per year. The average

annual gas bill for a small business customer in South Australia would fall by

A$750 (US$560) in 2016-17, before rising for the next four years by an average of

3.2% per year.

AER, 26/05/16

May 2016 16

AER Releases Final Decision For The Amadeus Gas PipelineOn 26 May 2016, the AER released its final decision on the access arrangement

that will apply to the Amadeus Gas Pipeline for the 2016-2021 access

arrangement period, starting on 1 July 2016. The AER is required under the

National Gas Rules to review the access arrangement proposed by APT

Pipelines (NT) Pty Ltd for the Amadeus Gas Pipeline and to determine a

forecast revenue requirement.

AER, 26/05/16

Network Charges In The ACT And NSW From 1 July 2016Five network service providers (in the Australian Capital Territory and New

South Wales) are affected by the February 2016 decision of the Australian

Competition Tribunal to set aside the AER’s network revenue determinations

and the AER’s subsequent application to the Federal Court for judicial review of

the Tribunal’s decisions. Resolution of the judicial review and remittal process

is likely to take some time. In the interim, a decision was needed to determine

network charges for 2016-2017. The AER has published proposed prices and

proposes to formalize these arrangements through enforceable undertakings.

AER Chair Paula Conboy said the network charges of ActewAGL, Ausgrid, and

Endeavour Energy will remain constant in real terms from 1 July 2016, rising

by no more than the Consumer Price Index (CPI), which is currently 1.5%. The

Jemena Gas Networks’ network tariffs will remain constant in nominal terms,

with no CPI adjustment. Essential Energy will apply the determination that the

AER made in April 2015 and has submitted a 2016–2017 pricing proposal.

AER, 02/05/16, 17/05/16

ESC Draft Report On The Energy Value Of Distributed GenerationThe Essential Services Commission of Victoria (ESC) released its first draft report

on the value of distributed generation. In 2015, the Victorian Government asked

the ESC to inquire into the value of distributed generation, including direct and

indirect benefits. After an initial investigation, the ESC separated the inquiry

into two parts: the energy value of distributed generation and its value to

networks. This first draft report considers the energy value.

The ESC found that the energy value of distributed generation depends on the

amount and timing of electricity exported to the network and on the value of

avoided line losses, ancillary services, and environmental and social benefits.

The ESC acknowledged the environmental benefit of a reduction in greenhouse

May 2016 17

gas emissions due to the relatively low emissions intensity of distributed

generation technology but did not put a monetary value on it. The ESC also

noted the possible existence of other environmental and social benefits but

found no data to support their monetary valuation.

The report recommends changes to the current single-rate Feed-in Tariff (FiT)

for distributed generation. The ESC recommends a two-part tariff for distributed

generation, including: (1) a flexible FiT that varies by location and time, and

accounts for the added value of avoided network losses and (2) a Deemed

Output Tariff (DOT) to reflect the environment benefit of distributed generation

based on reduced greenhouse gas emissions.

The ESC will publish the final report on the energy value of distributed

generation in August 2016 and address the network value of distributed

generation in the second half of 2016.

ESC, 06/05/16

AER Consumer Challenge Panel ReviewOn 5 May 2016, the AER released an independent review of its Consumer

Challenge Panel (CCP). The review considers the extent to which the CCP has

achieved its objectives and examines the efficiency and effectiveness of the CCP

program over its first three-year term. The CCP was established in July 2013, as

a part of the AER’s Better Regulation reform program, to inject an independent

consumer perspective into the AER’s regulatory decision-making processes.

The roles of the CCP include advising the AER on whether a network business’

proposal is in the long-term interests of consumers and on the effectiveness of

network businesses’ engagement with their customers.

The AER broadly agrees with the report’s findings and recommendations and

will refine the operation of the CCP. This will include increasing collaboration

and engagement between the AER and CCP, a more structured and consistent

approach to engagement between the CCP and network businesses and

consumer groups, and development of a precedent library to share knowledge

across various topics and resets.

AER, 05/05/16

May 2016 18

Singapore EMA Issues Request For Proposal On Test-Bed Energy Storage SystemThe Energy Market Authority (EMA) and Singapore Power jointly issued a

request for proposals to implement a large-scale energy storage system

test-bed. The test-bed is projected to be 6 MW in size, large enough to power 500

four-room flats for a day. Under the proposal, different technologies for storing

electricity on a large scale (e.g., lithium-ion batteries, redox flow batteries, and

flywheels) will be deployed at three substation locations in Singapore. The EMA

commented in the proposal that this test-bed is unique, as it will have to take

into account operating conditions in the hot and humid climate of Singapore,

which affects the performance of energy storage systems.

