Electricity market frequently asked questions.

• What is the electricity market?
  

  
  
  The electricity market provides the possibility for a user to buy electricity by freely selecting any of the several independent electricity traders. After 1 July 2007, any user in Latvia can change their electricity trader because anyone can choose any trader licensed in Latvia from whom to buy electricity. Electricity will be supplied to you by the provider of the system services AS "Sadales tīkls", whose rates are set by the Public Utilities Commission.
  

• Where is it possible to find electricity traders?
  

  
  
  In compliance with the valid regulatory acts, electricity can be sold to users exclusively by licensed traders (the complete list of traders is available on the website of the Public Utilities Commission (PUC)
  www.sprk.lv/index.php?sadala=647
  

• Who is obliged to buy electricity on the market?
  

  
  
  In compliance with the new Cabinet of Ministers Regulations No. 914 "Regulations on trade and use of electricity" that entered into force on 15 December 2011, electricity users who are legal entities and who have at least one site connected to the medium or high voltage network and/or the rated current of whose inlet protection device is 101 Amperes or above have to buy electricity at the agreed price by choosing one of the electricity traders as from 1 April 2012. For example, if a site is connected to 6-20 kV line/busbars (i.e. medium voltage), in this case, irrespective of the value of the rated capacity of the inlet protection device (IPD), the user has to become a market participant.
  
  The Cabinet of Ministers Regulations No. 914 (in Latvian) is available at http://www.likumi.lv/doc.php?id=241279
  

• What will change in the contractual relationship upon becoming a market participant?
  

  
  
  Upon becoming a customer on the market, you will buy electricity at the contracted price upon which you have agreed with the selected trader. Being a market participant, you will have to conclude a separate contract on the trade of electricity and another contract with the system operator on the provision of a distribution service. The distribution service will also be provided by the distribution system operator AS "Sadales tīkls" in the future. You will be able to buy electricity from any electricity trader registered in Latvia according to your free choice by concluding a contract on electricity trade and the balancing service and agreeing on the electricity price at the same time.
  

• Where is it possible to see the system service contract that should be concluded with the actual supplier of electricity AS "Sadales tīkls"?
  

  
  
  It is possible to see the system service contract and its annex, as well as to receive information about electricity traders on the website of AS "Sadales tīkls" www.st.latvenergo.lv
  

• How long does it take to prepare the electricity trade contract and the system service contract?
  

  
  
  The electricity trade contract and the system service contract are prepared and sent to the customer within a month following the change of the customer's status to become a market participant.
  

• What price will be applied to the system services?
  

  
  
  Settlements for the distribution service (AS "Sadales tīkls") will be performed based upon the rates of the distribution system services approved by the PUC. For your convenience, settlements for the services provided by the distribution system operator and components of the mandatory procurement (see the explanation below) can be delegated by you to the trader selected by you. The rates of the system service are available on the website of AS "Sadales tīkls"www.st.latvenergo.lv
  

• How can I become a market participant?
  

  
  
  1. By agreeing with AS "Latvenergo" or any other electricity supplier on the provision of electricity trade (price, terms, etc.).
  2. If an agreement is reached with AS "Latvenergo", the trader settles all the formalities related to change of the status or the trader. By the 10th day of a calendar month, AS "Latvenergo" notifies the system operator (AS "Sadales tīkls") on the change of the trader. All you have to do is sign the contracts on the system services and electricity trade.
  3. On the 1st day of a calendar month, the trader is changed. You become a market participant and further on will pay for electricity at the price upon which you have mutually agreed.
  

• Why is it requested to reply to the price offer by the 10th day of a month when an independent trader is selected for buying electricity?
  

  
  
  The electricity trader is obliged to notify the system operator on the concluded agreement on electricity trade at least 21 days prior to the commencement of the electricity trade, and it is also obliged to notify the system operator immediately on the termination of such an agreement. Therefore, for the new contract to enter into force from the 1st day of a month, the user has to approve the co-operation provisions by the 10th day of the preceding month.
  

• A customer has experienced short-term power failures that have caused considerable loss. Will such issues be solved? Who is responsible for solving it (AS "Latvenergo" or AS "Sadales tīkls")? Are guaranteed power supply solutions possible?
  

  
  
  It is possible to solve such issues, but they are directly dependent on the system operators (AS "Sadales tīkls" or AS "Augstsprieguma tīkls"). We as traders (AS "Latvenergo") can assist in coordinating a solution of such issues, thus saving the customer's time, but we cannot have full control over the process of a solution of the issue because, as stated above, the system operator has competence over such issues. At present, different kinds of guaranteed power supply solutions are available in Latvia. However, neither AS "Latvenergo" nor AS "Sadales tīkls" offers this type of service now.
  

• Is it possible to refuse to buy electricity on the market? What will be the consequences?
  

  
  
  In compliance with Paragraph 13 of the Cabinet of Ministers Regulations "On electricity trade and use" you have to buy electricity on the market. If a user who is a electricity market participant does not have a valid contract on the balancing service (see the explanation below) electricity supply to such a user takes place within the last guaranteed supply. Last guaranteed supply - supply of electricity to a user who has terminated its operation on the electricity market and buys electricity from the last guaranteed supplier or who does not have the contract on the balancing service. During the last guaranteed supply, all the electricity trade contracts concluded by the user lose their legal force. The system operators set the term for the selected trader when it has to take over the electricity supply to the particular user. The electricity supply to such a user takes place at the price defined by the trader, which is published on the trader's website at the latest one month prior to each settlement period. The user is obliged to pay for the supplied electricity to the electricity trader selected by the system operator. The last guaranteed supplier is selected by the system operator.
  