Channel NewsAsia, 12/05/16; The Straits Times, 12/05/16

New Zealand Electricity Authority Releases Proposed Changes To Transmission Pricing MethodologyThe New Zealand Electricity Authority released a consultation paper outlining

its proposed changes to the transmission pricing methodology. The Authority is

proposing to alter the way transmission charges are shared among transmission

customers. The proposal is intended to provide better price signals and to

reduce wasteful investment by linking transmission charges to the transmission

services being delivered and to the costs involved in delivering them. The

Authority’s proposal includes two new transmission charges: an “area-of-

benefit” charge, which allocates the costs of transmission investments to

transmission customers located in areas of the country that benefit from the

investment, and a “residual charge,” which covers the overheads and other

costs of Transpower, the national transmission grid operator. It is estimated that

the proposed changes will lead to an increase in electricity bills for residential

electricity consumers in 14 regions throughout the country, while electricity

bills will decrease in another 15 regions. Submissions on the Authority’s

consultation paper are due by 26 July 2016.

EA, 17/05/16

May 2016 19

MIDDLE EAST

Israel Israel Approves Revised Leviathan Gas DealIsrael’s Energy Minister Yuval Steinitz announced on 22 May that the

government has reached a new deal that it hopes will expedite the development

of the large offshore Leviathan gas field. In March, Israel’s Supreme Court

blocked an earlier agreement with Leviathan developers Noble Energy and Delek

Group, deeming the government’s commitment to leave industry regulation

unchanged for ten years unconstitutional. The revised agreement gives the

government leeway to change taxes, export quotas, and other regulation in

connection to Leviathan while offering the developers sufficient stability,

according to Steinitz. The Leviathan field, due to become operational in 2019, is

expected to turn Israel into an exporter of natural gas. The Leviathan partners

announced on 26 May a deal with a new private power plant, IPM Be’er Tuvia, to

supply up to US$3,000 million worth of natural gas over an 18-year period. This

follows the conclusion of a gas supply contract in January with Israel’s largest

private power generator, Eneltech, worth US$1,300 million.

Reuters, 29/05/16, 22/05/16, 18/05/16

About Our PracticeNERA is at the forefront of the continuing transformation of energy industries worldwide. Our experts have developed approaches for introducing competition in segments such as power generation, where competition is workable, and for improving the regulation of sectors where it is not. We work with companies and governmental bodies worldwide to design competitive power markets and to develop tariffs and rules of access for regulated transmission and distribution systems for electricity and gas and transport of oil and oil products. With industry restructuring, we also help companies develop strategies for exploring new opportunities and minimising new risks, including issues related to climate change and other environmental initiatives.

NERA helps our clients to develop new regulatory strategies and, when needed, support our clients with analysis and testimony before regulatory commissions, antitrust and competition policy agencies, and domestic and international courts. Our economists help clients to decide which lines of business to pursue; to divest assets no longer consistent with their strategy; to identify and evaluate opportunities for mergers, acquisitions and investment; and to develop bidding, trading, contracting, and marketing strategies and organisations. Our work also includes designing and conducting energy auctions and providing strategy and valuation advice on mergers and acquisitions, the financing of energy companies, and the financial restructuring of distressed companies.

March 2016 20

About NERANERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For over half a century, NERA’s economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world’s leading law firms and corporations. With its main office in New York City, NERA serves clients from more than 25 offices across North America, Europe, and Asia Pacific.

SubscribeNERA produces two newsletters that report and analyse energy matters around the world. Energy Regulation Insights summarise NERA’s views on the economics behind topical developments in energy sector regulation. Previous issues have discussed regulators’ use of “benchmarking”, unbundling of networks, regulation of pipelines for CO2 and other gases, and competition policy in electricity markets. The Global Energy Regulation Newsletter compiles brief summaries of news stories about energy regulation around the world. The coverage includes network regulation, industry restructuring, and the organisation of electricity and gas markets. The “GERN” allows energy sector professionals to easily keep in touch with looming problems, the latest developments in regulatory methods, and innovative solutions. To view the latest editions or to receive our newsletters each time they are published, click here: www.nera.com/publications/newsletters-briefs.html.

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