• The new Cabinet of Ministers Regulations No. 914 has entered into force and they no longer stipulate that companies with 50 employees and an annual turnover of 7 million have to join the market, because as from 1 April 2012, a user has to become a market participant if the size of the IPD (inlet protection device) exceeds 100 A (Amperes) and/or the voltage does not exceed 400 V (volts). If we do not have any site above 100 A and the voltage does not exceed 400 V at any site, can our company become an associated user again?
  

  
  
  Yes, you can become an associated user again and receive the universal service if you comply with the criteria set in Paragraph 13 of the Cabinet of Ministers Regulations No. 914, but:
  • you have to consider the conditions included in your current electricity trade contract (expire date of the contract, provisions for termination of the contract);
  • transition back from the status of a market participant to the status of an associated user takes place in compliance with the Cabinet of Ministers Regulations No. 914 that stipulate as follows: the system operator immediately sets the term for the public trader when the electricity supply to the particular user has to be taken over. The electricity supply to such a user for a period of six months as from the moment of the take-overtakes place at the price set by the public trader or a small-scale distribution system operator (the distribution system operator who has sub-users under its supervision), which is published on the website of the public trader or the small-scale distribution system operator. A user that has terminated their operation at the electricity market can become an associated user and receive electricity at rates set according to the procedure stipulated by the Law on Electricity Market after six months expire.
  

• What is the balancing service?
  

  
  
  The balancing service covers the difference between the planned and actual electricity consumption by a market participant (end user). The balancing service is provided by the transmission system operator (AS "Augstsprieguma tīkls") or the electricity trader, which provides the balancing service to other electricity market participants and has concluded the balancing contract with the transmission system operator (AS "Augstsprieguma tīkls"). The amount of the balancing electricity is set within each trade interval as the difference between the amount of the actually consumed electricity and the amount defined in the supply schedule.

• What impact will the purchase of electricity have upon the electricity bill?
  

  
  
  If you have concluded a contract with AS "Latvenergo" you will receive a unified bill containing information on each site and each service separately. The total electricity price will consist of three components:
  - electricity price (the price set in the co-operation proposal or the electricity trade contract);
  - the mandatory procurement component (http://www.sprk.gov.lv/doc_upl/Lemums_2(3).doc)*;
  - the system service price (http://www.sprk.gov.lv/doc_upl/N16D12012011.doc)*;
  *Latest available changes as at 10/2011.

• Where is it possible to obtain additional information on the electricity market?
  

  
  
  Information can be obtained on the website of electricity trade of AS "Latvenergo"
  www.t.latvenergo.lv
  More extensive information and corrections can be found in the Cabinet of Ministers Regulations No. 914 "Regulations on trade and use of electricity" or by contacting AS "Latvenergo" electricity trade team by calling 80200406 or writing to:tirdznieciba@latvenergo.lv

• What are the mandatory procurement components and why is it necessary to pay for them?
  

  
  
  Mandatory procurement –  the public trader’s obligation to purchase electricity generated from renewable sources at cogeneration plants compliant with the applicable legislation.
  Mandatory procurement components – compensate the public trader’s additional expenses arising from the purchase of electricity within the framework of mandatory procurement. Mandatory electricity procurement expenses are covered by all end users in Latvia in proportion to their electricity consumption. The mandatory procurement components are approved by PUC. They are revised and modified once a year on 1 April.

• What are the factors impacting the electricity price?
  

  
  
  • prices of electricity stock-exchanges (Nord Pool and BaltPool);
  •gas price (oil prices, currency fluctuations);
  • CO²allowances price;
  • water inflow to the river Daugava;
  • weather conditions;
  • demand/offer.
  Thus, the factors having an impact upon the electricity price can be split into three groups:
  1.Global factors: fuel, oil, CO² prices, policy (rebellion in Libya, abandonment of nuclear power plants in Germany), natural disasters (tsunami in Japan);
  2.Regional (Scandinavian) factors: hydrological situation, switch-offs of biggest power plants and lines;
  3.Local (Baltic) factors: high water, restrictions of the transmission network, shutting down of power stations.

• Why is the electricity price taken from the stock exchange?
  

  
  
  Nord pool stock exchange price has a direct impact upon the electricity price in the Baltic region and, therefore, the Nord pool prices serve as the best, most true and objective price information source at the moment. However, electricity is needed on an hourly and daily basis, and Daugava HPS as well as Riga CHP can supply the required amount of electricity only a couple of months or even a couple of weeks per year. During the rest of time, electricity is imported and foreign suppliers set their price taking into account the Nord pool stock exchange prices in particular.

• What types of products are offered by AS "Latvenergo"?
  

  
  
  An overview of all the products offered by our company is accessible in the following section on the Latvenergo website

• Why are the costs of the system services changed once a year?
  

  The rates of the system services are not changed once a year. These are the mandatory procurement components, which are changed once a year, on 1 April (see the explanation above).